As a UK marketplace seller on Amazon, eBay or Etsy you must report all income to HMRC and meet your tax obligations, whether trading as a sole trader or limited company. The rules depend on your trading structure, turnover and whether you sell UK or overseas goods.
This guide explains the main requirements for income tax, VAT, corporation tax and record keeping. Requirements change regularly so always check the latest guidance on GOV.UK and with HMRC before relying on any information.
Income tax for sole traders selling on marketplaces
If you sell on Amazon, eBay or Etsy as a sole trader you must declare all trading income on your Self Assessment tax return. This includes sales made on any platform and any related income such as fees you charge buyers or income from wholesale orders.
Start by separating personal and business bank accounts. Record every sale, refund, platform fee and shipping cost. Use spreadsheet templates or accounting software that integrates with the platforms to reduce manual work. At the end of the tax year calculate your profit by subtracting allowable business expenses from your total income. Common deductible expenses include platform fees, packaging, postage, stock purchases and a reasonable portion of home office costs if you store and dispatch goods from home.
Submit your Self Assessment by the deadline and pay any tax due. Late filing or payment attracts penalties. Keep records for at least six years in case HMRC makes enquiries.
VAT responsibilities for marketplace and multichannel sellers
You may need to register for VAT once your taxable turnover reaches certain levels, although these change and must be confirmed on GOV.UK. VAT applies to most sales of goods within the UK and can also apply to imports and exports. Amazon, eBay and Etsy provide VAT reports but you remain responsible for accurate returns.
Practical steps include: track UK and EU sales separately; understand distance-selling rules if you ship to other countries; and decide whether to use the Flat Rate Scheme or standard accounting. When selling on Amazon, check if you are using Fulfilment by Amazon (FBA) because this can create additional VAT obligations on stock stored in UK or European warehouses. For Etsy and eBay, record VAT on every domestic sale and on relevant international transactions. Submit quarterly or annual VAT returns on time and pay any VAT owing. Reconcile platform reports with your own records each period to avoid discrepancies that could trigger an HMRC review.
Corporation tax if you operate as a limited company
If you have incorporated your e-commerce business, the company must pay corporation tax on its profits. All income from Amazon, eBay, Etsy and any wholesale or multichannel sales belongs to the company and must be included in the company accounts.
Keep detailed records of company income and expenditure. Prepare annual accounts that comply with basic accounting standards. File the company tax return and pay any corporation tax due within the required deadlines. Directors who take money out of the company as salary or dividends have separate personal tax obligations which must also be reported. Many founders begin as sole traders and incorporate later when turnover grows; at that point you must inform HMRC and transfer assets correctly to avoid unexpected tax charges.
Record keeping requirements for Amazon, eBay and Etsy sellers
HMRC requires clear, complete records of all business transactions. For marketplace sellers this means retaining platform reports, bank statements, invoices, receipts and correspondence about returns or disputes. Digital records are acceptable provided they are accurate and accessible.
Follow these practical steps: download monthly sales reports from each platform and store them securely; match every bank deposit to a platform payout report; keep digital copies of supplier invoices for stock; log business mileage if you deliver goods yourself; and record details of any private use of business assets. Accounting software that connects directly to Amazon, eBay and Etsy can automatically import orders and fees, making reconciliation faster. Review your records monthly rather than leaving everything until the year end. This habit helps you spot errors quickly and gives a clear picture of actual profit.
Common pitfalls and how to avoid them
Many UK marketplace sellers under-report platform fees or forget to include overseas sales. Others claim personal expenses that do not qualify as business costs. Both can lead to corrections, interest and penalties. To stay safe, maintain a separate business account and credit card. Categorise every transaction at the time it occurs. Understand that HMRC can request information directly from Amazon, eBay and other platforms under certain conditions, so your own records must match what the platforms report.
If you sell on multiple channels including TikTok Shop, OnBuy or wholesale marketplaces, consolidate all income in one place. Use consistent product codes or SKUs across platforms to simplify stock and sales tracking. When in doubt about an expense or income item, keep a note of your reasoning and the source of the information you relied upon.
Seeking help and staying up to date
Tax rules for online sellers evolve with changes in legislation and platform policies. Set a routine to check the HMRC website and the seller help sections of Amazon, eBay and Etsy at least once per quarter. Consider using an accountant who understands e-commerce once your turnover increases or you begin importing goods. Many early-stage founders also benefit from free mentoring and workspace at places such as Loomworks in West Yorkshire, where practical business advice is available alongside desk space.
Remember that this guide provides general information only. Your obligations depend on your specific circumstances. Always verify current requirements directly with GOV.UK, HMRC or Companies House and take professional advice where appropriate.
Frequently asked questions
Do I need to register for VAT if I only sell on Etsy?
You must monitor your total taxable turnover across all sales channels. If it exceeds the current registration threshold you need to register for VAT regardless of which platforms you use. Etsy provides some VAT tools but you remain responsible for correct returns and record keeping.
What records should I keep for my Amazon FBA business?
Keep platform payout reports, supplier invoices, shipping records, monthly inventory reports and evidence of any VAT paid on imports. Reconcile these with your bank statements each month. Retain everything for at least six years.
Can I claim home office costs as an eBay seller working from home?
You may be able to claim a proportion of utility and rent costs based on the space and time used for business. Keep a simple log of hours spent and the area used. Use the simplified expenses method if it is easier, but check current allowable amounts on GOV.UK.
When should I switch from sole trader to limited company for my marketplace sales?
Many founders incorporate once profits increase and they want to take advantage of different tax treatment on dividends or need to limit personal liability. The decision depends on your turnover, profit level and long-term plans. Seek advice before transferring existing stock or contracts.
Does HMRC receive sales data from Amazon and eBay?
HMRC can request detailed sales information from major online platforms. This makes it important that your own records match the data the platforms hold. Accurate bookkeeping reduces the risk of disputes during any compliance checks.
Related reading: How to reduce Amazon FBA storage and removal fees, Is an eBay shop subscription worth it for UK sellers, Etsy fees calculator and profit margin guide UK. Browse all marketplaces guides or apply to Loomworks.