Choosing to sell on Amazon is becoming increasingly popular for individuals, sole traders, and limited companies, providing enhanced exposure and access to millions of potential customers online.
According to Mintel, almost 90% of all UK shoppers use Amazon , and around 70% make purchases on the site at least once a month. As a result, Amazon is now the 5th largest retailer in the UK . It’s easy to see why it’s such an appealing selling platform for new and existing businesses of all sizes.
At Rapid Formations, we receive a lot of enquiries from people who are interested in setting up a limited company for an Amazon business. The two most common queries are:
To answer these questions and help you to make the right decision, we will discuss the sole trader and limited company options available in the UK, as well as the process of setting up an Amazon Seller account. By the end of the blog, you should have a better understanding of this confusing topic and be confident in your decision to sell on Amazon as a limited company or sole trader.
Deciding whether to use a sole trader or limited company business structure depends on how much you’re going to sell on Amazon. Choosing the wrong type of business structure could significantly impact your Income Tax bill and National Insurance contributions (NIC), so it is not a decision that should be taken without careful consideration.
Generally, if you’re only likely to sell a small number of items each month, or you are planning to sell on Amazon on a casual basis, registering as a sole trader will probably be best. In these situations, you’re unlikely to gain any tax advantages by setting up a company . However, if you intend to sell a lot of products on Amazon on a regular basis, it will be more tax-efficient to set up a limited company. You will also benefit from limited liability.
Limited companies pay 19-25% Corporation Tax on business profits. Sole traders pay 20-45% Income Tax on profits (or 19-48% in Scotland). Value Added Tax (VAT) may also be payable. However, the rules and requirements for VAT registration are the same for companies and sole traders, so this potential tax liability will apply either way and should not influence your choice of business structure.
Choosing to sell on Amazon as a limited company may help to minimise your personal tax liability and National Insurance contributions (NIC). This is because you will be able to pay yourself a combination of salary and dividend payments.
By taking a salary below the National Insurance primary threshold, you won’t have any Income Tax or employee Class 1 NICs to pay. The NIC primary threshold for the 2026/27 tax year is £12,570. However, the company will be liable to employer’s Class 1 NICs on your salary earnings above £5,000.
Meanwhile, the first £500 of dividends will be tax-free. Any dividend income above that amount will be subject to dividend tax rates between 10.75% and 39.35%, which are lower than Income Tax rates. Furthermore, neither you nor your company will have to pay NIC on dividend income.
Conversely, if you choose to sell on Amazon as a sole trader, all profits will be treated as personal income. This means that all of your profit will be subject to varying rates of Income Tax and NICs.
Aside from the potential tax-saving benefits, setting up a limited company will also protect your personal finances. This is because limited companies are treated as distinct legal entities (just like people), so they are responsible for their own debts and liabilities.
If your business faces any legal issues or is unable to pay its bills, your personal finances and assets will be protected beyond what you’ve already invested in the business.
If you set up as a sole trader, there will be no legal distinction between you and the business. All business debts and liabilities will be your debts and liabilities, so your personal finances and assets will be at risk if anything goes wrong.
There are many misconceptions regarding setting up a limited company. People assume it is difficult, expensive, and requires a lot of work. In reality, it’s really quick and easy to set up a company. It can cost as little as £2.99 (excluding the £100 Companies House fee), the annual reporting requirements are pretty straightforward, and using an accountant to deal with your tax affairs will probably save you money.
You can register a limited company for your Amazon business online. It takes around 5 minutes to fill out the application form, and most companies are set up within 24 hours. When your company is registered, you will receive all of your incorporation documents, and you can start trading immediately. You can then set up your Amazon business on the very same day.
The simplicity of company formation comes as a surprise to many people. It is no longer an exclusive business structure reserved only for affluent entrepreneurs and large businesses. Limited companies are suitable for all types of traders and all sizes of businesses, both new and established.
You will have a few additional filing obligations and may have to spend a little more money on an accountant (which is optional, not required), but you will have the opportunity to retain more of your Amazon profits. Your accountant can advise on the best ways to minimise your tax bill and operate your business in the most tax-efficient way, so you will probably save more money than you spend on any such additional services.
If you are already set up as an Amazon Seller, changing from a sole trader to a limited company can be tricky. It really shouldn’t be, but the process of moving an Amazon Seller Account to a new entity requires re-verification, which seems to result in significant delays.
In many cases, sole traders who request to transfer an existing seller account to a new limited company are unable to sell through Amazon for several weeks or months whilst their accounts are waiting to be re-verified. During that time, seller accounts are often suspended, resulting in lost income.
Given the apparent difficulty that most people face when attempting this process, we would advise setting up a limited company before creating an Amazon Seller Account – particularly if you know or think that you will want to trade as a limited company at some point in the future.
There are two ways you can sell on Amazon – by registering as a vendor on Amazon Vendor Central, or by registering as a seller on Amazon Seller Central. As an individual or small business, you will only be able to create an account on Amazon Seller Central, but it’s worth understanding the difference between the two types of accounts.
A popular option for established manufacturers and distributors, Amazon vendors act as suppliers, selling their inventory (i.e. products) directly to Amazon at wholesale rates. Amazon then resells the products to customers under its own brand name, taking care of everything from pricing and shipping to customer service and returns.
It is not possible to apply to be an Amazon Vendor – registration is by invitation only, reserved for top sellers and well-known brands. Products being sold through Vendor Central will normally feature the phrase “ships from and sold by Amazon.com.” But you never know, one day you may receive an invitation!
Amazon Seller Central is suitable for individuals and any size of business. It is designed as an online marketplace for brands and merchants to sell products under their own name directly to Amazon customers. To sell on Amazon, you will need to choose a selling plan and set up an account on Seller Central.
Amazon Seller Central offers two selling plans – a Basic Selling Plan (to sell a little) and a Professional Selling Plan (to sell a lot). You must choose the most suitable plan before creating an account.
Your choice of selling plan will depend on two things: the products that you’re selling, and the number of items that you plan to sell each month.
If you’re selling products in a category requiring approval and/or you’re planning to sell more than 35 items per month, you will need to choose the Professional Selling Plan.
Here is a simple cost-benefit analysis to help you decide which selling plan in best:
You can easily switch between Amazon’s Basic and Professional selling plans at any time, downgrading if you’re not selling enough each month or decide to take a break, and upgrading if you need access to additional features or it becomes cost-effective to use the Professional Selling Plan at any point.
Please note: Amazon sometimes refers to the Basic Selling Plan as the ‘Individual’ selling plan, so don’t be thrown if you come across this term when you’re creating an account or reading articles on Amazon or other websites.
Once you get to grips with the terminology, requirements, and restrictions, creating an Amazon Seller Account is (usually) quite straightforward. Essentially, there are three main steps:
You will first need to choose the appropriate Amazon product category under which to list your products. More than 20 ‘open categories’ are available to both Basic and Professional sellers. Additional ‘categories requiring approval’ are available only to sellers with the Professional Selling Plan. We discuss this in more detail below.
Basic Selling Plan or Professional Selling Plan?
Once you’ve chosen your product category and selling plan, you are ready to create your Amazon Seller Account. You will need to provide the following information (where applicable):
Next, you will be asked to enable two-step verification to protect your account. Use your phone number to receive a ‘One Time Password’ by text message or telephone call and enter it when prompted.
When you have successfully completed the verification, you will be taken to your Seller Central dashboard where you can manage your account details and provide any required documentation, such as proof of ID, business documents, and VAT details. Once Amazon has received and validated your data, you can start listing your products.
To comply with all applicable laws and ensure that customers can shop with confidence, approval is required to sell certain products on Amazon. Given that Amazon sells a vast range of products, the list is extensive. Here is a brief overview of the types of listings that may need approval:
You are required to notify Amazon at the time of agreeing to the Acceptable Usage Policy (AUP) if you are planning to sell items in one of the following categories:
Amazon Payments Europe will have to perform additional checks to verify this information, which may delay the process. To select the relevant AUP category, you must:
If you’re creating an Amazon Seller Central account as a business (rather than as a private individual), you will be asked to provide certain documentation to verify your identity and the existence of your business (if applicable).
You will provide the required information and/or documentation in your Amazon Seller Central account. Go to ‘Settings’ then ‘Account Info’ and select the sections that are highlighted in red to see what you need to provide.
It usually takes Amazon between 5–10 working days to verify information, but it can take longer. You may be able to sell on Amazon whilst your information is being verified, but this is subject to certain criteria. In some cases, you may have to wait until your information is verified before you are permitted to sell on Amazon.
A business registration extract is an official document that confirms the registered details of a business. The document that you will need to provide for this purpose depends on your business structure.
If you decide to sell on Amazon as a UK-registered limited company or LLP, you can provide a Company Report. To obtain this document, follow these simple steps:
If you decide to sell on Amazon as a sole trader or partnership, your UTR number may suffice as a business registration extract, but you might have to provide evidence by uploading a copy of a letter from HMRC that contains your UTR.
There is a limit to the number of documents that you can upload and submit for review. If you need to provide several documents, you may have to merge them into one document. You can do this by scanning each document, merging the scanned images into a Microsoft Word document, and creating a PDF.
As per the laws governing EU member states, Amazon charges VAT on all orders delivered to customers within these EU countries. Whether registered as a sole trader or a limited company, your Amazon business may be subject to VAT registration in one or more countries.
If your Amazon business is set up in the UK, you will need to register for VAT in the UK if:
If your Amazon business is set up in a different EU country, you will need to register for VAT in the UK if:
If your Amazon business is set up outside the EU, you will need to register for VAT in the UK if:
You can add your VAT registration number(s) and upload your VAT certificate(s) for your Amazon business once you have created your seller account. We would strongly recommend using an accountant if you need to register your sole trader or limited company Amazon business for VAT because it is an incredibly complex issue.
When consumers buy goods from your Amazon business, they pay via Amazon Pay rather than directly to you. Amazon deducts the applicable fees based on your selling plan then transfers the remaining proceeds to the business bank account linked to your seller account.
To get paid for your Amazon sales using Amazon Pay, you must:
Amazon Pay will transfer sales proceeds to your nominated bank account 14 days after the first business day (i.e. Monday-Friday) on which the corresponding purchases were made. If you set up (or change) your bank account at any time, your payments will be suspended for three days as a security measure.