Sole Trader or Limited Company for Amazon FBA in the UK?
Most new UK Amazon sellers start as sole traders because it is quick and cheap. A limited company adds admin but changes how profit is taxed and separates the business from you. This guide sets out the facts from gov.uk so you can have a sensible conversation with an accountant.
A sole trader can start selling straight away and registers for Self Assessment once gross trading income passes £1,000 in a tax year. A limited company costs £100 to register online, files accounts and a confirmation statement every year, and pays corporation tax at 19% to 25% on its profits. Which works out better depends on your profit, what you take out of the business and your other income. That is a question for an accountant, but the facts below will make the conversation quicker.
Side by side
| Sole trader | Limited company | |
|---|---|---|
| Setting up | Start trading straight away; register for Self Assessment when required | Register with Companies House: £100 online, usually within 24 hours; directors must verify their identity |
| Who owns the business | You. Business debts are your debts | The company, a separate legal entity |
| How profit is taxed | Income Tax and National Insurance on your profits through Self Assessment | Corporation tax on company profits; you then pay personal tax on salary or dividends you take |
| Yearly admin | One Self Assessment tax return | Company accounts, corporation tax return, confirmation statement, plus your own personal tax |
| Making Tax Digital for Income Tax | Applies above the qualifying income thresholds (below) | Not applicable to the company's corporation tax |
| VAT | The same £90,000 rolling 12-month threshold applies to both | |
Starting as a sole trader
GOV.UK confirms you can start trading as a sole trader without registering first. You must register for Self Assessment if you earn more than £1,000 from self-employment in a tax year (6 April to 5 April), and the deadline to register is 5 October after the end of that tax year. You need to keep records from the day you start trading.
The £1,000 figure is the trading allowance, and it is based on gross income (your sales), not profit. FBA sellers pass it quickly: a few dozen sales of a £20 product is enough.
Making Tax Digital for sole traders
Making Tax Digital (MTD) for Income Tax means keeping digital records and sending quarterly updates to HMRC using compatible software. It is being phased in based on qualifying income, which is your gross self-employment and property income before expenses:
| Qualifying income | Based on tax year | MTD starts |
|---|---|---|
| Over £50,000 | 2024 to 2025 | 6 April 2026 |
| Over £30,000 | 2025 to 2026 | 6 April 2027 |
| Over £20,000 | 2026 to 2027 | 6 April 2028 |
Because it uses turnover, an Amazon sole trader with modest profit can still be in scope. Pick accounting software that supports MTD from the start: see best UK accounting software for Amazon sellers.
Running a limited company
Registering online with Companies House costs £100 and is usually done within 24 hours; postal applications cost £124 and take 8 to 10 days. Each director needs an identity verification code, and the company needs its own Government Gateway user ID for tax. You are normally registered for corporation tax at the same time.
Current corporation tax rates from GOV.UK:
- 19% small profits rate on profits of £50,000 or less.
- 25% main rate on profits above £250,000.
- Marginal relief for profits between £50,000 and £250,000, which brings the effective rate between the two.
The £50,000 and £250,000 limits are reduced for short accounting periods and if you have associated companies.
Money in the company belongs to the company. To take it out you pay yourself a salary, dividends or both, and those carry their own personal tax. This is where the real comparison happens, and why the answer differs from seller to seller.
Things Amazon sellers often miss
- Your Seller Central account details. The legal entity and bank account on your seller account should match how you actually trade. Changing from sole trader to company later means updating Amazon too, which can trigger verification, so plan the timing.
- Supplier accounts. Some wholesale suppliers prefer to open accounts with limited companies. See our UK wholesale suppliers guide.
- HMRC can see your sales either way. Amazon reports seller income to HMRC under the digital platform reporting rules.
- VAT is separate from structure. Becoming a company does not change the VAT threshold. Read the UK VAT guide.
- Cash flow. Whatever the structure, stock ties up cash. Our cash flow guide covers the basics.
A sensible way to decide
- Start as a sole trader if you are testing the model and your volumes are small. It is quick, cheap and easy to unwind.
- Keep clean records from day one: settlement reports, supplier invoices, mileage and software subscriptions.
- Once you have a few months of real numbers, ask an accountant to compare sole trader and company outcomes for your expected profit and drawings. Our guide to choosing a UK FBA accountant helps.
The set-up order (business structure, Seller Central, bank, VAT checks) is in the free UK FBA Starter Framework. The bookkeeping and numbers routine is in the £29 Amazon FBA Playbook.
Sources
GOV.UK, Set up as a sole trader. GOV.UK, Tax-free allowances on property and trading income. GOV.UK, Register your company. GOV.UK, Corporation Tax rates and reliefs. GOV.UK, Find out if and when you need to use Making Tax Digital for Income Tax. GOV.UK, VAT registration: when to register. All reviewed 27 October 2026. This is general information, not tax or legal advice.