Well, the first month of the year is over, and it’s been a great start to 2021 for my Amazon FBA business, with the December to January drop-off being a lot less than I had expected.
That could be the result of more lockdown-induced spending but either way, I’m not complaining and it’s a great start to my 2021 targets. Amazon FBA continues to be a profitable, growing and scalable way to generate profits as an online entrepreneur. Yes, some aspects of the ever-increasing Amazon FBA competition create new challenges, but for those of us who know how to research profitable products and sell them on Amazon the right way, Amazon FBA is still a gold mine.
I would love to hear how everyone else’s Amazon FBA sales have been for January, and I’ll also have a full update blog post out soon!
Time to start thinking about Self-Assessment?
January 31st is usually the yearly self-assessment deadline for sole traders in the UK but good news for all of those people who left it until the last minute – and judging from my emails there were a LOT this year – as the government has extended the deadline to the end of February. It’s definitely nice to see the government helping us e-commerce entrepreneurs out a bit.
Just to be clear as there always seems to be a lot of confusion over what constitutes a full year: this self assessment is for the tax year running from 6th April 2019 – 5th April 2020, and not the calendar year, and you MUST complete a self assessment even if you’re employed and your Amazon FBA business is a second income.
For tax purposes, your income from both your job and Amazon FBA or other e-commerce business are counted as one and taxed accordingly.
So if you’re self-employed / acting as a sole trader, or part of a business partnership, you have to file a self assessment if you sold over £1,000. And yes that’s SOLD, as in revenue not profit, as HMRC’s wording of “earned” is open to interpretation.
You will also need to include any other untaxed income in your self assessment, which includes:
- Money from renting out a property
- Tips and commission
- Income from savings, investments and dividends
- Foreign income
Long story short, if you’re making money, the government wants their share of it!
Going back to this year’s extension, here’s a full list of the self assessment deadlines:
| Register for Self Assessment if you’re self-employed or a sole trader, not self-employed, or registering a partner or partnership | 5 October 2020 |
| Paper tax returns | Midnight 31 October 2020 |
| Online tax returns | Midnight 31 January 2021 (you can submit up to 28 February 2021 without getting a late filing penalty) |
| Pay the tax you owe | Midnight 31 January 2021 |
Overview of 2021 Self-Assessment Deadlines for Amazon FBA Sellers
As you can see, filing your self assessment after January 31st would usually land you with a penalty, which is £100 if your tax return is up to 3 months late plus interest on the full late payment amount. There are additional charges if it’s more than 3 months late or if you don’t actually pay your owed tax on time. Do you really want your Amazon FBA profit margins eaten away needlessly? Please don’t procrastinate. Don’t hand over your hard earned ecommerce gains to the government unnecessarily. File on time!
In case you are late, HMRC provides a calculator for working out your penalty, which you can find at https://www.gov.uk/estimate-self-assessment-penalties, but as you’re reading this that shouldn’t be needed!
For most people the above deadlines will apply, but they can differ slightly depending on your personal circumstances so if in doubt, it’s always best to call HMRC and speak to them directly on 0300 200 3310 or use the live chat service: HMRC Self Assessment Web Chat
When would the deadlines change?
Here are some of the cases where there’ll be a different deadline:
- Submit your online return by 30 December if you want HMRC to automatically collect tax you owe from your wages and pension. You must be eligible.
- HMRC must receive a paper tax return by 31 January if you’re a trustee of a registered pension scheme or a non-resident company. You cannot send a return online.
- HMRC might also email or write to you giving you a different deadline
What about Partnership returns if you have a company as a partner?
If your partnership’s accounting date is between 1 February and 5 April and one of your partners is a limited company, the deadline for:
- Online returns are 12 months from the accounting date.
- Paper returns 9 months from the accounting date.
How to complete the SA100
You basically have two options – you can either do it yourself or appoint someone (an accountant) to complete it on your behalf.
Which option you go for depends entirely on you. There are plenty of good local accountants who will take care of sole trader accounts and paperwork and file your return for a fairly small monthly fee but at the same time the form itself is incredibly easy and straightforward to complete. There’s loads of help available if you do need it and HMRC provides accompanying notes and help sheets for each section to help clear anything up.
Personally I suggest doing it yourself at least once as if anything it’s worthwhile to know how it’s done. As an Amazon FBA seller, I don’t want you spending a lot of time on tax returns but getting involved in the details at least once will serve you well.
If however you decide that a few hundred pounds is worth it to save yourself the time, which you can then spend on researching other new Amazon FBA products, I won’t fault you for it. As I’ve always said in business, time is money and the smartest online entrepreneurs know when it’s worthwhile to outsource something.
If you do decide to go down this route you’ll have to authorize your accountant to deal with HMRC on your behalf but that’s a very simple process and they’ll be able to walk you through it.
Remember that this all applies to you being a sole trader, if you have a Ltd. company that’s a whole different scenario and in that case you 100% need to hire someone to take care of this for you.
There are more filing requirements and the rules are more complex so a good accountant will actually save you money, especially when it comes to claiming expenses which is an area a lot of businesses miss out on big time.
I’m planning a few great guides for Ltd. businesses on this exact topic – to help you maximise your FBA profit. After all, nobody wants to pay more Amazon FBA taxes than needed!
So stay tuned for that in the upcoming months.
Until next time!