Understanding your real profit on Amazon FBA is harder than it looks. Amazon takes referral fees, fulfilment fees, and VAT before you see a penny — and that's before your own costs. This guide walks through every component so you can calculate your true margin with confidence.
Why calculating FBA profit is tricky
When a customer pays £30 for your product, Amazon doesn't hand you £30. A typical UK sale involves:
- Referral fee — usually 8–15% of the sale price
- FBA fulfilment fee — charged per unit shipped, based on size and weight
- VAT — collected by Amazon and passed to HMRC
- Cost of goods (COGS) — what you paid for the product
- PPC advertising — any spend on Sponsored Products or Sponsored Brands
- Other costs — prep fees, labels, storage, returns
Only after subtracting all of these do you have your true net profit.
The FBA profit formula
Net Profit = Sale Price − Referral Fee − FBA Fee − VAT − COGS − PPC − Overheads
Let's go through each component.
1. Sale price
This is the price the customer pays. If you're selling at £29.99, that's your starting point.
2. Referral fee
Amazon charges a percentage of the sale price as a referral fee. For most categories this is 15%, but electronics can be as low as 8%. On a £29.99 sale at 15%, that's £4.50.
3. FBA fulfilment fee
This is charged per unit and depends on the size and weight of your product. A small parcel in the UK costs around £2.76, while a large parcel might be £5.31. Always check the current Amazon fee schedule as these change.
4. VAT
In the UK, VAT is 20%. Amazon collects this on your behalf. If your item sells for £29.99 including VAT, the ex-VAT price is £24.99. Your profit calculation should use the ex-VAT figure.
5. Cost of goods (COGS)
This is what you paid for the product, including shipping from your supplier to Amazon's fulfilment centre. If you bought at £6 and paid £1 freight, your COGS is £7.
6. PPC advertising
If you run Sponsored Products, divide your total ad spend by the number of units sold. If you spent £50 to sell 20 units, your ad cost per unit is £2.50.
Worked example (UK)
| Component | Amount |
|---|---|
| Sale price (inc. VAT) | £29.99 |
| VAT (20%) | −£5.00 |
| Referral fee (15%) | −£3.75 |
| FBA fulfilment fee | −£3.88 |
| Cost of goods | −£7.00 |
| PPC per unit | −£2.50 |
| Net profit | £7.86 |
| Net margin | 26.2% |
A 26% margin is solid for FBA. Most experienced sellers aim for 20–30%.
Use our free profit calculator
Rather than doing this by hand every time, use our FBA Profit Calculator. It handles the maths for all 22 Amazon marketplaces, including the correct fees and VAT rates for each country.
What margin should you aim for?
- Below 15% — fragile. A small fee change or PPC increase wipes your profit.
- 15–25% — healthy. Room to absorb cost increases and invest in growth.
- Above 25% — excellent. Strong foundation for scaling.
Common mistakes sellers make
1. Forgetting VAT. If you're VAT-registered, you'll reclaim input VAT on COGS but must remit output VAT. Factor this correctly.
2. Ignoring returns. A 3–5% return rate can cost £1–2 per unit on average when you account for return shipping, inspection, and restock.
3. Underestimating PPC. New listings typically spend more on ads while building organic rank. Budget for this in your initial margin calculations.
4. Using the sale price before VAT as your baseline. Always calculate from the ex-VAT price.
Summary
True FBA profitability comes down to one formula: sale price minus all the things Amazon and your supplier take. Use our calculator to run these numbers before you source any product — it takes two minutes and can save you from a costly mistake.