Self-publishing on Amazon Royalties Explained

Understanding the Two Main Royalty Tiers for eBooks

When you begin your journey into the world of Kindle Direct Publishing (KDP), the first thing you must grasp is that eBook royalties are not a flat rate. Instead, Amazon offers two distinct options: 35% and 70%. Choosing the right one depends on your book's price point and the territories where you intend to sell.

The 70% royalty tier is the most popular for independent authors, but it comes with specific requirements. To qualify, your eBook must be priced between £1.99 and £9.99 (or the equivalent in USD/EUR). If you price your book below £1.99 or above £9.99, you are automatically moved to the 35% tier. While 70% sounds significantly better, keep in mind that Amazon deducts a 'delivery fee' based on the file size of your eBook in this tier—usually around £0.10 per megabyte. This is why careful formatting is essential to keep file sizes small.

The 35% Royalty Option

This tier is often used for very short works or massive bundles that exceed the £9.99 price cap. The advantage here is that Amazon does not charge a delivery fee. If you are publishing a heavily illustrated book with a large file size, the 35% tier might actually result in higher net earnings than the 70% tier once delivery costs are subtracted.

How Paperback and Hardcover Royalties Work

Print-on-demand (POD) royalties are calculated differently than digital sales. For paperbacks sold on Amazon marketplaces, the standard royalty rate is 60%. However, this is not 60% of the total list price in your pocket. You must first subtract the cost of printing the book.

The formula looks like this: (Royalty Rate x List Price) – Printing Costs = Your Earnings. For example, if you sell a paperback for £10.00, the 60% royalty is £6.00. If the printing cost for your specific page count and ink type is £3.50, your actual profit per book is £2.50. This highlights the importance of professional typesetting to ensure your page count is efficient without sacrificing readability.

The Impact of VAT and Taxes for UK Authors

One aspect of self-publishing on Amazon royalties explained that often surprises UK authors is the treatment of VAT. In the UK, eBooks are subject to 0% VAT (as of 2020), but Amazon still calculates royalties based on the 'net' price. If you sell in European territories where VAT is higher, your royalty is calculated after that tax has been removed from the customer's payment.

Furthermore, because Amazon is a US-based company, you must complete a tax interview on the KDP dashboard. Without providing a valid National Insurance number or UTR (Unique Taxpayer Reference) to claim treaty benefits, Amazon may legally be required to withhold up to 30% of your US-source earnings for the IRS. Ensuring your publishing details are correct from day one is vital to keeping your full earnings.

Common Mistakes When Setting Your Price

Many first-time authors struggle with pricing strategy. A common mistake is pricing a debut novel too high, thinking it will lead to higher royalties. In reality, a higher price often leads to fewer sales and a lower ranking in the Amazon store. Conversely, pricing too low (under £1.99) forces you into the 35% royalty bracket, which can devalue your work.

• Ignoring file size: High-resolution images that haven't been optimised can lead to large delivery fees on the 70% tier.
• Miscalculating print margins: Forgetting that colour printing costs significantly more than black and white.
• Overlooking Expanded Distribution: If you opt into Expanded Distribution for paperbacks, the royalty drops from 60% to 40% for sales made through third-party retailers.

Maximising Your Earnings with Professional Preparation

To ensure you get the most out of the royalty structures, your book needs to be of professional quality. This starts with a solid structure that keeps the reader engaged, followed by rigorous editing. A well-polished book receives better reviews, which leads to more sales and a better return on your initial investment.

How There's a Book in Everyone helps: Our platform simplifies the technical hurdles of KDP. From helping you refine your book planning to providing tools for ai writing support, we ensure your manuscript is ready for the 70% royalty tier. We guide you through the complexities of kdp setup so you can focus on writing while we help with the technicalities of formatting and metadata.