Tax on an eligible margin
A margin scheme can apply to qualifying second-hand goods and certain other items. Eligibility depends on the transaction and purchase evidence. For a standard-rate illustration, tax is one sixth of the positive difference between selling and purchase prices.
Keep margin and profit separate
Buy for £240 and sell for £360: the difference is £120 and the illustrative VAT is £20. The £100 remaining before other costs is not necessarily your business profit. Repairs and selling expenses do not automatically change the purchase price used for the scheme calculation.
Review each item
Keep a traceable reference linking purchase and sale records. Confirm the purchase is eligible rather than assuming any used item qualifies. Specialist rules apply to some transactions, including vehicles and auctioneers, and a single-item calculator does not implement those rules.
If you sell below cost
A £300 purchase sold for £270 has a £30 negative margin. The single-item tool shows no VAT on that sale, not a tax credit. Do not use it for global accounting or loss offsets across stock. Follow the HMRC scheme record requirements.
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FAQs
What is the VAT Margin Scheme?
The margin scheme lets you pay VAT on the difference between what you paid for an item and what you sold it for — the margin — instead of on the full selling price. It is designed for second-hand goods, works of art, antiques and collectors' items.
How much VAT do I pay on the margin?
At the standard rate, the VAT in the margin is one sixth (1/6) of the margin. If you bought an item for £1,000 and sold it for £1,600, the margin is £600 and the VAT due is £100.
What if I sell at a loss?
If you sell an item for less than you paid, there is no margin and no VAT to pay. The loss cannot be set against margins on other items — except under the Global Accounting variant of the scheme.
What records must I keep for the margin scheme?
You need a stock book (or equivalent record) linking each item's purchase and sale: dates, purchase price, selling price and the invoice details. Without matching purchase evidence, the item cannot go through the scheme.
Can I use the margin scheme for anything I resell?
No. It only covers eligible goods — mainly second-hand goods, art, antiques and collectors' items — bought in the UK or EU under conditions where you could not reclaim VAT (typically from someone who was not VAT-registered, or under the scheme itself). It cannot be used for precious metals, precious stones or investment gold.
Official sources
Sources checked: 2026-09-26. Check the official guidance for later changes.
Educational information and estimates. These tools do not submit VAT returns or determine the treatment of a specific transaction.