Who can use the Margin Scheme?

VAT-registered dealers in second-hand goods, antiques, works of art, and collectors' items. There's no turnover limit (unlike FRS). You must keep detailed stock records.

Can I use the Margin Scheme on imported goods?

Only if no UK or EU VAT was reclaimable on import. Items imported under postponed VAT accounting and treated as standard imports cannot use the Margin Scheme.

How do I show VAT on my customer invoice?

You don't — the customer sees only a gross price. Separate VAT lines are not allowed under the Margin Scheme. Customers can't reclaim VAT on purchases under the scheme.

What records do I need for the Margin Scheme?

A stock book with each item: purchase date and price, supplier name and address, item description, sale date and price, customer name. HMRC inspects this regularly.

Is global accounting available for high-value items?

No — global accounting is restricted to items below £500 each (subject to type). High-value items must be tracked individually under the standard Margin Scheme.

Can I switch between Margin Scheme and standard?

Yes — you can sell some items under Margin Scheme and others (e.g. new accessories) under standard scheme, but you must clearly distinguish in records. Once you opt an item into Margin Scheme, you cannot switch it back.

Does the Margin Scheme work for export sales?

Yes — exports under the Margin Scheme are zero-rated, but you still calculate a notional margin. The treatment is similar to standard zero-rated exports, just with margin scheme accounting.

Can charity shops use Margin Scheme?

Yes — many charity shops use Global Accounting for their second-hand donations. The 'purchase price' for donated goods is £0, so the entire sale price is the margin. VAT due = 1/6 of total sales.

VAT Margin Scheme Calculator UK 2025/26

How the Margin Scheme works in 2025/26

The VAT Margin Scheme is for dealers in qualifying goods who buy from non-VAT-registered sellers (private individuals, exempt businesses, etc.). Without the scheme, the dealer would pay VAT on the full sale price even though they couldn't reclaim VAT on the purchase (because the seller didn't charge VAT). The Margin Scheme avoids this double-taxation by levying VAT on the profit margin only.

Calculation:

Margin = Sale price − Purchase price (negative margins are treated as zero — no VAT relief).
VAT due = Margin × (1/6) = Margin × 16.67%.
The customer is shown the gross price (no VAT broken out separately on the invoice).

Eligible goods:

Second-hand goods — used cars, furniture, jewellery, electronics.
Antiques — defined as items over 100 years old (broadly).
Works of art — paintings, sculptures, fine art, by named artists.
Collectors' items — stamps, coins, books, philatelic.

Each transaction must be logged in a stock book showing purchase date, supplier, item description, purchase price, sale date, customer, sale price, and margin. HMRC inspections of margin scheme dealers focus heavily on stock book completeness.

Global accounting variant

For dealers in low-value items (typically under £500 each), HMRC permits a "global accounting" variant. Instead of tracking each item individually, you maintain quarterly totals of all purchases and sales of qualifying goods. The margin is calculated globally:

Global margin (per VAT period) = Total qualifying sales − Total qualifying purchases

This is much easier administratively for high-volume, low-margin dealers (charity shops, vintage clothing, second-hand books). However, you cannot mix Global Accounting with the standard Margin Scheme — choose one approach per qualifying item type.

Restrictions: items above £500 must use the standard Margin Scheme regardless. Imported items where you've reclaimed import VAT cannot use either scheme. Goods you've used personally cannot be sold under the scheme even if eligible by type.

Three worked examples (UK 2025/26)

Example 1: Antique dealer, £4,500 sale on £3,000 purchase

Helen sells an antique writing desk for £4,500 cash. She bought it from a private estate for £3,000.

Calculation: Margin £1,500. VAT due 1/6 × £1,500 = £250. Standard scheme would have charged £750 (1/6 × £4,500), making the Margin Scheme £500 cheaper. The customer pays £4,500 — no separate VAT shown.

Example 2: Second-hand car dealer, £8,000 sale on £6,500 purchase

Used car dealer sells a 2018 Ford Focus for £8,000. Bought from private owner for £6,500.

Calculation: Margin £1,500. VAT due £250. Standard scheme £1,333. Margin Scheme saves £1,083. Effective profit margin after VAT: £1,250.

Example 3: Charity shop using global accounting

Charity shop's quarter Q1 2025/26: Total purchases £12,000, total sales £18,000. All eligible second-hand goods.

Calculation: Global margin £6,000. VAT due 1/6 × £6,000 = £1,000. Vs standard scheme: £18,000 / 1.2 = £15,000 net + £3,000 VAT — they'd owe £3,000. Global accounting saves £2,000 per quarter on this volume.

Common mistakes to avoid

Selling new (unworn / unused) goods under the Margin Scheme — only used/second-hand goods qualify.
Failing to maintain stock book — HMRC will deny the scheme and apply standard VAT retroactively.
Reclaiming input VAT on margin scheme purchases — explicitly prohibited.
Mixing standard Margin Scheme and Global Accounting on similar items — must choose one.
Treating negative margins as a refund — zero is the floor, no VAT relief on losses.
Showing VAT separately on customer invoice — must show gross price only.
Using the scheme on items where VAT was previously reclaimed (e.g. company car sold to second-hand dealer).

When to use this calculator

Use this calculator before each large second-hand transaction, at each VAT period end, and when deciding between standard and Margin Schemes for eligible inventory. Compare against the Auctioneers' Scheme (different formulas) if running auctions. New entrants should consult VAT Notice 718 and 718/1 for full eligibility lists.

Regional differences (Scotland, Wales, Northern Ireland)

VAT is a UK-wide tax administered by HMRC. The £90,000 registration threshold (from 1 April 2024), 20% standard rate, 5% reduced rate, and 0% zero rate apply identically in England, Scotland, Wales, and Northern Ireland. The Northern Ireland Protocol creates separate rules for goods moving between NI and Great Britain — NI remains aligned with EU VAT for trade in goods (but not services). Scottish or Welsh tax bands are irrelevant to VAT (it is not a devolved tax).

VAT Margin Scheme Calculator — UK 2025/26