VAT margin scheme calculator.

How VAT works under the margin scheme

Under a UK VAT margin scheme you pay VAT on the difference between what you paid for an item and what you sold it for, not on the full selling price. GOV.UK describes this as VAT at 16.67% (one-sixth) of the margin, with the example of a work of art bought for £1,500 and sold for £2,000: a £500 margin and £83.33 of VAT. The scheme covers second-hand goods, works of art, collectors' items and antiques, and you cannot use it for an item you bought with VAT charged. HMRC's manual defines second-hand goods as tangible movable property suitable for further use as it is or after repair, and puts the onus on the trader to show an item is eligible.

Worked example

Three items: bought £100, sold £220 (margin £120, VAT £20); bought £40, sold £100 (margin £60, VAT £10); bought £50, sold £30 (a £20 loss, 0 VAT in this model). VAT due is £30. Charging VAT on the full selling prices instead would be £58.33, because 350 divided by six is a much larger number than the margin on its own.

Methodology

For each item the tool takes margin = selling price − purchase price and VAT = margin × rate / (100 + rate), which is one-sixth at 20% because the selling price already contains the VAT. VAT is added across items before rounding to the penny, so small rounding differences do not pile up. Repairs, parts, accessories and overheads cannot be added to the purchase price under the scheme (the withdrawn Notice 718 said so), so the "other costs" box only reduces your profit, not the VAT.

Negative margins: the GOV.UK pages read for this tool did not state how a loss on one item is treated. The tool assumes the simple item-by-item approach with no offset and tells you the total of losses so you can check with HMRC. Using the margin scheme also has record-keeping and invoicing conditions that this tool does not cover; GOV.UK points to separate eligibility and record-keeping pages.

Sources and retrieval date

All figures below were read from the primary sources listed here in October 2026 (retrieved 2026-10). Rules and fees change; re-verify before relying on a number. GOV.UK, VAT margin schemes (one-sixth rule, worked example, eligibility); HMRC VAT Margin Schemes manual, VATMARG02100 (eligible goods); The Margin and Global Accounting Scheme (VAT Notice 718), now marked withdrawn on GOV.UK and replaced by the guidance pages above; Auctioneers' Scheme (Notice 718/2) (£120 margin = £20 VAT example).

What this does not cover

• Second-hand motor vehicles, which have their own notice and purchase-price rules.
• The Global Accounting scheme, which pools stock instead of working item by item.
• Items bought with VAT charged, which cannot use the scheme.
• Imports and exports, which have separate conditions on GOV.UK.
• Corporation tax or income tax on your profit, and VAT registration thresholds.

Frequently asked questions

How is VAT calculated under the margin scheme?

GOV.UK says you pay VAT at one-sixth (16.67%) of the difference between purchase and selling price. A £120 margin therefore carries £20 of VAT at the standard 20% rate.

What goods can use the VAT margin scheme?

Second-hand goods, works of art, collectors' items and antiques. Items you bought with VAT charged cannot use it, and precious metals and investment gold are excluded.

What records do I need for the margin scheme?

GOV.UK says to keep correct records and points to a separate Keeping Records page, which this tool does not reproduce. Check it, and the invoicing rules, before you rely on the scheme.

What happens if I sell an item at a loss?

This tool charges no VAT on that item and does not offset the loss against other items. The GOV.UK pages used here do not state the rule, so check HMRC guidance.

Can I add repair costs to the purchase price?

No. The former Notice 718 said repairs, parts, accessories and overheads cannot be added to the purchase price, although you can reclaim VAT on them in the normal way.