A single jewellery business often runs four very different income streams under one roof. You repair customers' rings, you sell new stock over the counter, you make bespoke pieces from scratch, and you buy and resell second-hand items.
Each of those is taxed differently for VAT. Get the treatment wrong and you either overcharge customers, underpay HMRC, or both. The most common slip we see is a jeweller running every sale at the same 20% on the full price, when some of those sales should sit on the margin scheme instead.
This guide walks through all four streams, shows where the boundaries fall, and ends with a worked example and a VAT-return-box walkthrough. It is written for a VAT-registered jeweller in England, Wales or Northern Ireland for the 2025/26 tax year.
If you want a hand mapping your own till categories to the right VAT codes, our team works with jewellers on exactly this, and you can read more on our accountants for jewellers page.
How is VAT charged on jewellery repairs?
A repair is a supply of services. If you are VAT registered, you charge VAT at the standard rate of 20% for 2025/26 on the full repair charge, including both your labour and any materials you use.
There is no special scheme for repairs. Resizing a ring, replacing a clasp, restringing pearls, rhodium plating or a watch battery swap are all standard-rated services. The 20% applies to the whole invoice, not just the parts.
You reclaim the input VAT on solder, findings, tools and other materials you buy for repair work in the normal way, because you are making a taxable supply.
The supply is treated as a service even where you fit a new part, because the customer is buying the work done to their own item, not a finished article from your stock. Where a job is mostly diagnosis, design or skilled labour with the goods incidental to it, HMRC treats it as a service rather than a supply of goods.
How is VAT charged on bespoke and commission work?
Bespoke and commission work is standard-rated at 20%, and it is charged on the full selling price.
This is the stream jewellers most often want to put on the margin scheme, and you cannot. A bespoke engagement ring you design and make is a brand-new article that you are supplying to the customer. New goods are never eligible for a margin scheme, so VAT is due on the entire price.
That holds even if the customer brings in their grandmother's gold to be melted down, or their own loose diamond to be set. You are still making and supplying a new piece. The customer-supplied metal or stone reduces what you charge, but it does not change the VAT treatment of the work and materials you do invoice.
One practical point on deposits. If you take a deposit before the piece is finished, the tax point is usually the date you receive the payment, so VAT can fall due on the deposit in that VAT period rather than on final delivery.
How is VAT charged on new retail jewellery?
New jewellery sold from your stock is standard-rated at 20% on the full selling price. This is the simplest stream. You charge 20%, you reclaim the input VAT you paid your suppliers, and you account for the difference.
There is one important carve-out that is not really "retail jewellery" at all. Investment gold is exempt from VAT. To qualify, a gold bar or wafer must be of a purity not less than 995 thousandths and of a weight accepted by the bullion markets, or it must be an investment gold coin (broadly, minted after 1800, of a purity not less than 900 thousandths, and either legal tender in its country of origin or sold at a price not more than 180% of its open-market gold value).
A wedding ring or a gold chain is not investment gold. It is an article of jewellery, standard-rated at 20%. Do not let the gold content tempt you into treating ordinary jewellery as exempt.
When can a jeweller use the VAT margin scheme?
Here is the answer in one line: you can use the VAT margin scheme on genuinely second-hand finished jewellery you buy in without a VAT invoice, but not on scrap metal, bullion, investment gold or loose precious stones.
The margin scheme lets you account for VAT on the difference between what you paid for an item and what you sold it for, rather than on the full selling price. The VAT due is the margin multiplied by the VAT fraction of 1/6 (one sixth, equivalent to 16.67%).
The scheme exists because you cannot reclaim VAT on stock you buy from private individuals or other non-VAT-registered sellers. Charging 20% on the full resale price would tax value that has already borne VAT once. The margin scheme fixes that.
What jewellery qualifies for the margin scheme?
A finished, second-hand article of jewellery you buy in privately, for example a pre-owned diamond ring or a vintage gold bracelet, is eligible second-hand goods and can be sold under the margin scheme.
What is specifically excluded by Notice 718 is precious metals, investment gold and precious stones. So the exclusion bites on:
- Scrap gold and bullion you buy for the metal value
- Investment gold (exempt anyway, and often within the special accounting scheme for gold)
- Loose, unset precious stones such as a single unmounted diamond
A practical way to read this: the margin scheme is for the finished piece a customer wore, not for the raw materials a trade buyer would weigh.
The conditions you must meet
To use the scheme on an eligible item:
- You must not have been charged VAT you could reclaim when you bought it. If you bought it with a VAT invoice and recovered the input tax, the item cannot go on the margin scheme.
- You must keep a stock book recording the purchase and sale details and the margin for each item.
- You cannot show VAT separately on a margin scheme sales invoice. The customer cannot reclaim it.
If you handle a high volume of low-value second-hand pieces and per-item record-keeping is impractical, the global accounting scheme is a simplified variant that taxes the margin between your total eligible purchases and total eligible sales in a period. Higher-value individual items are best kept on the standard margin scheme.
Worked example: a jeweller's VAT across all four streams
Illustrative example. Priya runs a VAT-registered jewellery shop. In one VAT quarter in 2025/26 she has four transactions, one from each stream. All figures are illustrative.
| Stream | What happens | VAT basis | VAT due |
|---|---|---|---|
| Repair | Resizes a customer's ring, charges £80 labour plus parts | Standard-rated service on full charge | £80 x 20% = £16.00 |
| Bespoke | Makes a commissioned pendant, sells for £2,000 plus VAT | Standard-rated on full price (new goods) | £2,000 x 20% = £400.00 |
| New retail | Sells a new gold chain from stock for £450 plus VAT | Standard-rated on full price | £450 x 20% = £90.00 |
| Second-hand | Buys a pre-owned ring privately for £600, sells for £900 | Margin scheme on the £300 margin | £300 x 1/6 = £50.00 |
The arithmetic on the margin scheme item is the one to watch. The margin is £900 minus £600, which is £300. The VAT inside that margin is £300 x 1/6 = £50.00. Priya keeps £250 of the margin and pays HMRC £50, rather than charging £150 (20% of £900) as she would on a full-rate sale.
Across the quarter her output VAT on these four sales is £16.00 + £400.00 + £90.00 + £50.00 = £556.00. She then deducts the input VAT she can reclaim on her standard-rated purchases (her bullion and findings for the bespoke and new pieces, her repair materials), but not any VAT on the privately bought second-hand ring, because there was none to reclaim.
How does this hit your VAT return and income tax?
For the three standard-rated streams (repairs, bespoke, new retail), the full VAT goes in box 1 and the net sale value in box 6 of your VAT return, in the normal way.
For margin scheme sales, you put only the VAT on the margin in box 1, and you include the full selling price of the goods in box 6. You do not put the purchase price of margin goods in box 7. Your reclaimable input VAT on standard-rated costs goes in box 4, with the net purchases in box 7.
If you also deal in investment gold and sell it to another UK VAT-registered business, a different mechanism can apply: the special accounting scheme for gold shifts responsibility for the output VAT to the buyer under a reverse charge. The amount must be shown on your invoice but not included in the total VAT you charge, and the buyer accounts for it. That is a niche of its own and worth taking advice on before you invoice.
On income tax or corporation tax, all four streams are simply trading income. The VAT treatment changes what you collect and remit, not whether the profit is taxable. Your taxable profit is your sales less allowable costs, and the cost of equipment such as a laser welder, a workbench or a display safe can usually be written off in full in the year of purchase under the Annual Investment Allowance, which is £1,000,000 for 2025/26. If you are unsure how your repair, bespoke and resale margins flow through to profit, our tax advisory service can model it for you.
One compliance point that sits alongside the tax. If you take cash payments of 10,000 euros or more (or the equivalent in any currency) for goods, whether in one payment or several linked payments, you must register with HMRC as a high value dealer for money laundering supervision before you accept that cash. Trading first and registering later is a criminal offence, so this one is worth getting ahead of.
Frequently asked questions
Can I put a second-hand ring I bought from a customer on the margin scheme?
Yes, if it is a finished article of jewellery and you were not charged reclaimable VAT when you bought it. A pre-owned ring bought from a private individual is eligible. You then pay VAT only on the difference between your buying and selling price, at 1/6 of the margin.
Is bespoke jewellery ever eligible for the margin scheme?
No. Bespoke and commissioned pieces are new goods that you make and supply, so they are standard-rated at 20% on the full price. New goods can never go on a margin scheme, even where the customer supplies their own gold or stones.
Do I charge VAT on a repair if the customer's item is their own?
Yes. A repair is a standard-rated supply of services at 20% for 2025/26, charged on the full invoice including labour and any parts you fit. The fact that the item belongs to the customer does not change this.
Is gold jewellery exempt from VAT because it contains gold?
No. Ordinary gold jewellery such as a chain or wedding ring is standard-rated at 20%. The VAT exemption is only for investment gold, meaning bullion bars or wafers of at least 995 thousandths purity in a bullion-market weight, or qualifying investment gold coins. A finished article of jewellery is not investment gold.
Can I reclaim VAT on stock I buy to sell on the margin scheme?
No. The margin scheme is designed for goods on which you were not charged reclaimable VAT, typically items bought from private individuals. If you were charged VAT and reclaimed it, the item is not eligible for the margin scheme and must be sold at the full standard rate.
What VAT rate applies to the gold in a customer's commission?
If the customer supplies their own gold, you simply do not charge them for that metal, so there is no VAT on it. The work and any materials you do supply are standard-rated at 20% as part of making the new piece.
