Jewellery Stock Valuation at Year End: Cost vs NRV

Your stock is probably the biggest number on your balance sheet, and for a jeweller it's also the trickiest. A single ring can sit in the cabinet for two years and still sell at a profit. A trend-led piece can lose half its retail appeal in a season. Get the year-end valuation wrong and you either overstate profit and pay tax you didn't owe, or understate it and invite questions later.

This guide explains how to value jewellery stock at your year end using the "lower of cost and net realisable value" rule, how that plays out on genuinely high-value pieces, and the quirks that catch jewellers out: scrap and melt value, the VAT margin scheme, investment gold, and the money laundering rules that sit alongside all of it.

It's written for independent retail jewellers, bench jewellers and dealers preparing accounts for 2025/26. If you'd rather hand the whole thing over, our accountants for jewellers do this every year.

How do you value jewellery stock at year end?

You value each line of stock at the lower of what it cost you and its net realisable value (NRV), and you total those figures. That's the rule HMRC accepts and the one UK accounting standards require.

HMRC's Business Income Manual is explicit: "one of the acceptable bases of stock valuation is the lower of cost and net realisable value", and accounts must follow generally accepted accounting practice, which for most small jewellers means FRS 102 or FRS 105 (see BIM33135).

The important word is "lower". You compare cost against NRV piece by piece, not across the whole cabinet. You can't use a fast-selling ring's healthy margin to prop up a slow piece that's worth less than you paid. Each item stands on its own.

What counts as cost for a piece of jewellery?

Cost is more than the wholesale price on the invoice. HMRC follows the accounting definition: cost includes "all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition" (BIM33135).

For a jeweller, that typically means:

• The purchase price of the piece, or of the loose stones and metal.
• Import duty and non-recoverable taxes.
• Carriage and insurance to get it to you.
• For pieces you make or remodel, the bench labour and a fair share of workshop overheads that go into converting raw materials into a finished item.

It does not include selling costs, your shop's general overheads, or interest on borrowing. Those belong in the profit and loss account, not in the stock figure.

If you genuinely can't pin down exact cost, the standard asks for "the closest approximation to historical cost that is practically attainable". For mixed parcels of stones bought as one lot, a consistent, reasonable allocation method is fine, as long as you apply it the same way every year.

What is net realisable value and when does it bite?

Net realisable value is the estimated selling price in the ordinary course of business, less the costs still to be incurred to complete and sell the item. HMRC quotes FRS 102 directly: you reduce the carrying amount to "selling price less costs to complete and sell" when stock is impaired (see BIM33150).

For jewellery, NRV is the realistic price you'd actually get, not the optimistic ticket price, minus things like:

• Remaining repair, polishing or resizing costs.
• Hallmarking, if not yet done.
• Any selling commission tied directly to the item (for example an auction or consignment fee).

NRV only matters when it falls below cost. If a piece cost you £4,000 and you can still sell it for £6,000, you carry it at £4,000 and the comparison is over. NRV bites when the price you can realistically achieve, net of finishing and selling costs, has dropped below what you paid. That's when you write the piece down.

Does slow-moving stock have to be written down?

No, and this is the single most common mistake we see in jewellers' accounts. Age alone is not impairment.

HMRC could not be clearer. Its guidance states that "the fact that stock is slow moving is not justification for a write-down below cost. It may be slow moving but still sell at a profit, for example antiques and jewellery" (BIM33150).

So a classic solitaire that's been in the cabinet for three years is not written down simply because it's old. If you can still sell it at or above cost, it stays at cost. You only write down where there's genuine impairment: physical damage, a stone that's chipped, a setting that's gone out of fashion to the point the realistic price has dropped, or metal that's now worth more melted than mounted.

The flip side matters too. Don't blanket-discount the whole cabinet for prudence. An across-the-board write-down that isn't supported by item-level evidence overstates your costs and understates your profit, and it won't survive scrutiny.

Worked example: valuing three high-value pieces

Illustrative example. Aria runs an independent jeweller preparing accounts to 31 March 2026 (the 2025/26 tax year). Three pieces need a decision at year end.

Reading the table:

• The solitaire is slow-moving but sells well above cost. NRV of £6,850 is higher than the £4,200 cost, so it stays at cost. No write-down.
• The damaged pendant is impaired. Its realistic price is £1,400, and £200 of repair and selling costs reduces NRV to £1,200, below the £1,800 cost. Aria writes it down to £1,200, recognising a £600 reduction.
• The dated chain is worth more as scrap than as a retail piece. Even on a melt basis, NRV of £990 still exceeds the £900 cost, so it stays at cost. Worth more than you paid is worth more than you paid, whatever the route to sale.

Aria carries this stock at £6,300, not £6,900. The £600 difference is the only write-down supported by evidence. Crucially, she does not net the pendant's loss against the solitaire's unrealised gain, because the rule is applied item by item. That £600 reduces stock on the balance sheet and increases cost of sales, lowering taxable profit for the year. We pull all of this together when we prepare your year-end statutory accounts.

How does the VAT margin scheme affect your figures?

If you're VAT registered and you buy second-hand jewellery from private individuals (who can't charge you VAT), the VAT margin scheme lets you account for VAT only on your margin rather than the full selling price. You pay VAT at 16.67%, one-sixth, on the difference between what you paid and what you sell it for (VAT margin schemes).

There are two points jewellers must keep straight.

First, stock value and VAT are separate questions. Your year-end stock figure is the lower of cost and NRV regardless of whether an item will eventually sell under the margin scheme. The margin scheme changes how much VAT you pay when you sell; it doesn't change how you value the piece sitting in the cabinet.

Second, precious metals, investment gold and precious stones are excluded from the margin scheme. You cannot use it for those (VAT margin schemes). There's one narrow exception worth knowing: gold coins that are not investment gold coins, bought and sold as collectors' items of numismatic interest, can be eligible (see HMRC's eligibility manual, VATMARG02100).

In practice that means a second-hand diamond ring bought from a member of the public can usually go through the margin scheme, but a loose investment-grade gold bar cannot.

What about investment gold and scrap?

Investment gold has its own VAT regime, and it's a trap if you treat it like ordinary stock.

Investment gold is exempt from VAT. It covers gold bars or wafers of a purity of not less than 995 thousandths in a weight accepted by the bullion markets, and certain coins of a purity of not less than 900 thousandths that have been legal tender in their country of origin, are normally sold at a price not exceeding 180% of the open market value of the gold they contain, and were minted after 1800 (VAT Notice 701/21).

Two features matter for your records:

• The option to tax. If you produce or transform investment gold, or supply it for industrial use in the normal course of business, you can opt to tax your supplies so you can recover related input VAT. You must notify HMRC before opting (VAT Notice 701/21).
• The Special Accounting Scheme (the reverse charge). On supplies of gold between VAT-registered businesses, the buyer accounts for the seller's output tax, not the seller. The invoice must state that output tax is to be accounted for by the buyer (VAT Notice 701/21). Get this wrong on a high-value transaction and the VAT exposure is real.

For scrap and melt, the valuation principle is unchanged: you still carry the item at the lower of cost and NRV. If a tired retail piece is genuinely worth more as scrap than on the shelf, its scrap value is simply its selling price for the NRV test, as the dated chain showed in the worked example above.

A quick note on equipment, not stock: your workbench tools, laser welder, display cases and the like aren't stock at all. They're capital assets, and most qualify for the Annual Investment Allowance, which gives 100% tax relief on up to £1,000,000 of qualifying plant and machinery in the year you buy it (Annual Investment Allowance). Keep them out of your stock figure entirely.

Money laundering and high-value cash sales

Stock valuation and anti-money-laundering compliance land at the same desk for jewellers, so it's worth stating plainly. If your business accepts or makes cash payments of 10,000 euros or more (or the equivalent in any currency) in exchange for goods, you are a "high value dealer" and must register for money laundering supervision with HMRC (money laundering registration for high value dealers).

"Cash" means notes, coins or travellers' cheques, including a customer paying cash directly into your bank account. The threshold also catches a series of linked payments for a single transaction that together reach 10,000 euros, and payments deliberately broken into smaller amounts to stay under the limit (money laundering registration for high value dealers). You must register straight away once you decide you'll accept such payments. This doesn't change the numbers in your accounts, but the clean transaction records you need for it are exactly what makes a year-end stock-take painless.

A year-end stock-take checklist for jewellers

• Count and identify every piece, with a clear line reference, on the year-end date.
• Record cost properly: purchase price plus duty, carriage and, for made pieces, bench labour and workshop overheads.
• Set a realistic selling price for each piece and deduct remaining finishing and selling costs to get NRV.
• Carry each piece at the lower of cost and NRV. Compare item by item, never on the total.
• Don't write down stock just because it's old. Only impair where there's evidence.
• Flag investment gold and bullion separately for their VAT treatment.
• Note which second-hand pieces will sell under the VAT margin scheme, and check none are precious-metal or precious-stone items that the scheme excludes.
• Keep the transaction trail you need for money laundering supervision.

Get the stock figure right and the rest of the accounts follow. Want a second pair of eyes on your year-end valuation, or the whole job taken off your hands? Book a free 20-minute call with a Zmartly accountant who works with jewellers.

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