Buying and selling pre-owned jewellery is a great trade to be in, but the accounting has more sharp edges than most start-ups expect. The VAT alone has three different regimes that can apply to the same shop, and one of them flips the usual rules on their head.
This is the checklist we walk new jewellery clients through. It covers how to charge VAT on second-hand stock, when a gold deal makes the buyer account for the VAT instead of you, the money laundering registration you might need before you take a single cash payment, and the records that keep all of it defensible.
It's written for sole traders and small limited companies setting up a pre-owned or estate jewellery business in England, Wales or Northern Ireland. Every figure is dated to the 2025/26 tax year and linked to the gov.uk page it comes from.
What does the accounting for a second-hand jewellery business involve?
In short: choose the right VAT method for second-hand stock (usually the margin scheme so you only pay VAT on your profit), check whether the gold reverse charge applies to any bullion or scrap deals, register for money laundering supervision if you'll take large cash payments, and keep a stock book that traces every item from purchase to sale.
Get those four things right from day one and the rest of the bookkeeping is ordinary retail accounting.
Should I register for VAT, and which scheme fits? {#vat-scheme}
You must register for VAT once your taxable turnover passes the registration threshold of £90,000 in any rolling 12-month period (the current threshold from 1 April 2024). You can register voluntarily below that if it helps you reclaim input VAT.
For a second-hand jewellery business there's a catch most retailers never meet. When you buy stock from a member of the public or another non-VAT-registered seller, there's no VAT on the purchase for you to reclaim. If you then had to charge 20% VAT on the full resale price, you'd be taxed on money you never gained.
That's exactly the problem the margin schemes solve. So the real question isn't just "do I register", it's "which VAT method do I use once I do".
There are three you'll meet:
| VAT method | VAT charged on | Best for |
|---|---|---|
| Standard VAT | Full selling price (20%) | New stock bought with a VAT invoice |
| Margin scheme | Your profit margin only | Most second-hand jewellery |
| Global accounting | Total period margin, not per item | High volumes of low-value pre-owned pieces |
You can run more than one method at once. Many jewellers sell new lines on standard VAT and pre-owned lines on the margin scheme, side by side.
How does the VAT margin scheme work for jewellery? {#margin-scheme}
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. You work out the margin on each item, then take 1/6 of that margin as the VAT due.
The 1/6 fraction is used because the margin is treated as VAT-inclusive. For a standard-rated item, 20% VAT inside a gross figure is one sixth of it.
You can use the scheme for second-hand goods, meaning goods suitable for further use as they are or after repair, which covers most pre-owned rings, watches and chains.
There are firm conditions:
- You cannot use the scheme on an item where VAT was shown separately on your purchase invoice (because you've already been charged VAT you can reclaim).
- The scheme does not apply to investment gold, precious metals or precious stones bought as raw materials. A loose diamond or a gold bar is not "second-hand goods" for this purpose.
- If you sell an item for less than you paid, the margin is nil. You never get a negative margin under the item-by-item scheme, and you can't use a loss on one piece to reduce VAT on another.
- You must keep a stock book and the right invoices (more on that below).
If you buy a Victorian gold locket from a private seller for £300 and sell it for £540, your margin is £240. The VAT due is £240 times 1/6, which is £40. You keep the rest.
What is the global accounting scheme, and is it better for me? {#global-accounting}
The global accounting scheme is a simplified version of the margin scheme for businesses selling high volumes of low-value second-hand goods. Instead of tracking the margin on each individual item, you work out VAT on the difference between your total eligible purchases and total eligible sales in the VAT period, then take 1/6 of that.
It's worth considering if you buy mixed job lots of costume or low-value gold jewellery where pricing every piece individually would be a nightmare.
Two rules matter most:
- You cannot put any item that cost more than £500 to buy into global accounting. Higher-value pieces stay on the normal margin scheme, item by item.
- If your total purchases exceed your total sales in a period, you have a negative margin. No VAT is due, and you carry that negative figure forward and add it to next period's purchases.
The trade-off is record-keeping. Global accounting saves you per-item margin calculations but you still keep full purchase and sales records, and you must keep them for six years.
When does the gold reverse charge apply? {#gold-reverse-charge}
This is the rule that catches new jewellers out, so it's worth slowing down on.
First, investment gold is generally exempt from VAT. For VAT purposes, investment gold means gold bars or wafers of a purity not less than 995 thousandths in a weight accepted by the bullion markets, or investment gold coins with a purity of not less than 900 thousandths that are legal tender in their country of origin and normally sold at no more than 180% of the open market value of the gold they contain. Selling exempt investment gold doesn't add VAT, but it can restrict the input VAT you reclaim.
Second, and separately, there's the Special Accounting Scheme for gold, often called the gold reverse charge. It transfers responsibility for paying the VAT from the seller to the buyer on certain gold transactions between VAT-registered traders.
When it applies, you as the seller issue a tax invoice but do not charge VAT on it. The VAT-registered buyer accounts for the output tax to HMRC themselves and reclaims it as input tax on the same return, subject to the normal rules.
The scheme covers supplies such as fine gold, gold grain and scrap gold, and goods containing gold where the price doesn't exceed the open market value of the gold in them by more than a negligible amount. It does not apply to manufactured jewellery and finished products sold as such. So a finished ring sold at a retail markup is outside the reverse charge, but a parcel of scrap gold sold to a refiner at bullion value is very likely inside it.
In practice this matters if you sell scrap or melt to a refiner or wholesaler. Get the invoicing wrong and you either over-collect VAT you shouldn't have or under-account for VAT you owed. If you deal in scrap gold at all, get the treatment of each customer confirmed before you invoice.
Do I need to register for money laundering supervision? {#money-laundering}
If you accept or make cash payments of 10,000 euros or more (or the equivalent in any currency) in exchange for goods, you're a high value dealer and you must register with HMRC for money laundering supervision before you start trading at that level.
Cash means notes, coins or traveller's cheques. It includes a customer depositing cash directly into your bank account, or paying cash to a third party for your benefit. The threshold also catches a single transaction split into several smaller cash payments, and payments that appear to have been broken down deliberately to slip under the limit.
The jewellery trade is squarely in scope because high-value, portable, easily-resold goods are attractive to money launderers. If you only ever take card, cheque or bank transfer for large sales, and never hit the 10,000 euro cash limit, you may not need to register as a high value dealer. Many jewellers simply cap cash takings below the threshold to stay outside the regime.
If you are in scope, registration isn't a one-off form. You'll pay an annual fee per premises, keep your registration up to date, and put in place customer due diligence and risk controls. Build that into your launch budget and your till procedures.
What records and bookkeeping do I need? {#records}
The margin schemes only stand up if your records do. HMRC can refuse the scheme on an item and make you account for VAT on the full selling price if you can't evidence the purchase price and the chain of ownership.
You need a stock book that records, for each item, a stock number, the purchase date and the sale date, the purchase and sale prices, the purchase and sale invoice numbers, a description, and the margin and VAT due. You also keep the purchase records and sales invoices behind it. None of your margin-scheme purchase or sales invoices may show VAT separately.
Keep all of it for six years. That's the standard VAT record retention period and it applies to the stock book, purchase receipts and sales invoices alike.
Two habits make this painless rather than painful:
- Photograph and number every item as it comes in, and record who you bought it from. That single step underpins both your VAT position and your money laundering due diligence.
- Reconcile the stock book to your bookkeeping each month, so the margin VAT on your return ties back to physical stock.
If you'd rather not run a manual stock book, this is exactly the kind of thing we set up for jewellery clients in our bookkeeping services, linked to a VAT process that handles margin and standard-rated lines correctly.
Can I claim capital allowances on my equipment? {#capital-allowances}
Yes. The tools and equipment you buy to run the business, things like display cabinets, a safe, a ring sizer, scales, testing kit and a computer, are plant and machinery. You can claim the Annual Investment Allowance (AIA), which gives 100% tax relief on qualifying plant and machinery up to £1,000,000 in the period (the current limit).
That deducts the full cost from your taxable profit in the year you buy it, rather than spreading it over several years. The AIA is available to both sole traders and limited companies. Business cars are excluded and have their own rules.
Your trading stock, the jewellery you buy to sell, is not capital. It's an expense of the trade and goes through your accounts as cost of sales, not capital allowances.
A worked example: margin scheme vs standard VAT {#worked-example}
Illustrative example. Aisha runs a small VAT-registered pre-owned jewellery shop as a sole trader in the 2025/26 tax year. In one quarter she buys 10 estate pieces from private sellers for £400 each (£4,000 total, no VAT charged to her) and sells them all for £640 each (£6,400 total).
Here's how the two VAT methods compare on the same sales.
| Margin scheme | Standard VAT | |
|---|---|---|
| Total sales | £6,400 | £6,400 |
| Total purchases (no input VAT) | £4,000 | £4,000 |
| Gross margin | £2,400 | not used |
| VAT due to HMRC | £2,400 × 1/6 = £400 | £6,400 × 1/6 = £1,067 |
| Cash left after VAT | £6,000 | £5,333 |
Under the margin scheme the VAT is £400, charged only on the £2,400 she actually added. Under standard VAT she'd owe £1,067 on the full takings, with no input VAT to offset because her private-seller purchases carried none. The margin scheme keeps £667 more in the business on this batch alone.
The arithmetic: £2,400 × 1/6 = £400. £6,400 × 1/6 = £1,066.67, rounded to £1,067. The £667 difference is one sixth of the £4,000 purchase cost that the margin scheme protects from VAT.
This is why getting the scheme right at registration, and keeping the stock book to support it, is worth real money on every batch you sell. We help jewellery businesses set this up end to end on our accounting for jewellers page.
Frequently asked questions {#faqs}
Can I use the VAT margin scheme for second-hand jewellery?
Yes. Second-hand jewellery suitable for further use, as it is or after repair, is eligible for the VAT margin scheme. You account for VAT at 1/6 of your profit margin rather than on the full selling price. You cannot use it on items bought with VAT shown separately on the invoice, or on investment gold, precious metals or loose precious stones bought as raw materials.
Do I charge VAT when I sell scrap gold to a refiner?
Often not directly. The Special Accounting Scheme (gold reverse charge) can apply to supplies of scrap and fine gold between VAT-registered traders, where the buyer accounts for the VAT instead of you. It does not apply to finished manufactured jewellery sold as such. Confirm each customer's VAT status and the nature of the goods before you invoice.
When do I have to register for money laundering supervision as a jeweller?
You must register with HMRC as a high value dealer before you accept or make cash payments of 10,000 euros or more (or the equivalent in any currency) for goods. That includes a transaction split into smaller cash payments. If you never take cash above that limit, you may not need to register as a high value dealer.
Is investment gold subject to VAT?
Investment gold is generally exempt from VAT. It means gold bars of at least 995 thousandths fineness in a bullion-market weight, or qualifying investment gold coins of at least 900 thousandths fineness that are legal tender and sold at no more than 180% of their gold value. Selling exempt investment gold can restrict the input VAT you're able to reclaim.
How long do I keep my jewellery stock and VAT records?
Six years. That covers your margin-scheme stock book, purchase records and sales invoices. Without them, HMRC can refuse the margin scheme on an item and charge VAT on the full selling price instead of the margin.
Can I claim tax relief on my shop fittings and tools?
Yes. Display cabinets, safes, scales, testing equipment and computers are plant and machinery, so you can usually claim the Annual Investment Allowance and deduct 100% of the cost (up to £1,000,000 a period) from your taxable profit in the year of purchase. The jewellery you buy to resell is trading stock, not a capital allowance.
Talk to an accountant who knows the jewellery trade
Setting up the VAT, the gold reverse charge treatment and your money laundering position correctly from day one saves a lot of expensive unpicking later. Want it done properly? See how we support pre-owned and estate jewellers on our accounting for jewellers page, or book a call with a Zmartly accountant.
