You buy second-hand stock, do it up or list it as-is, and sell it on. There's no VAT invoice from the person you bought it off, so charging 20% VAT on the full resale price would wipe out your margin. The VAT margin scheme fixes that, but only if your records stand up.
The stock book is the heart of it. Get a column wrong, lose a purchase note, or skip an item, and HMRC can charge VAT on the full selling price of that item rather than just your profit. That's the difference between paying VAT on a £40 margin and paying it on a £240 sale.
This guide shows you exactly what the stock book has to contain, how to work out the VAT, and where the figures land on your VAT return. We'll use a realistic resale business as the worked example. It's written for sellers on marketplaces like Vinted, eBay and Depop who've grown past a hobby and into a VAT-registered trade.
What is a VAT margin scheme stock book?
It's a running record of every item you buy and sell under the margin scheme, so HMRC can trace the margin on each individual sale. Under the scheme you pay VAT at one-sixth (16.67%) on the difference between what you paid and what you sold for, not on the full sale price, but only if your stock book and invoices back up every figure.
Who can use the VAT margin scheme?
The scheme is for businesses selling second-hand goods, works of art, antiques and collectors' items. Second-hand goods are things that can still be used, or could be used after repair, which covers most pre-loved clothing, trainers, bags, books and tech that resellers handle.
There's one rule that catches people out. You can't put an item in the scheme if you were charged VAT when you bought it. The whole point of the scheme is that VAT wasn't recoverable on the purchase, typically because you bought from a private individual, a non-VAT-registered seller, or another margin-scheme dealer.
You also don't formally register for the scheme. According to gov.uk, you can start using a margin scheme at any time by keeping the correct records and reporting it on your VAT return. There's no application. The trade-off is that the burden of proof sits entirely on your records.
A few things never qualify: precious metals, investment gold, and precious stones. And if you don't meet all the scheme's requirements for an item, you pay VAT on its full selling price, so the admin is not optional.
What columns does the stock book need?
HMRC sets out the required stock book in VAT Notice 718. You can keep it on paper or digitally (a spreadsheet is fine), but it must be kept up to date and contain all of the following for every item.
| Stock book field | What goes in it |
|---|---|
| Stock number | A unique reference for the item, in numerical sequence |
| Date of purchase | When you bought it |
| Purchase invoice number | From the seller, unless you raised the purchase note yourself |
| Purchase price | What you paid, with no added costs |
| Name of seller | Who you bought it from |
| Description of item | Enough to identify it |
| Date of sale | When you sold it |
| Sales invoice number | Your own invoice number |
| Name of buyer | Who you sold it to |
| Selling price | What you sold it for |
| Margin on sale | Selling price less purchase price |
| VAT due | The margin multiplied by one-sixth |
Two practical points. First, the stock number is the spine of the whole system: it links the purchase note, the stock book line and the sales invoice together, so HMRC can follow one item from buy to sell. Second, the purchase price is the price you actually paid. Costs like repairs, cleaning, postage or platform fees do not go in the purchase-price column, and they don't reduce the margin. You reclaim VAT on those separately through normal VAT rules if they carry VAT.
How do you calculate the VAT on the margin?
The margin is your selling price minus your purchase price. The VAT is one-sixth (16.67%) of that margin.
The one-sixth fraction is just the standard 20% rate expressed as a portion of a VAT-inclusive figure. Your margin already includes the VAT, so you take it out by multiplying by 1 and dividing by 6.
If you sell an item for less than you paid, the margin is nil or negative. There's no VAT to pay on that item, but you can't use the loss to reduce the VAT on other margin-scheme sales (with one exception under Global Accounting, covered below). Each item stands on its own.
Worked example: a Vinted reseller's stock book
Illustrative example. Priya runs a pre-loved fashion business, sourcing from house clearances and private sellers and reselling on Vinted. She's VAT-registered and uses the margin scheme. Here are four items from one VAT quarter in 2025/26.
| Stock no. | Description | Purchase price | Selling price | Margin | VAT due (margin × 1/6) |
|---|---|---|---|---|---|
| 0411 | Wool coat | £30.00 | £85.00 | £55.00 | £9.17 |
| 0412 | Designer handbag | £120.00 | £240.00 | £120.00 | £20.00 |
| 0413 | Trainers (worn) | £45.00 | £40.00 | £0.00 | £0.00 |
| 0414 | Vintage denim jacket | £18.00 | £60.00 | £42.00 | £7.00 |
A few things to read off this:
- The handbag margin is £120, and £120 × 1/6 = £20.00 VAT.
- The trainers sold for less than Priya paid. The margin is treated as nil, so there's no VAT, and the £5 loss can't offset the other items.
- Total VAT due on these four sales is £9.17 + £20.00 + £0.00 + £7.00 = £36.17.
Compare that with standard VAT. Without the scheme, Priya would owe one-sixth of her total VAT-inclusive sales of £425, which is £70.83. The margin scheme nearly halves the VAT here, which is exactly why getting the stock book right is worth the effort.
Her cleaning products, packaging and any repair costs are not in this table. They're business expenses she handles under normal VAT rules, and the VAT on them (where there is any) goes in her input tax as usual.
What invoices do you need to keep?
The stock book is only half the audit trail. You also need a purchase document and a sales invoice for each item, and they have to cross-reference the stock book.
Your purchase document (you'll often raise this yourself when buying from a private individual) must show the seller's name and address, your name and address, a cross-reference to the stock book such as the stock number, an invoice number unless you created the document yourself, the date, a description of the item, and the total price with no extra costs added.
Your sales invoice must show your name, address and VAT registration number, the buyer's name and address, the stock number cross-reference, an invoice number, the date, a description, and the total price. Crucially, you must not show VAT separately on a margin scheme sale. Instead the invoice must carry one of these exact legends:
- "Margin scheme - second-hand goods"
- "Margin scheme - works of art"
- "Margin scheme - collectors' items and antiques"
Keep all of it for six years. There's a twist for slow-moving stock: if you bought something more than six years ago and still haven't sold it, you must keep the purchase records until you do sell it. If HMRC can't verify a margin from your records, VAT falls due on the full selling price of that item.
Where do the figures go on the VAT return?
Margin scheme entries sit slightly differently from normal sales on your VAT return. Using Priya's quarter as the basis:
| VAT return box | What you include |
|---|---|
| Box 1 (VAT due on sales) | The VAT on the margins, here £36.17 |
| Box 6 (total sales ex VAT) | Full selling price of margin goods sold, less the VAT on the margin |
| Box 7 (total purchases ex VAT) | Full purchase price of margin goods bought in the period |
| Boxes 8 and 9 | Not used for margin scheme goods |
So Box 6 is the full £425 of sales minus the £36.17 VAT on the margins, giving £388.83. Box 7 is the £213 total she paid for the four items in the period. You don't break Box 6 down to just the margin, and you don't put margin scheme figures in the EU-related boxes 8 and 9.
If you're juggling margin scheme sales alongside standard-rated sales and want a second pair of eyes on the return, our VAT and bookkeeping support for online sellers is built around exactly this kind of mixed-rate trading.
Is the Global Accounting Scheme easier for high-volume sellers?
If you buy and sell large volumes of low-value items, tracking a margin on every single one is painful. The Global Accounting Scheme is a simplified version of the margin scheme that lets you work out VAT on your total eligible purchases against your total eligible sales for the period, rather than item by item.
The catch is the value cap. You can only use Global Accounting for items that cost under £500 each. Anything you buy for £500 or more has to come out and go through the standard margin scheme with its own stock book line. Certain goods are excluded entirely, including aircraft, boats, caravans, horses and ponies, and motor vehicles.
Here's how the period maths works under Global Accounting:
Illustrative example. A high-volume clothing reseller has these two quarters.
- Quarter 1: total eligible sales £8,000, minus opening stock £10,000 plus purchases £2,000. That's a negative margin of £4,000, so no VAT is due, and the £4,000 is carried forward.
- Quarter 2: total eligible sales £7,000, minus purchases £1,000, minus the £4,000 carried forward. That leaves a positive margin of £2,000, and the VAT is £2,000 × 1/6 = £333.33.
For most clothing and accessories resellers whose items sit well under £500, Global Accounting is the lighter-touch option. You still keep purchase and sales records and totals, you just don't compute a margin per item.
Do Vinted sellers even need to worry about VAT?
Most casual Vinted users never touch any of this. If you're clearing out your own wardrobe, you're selling personal possessions, not trading, and there's generally no income tax and no VAT to think about.
It changes once you're buying or making goods to sell at a profit. That's trading, and the profit is taxable. There's a £1,000 trading allowance for 2025/26, so genuinely small side income can be covered without even reporting it. Above that, you're in self-assessment territory.
Be aware that platforms now report seller data to HMRC under the digital platform reporting rules. A platform reports your details if you have 30 or more sales of goods in a calendar year, or total sales of more than 2,000 euros (around £1,700). Being reported doesn't automatically mean you owe tax, but it does mean HMRC can see the activity.
VAT only comes into play once your taxable turnover crosses the registration threshold, which is £90,000 in any rolling 12-month period for 2025/26. At that point a reselling business that sources second-hand stock will usually want the margin scheme, because it stops VAT eating the whole margin. If you're scaling a resale business and wondering when these obligations bite, our guide to accounting for Vinted and online resale sellers walks through the thresholds in order.
Frequently asked questions
Do I have to register for the VAT margin scheme?
No. There's no separate registration. You start using it simply by keeping the correct records and reporting the margins on your VAT return. The trade-off is that your stock book and invoices have to prove every margin, or VAT becomes due on the full selling price.
Can I include repair and cleaning costs in the purchase price?
No. The purchase-price column is only what you paid for the item itself, with no added costs. Repairs, cleaning, postage and platform fees don't reduce the margin. You deal with the VAT on those separately under normal VAT rules.
What VAT rate applies under the margin scheme?
You pay one-sixth (16.67%) of the margin, where the margin is your selling price minus your purchase price. If you sell for less than you paid, the margin is nil and there's no VAT on that item.
How long do I keep margin scheme records?
Six years, like other VAT records. But if you bought stock more than six years ago and still haven't sold it, you must keep the purchase records until you actually sell the item.
Can I use the margin scheme if I was charged VAT when I bought the item?
No. Goods you were charged VAT on can't go in the margin scheme. The scheme is designed for stock bought without recoverable VAT, such as items bought from private individuals or non-VAT-registered sellers.
Talk to a Zmartly accountant about your margin scheme
Running a margin scheme stock book correctly is mostly about discipline: one line per item, every column filled, every invoice cross-referenced. If you'd rather hand the VAT returns and bookkeeping to someone who does this every day, book a free call with a Zmartly accountant and we'll set your stock book and VAT process up properly.
