Work out the VAT due on a sale under the UK VAT margin scheme. Enter what you paid and what you sold for — the calculator applies the correct one-sixth VAT fraction to your margin, not a flat 20%.
How the VAT Margin Scheme Works
Ordinarily, VAT-registered businesses charge VAT on the full price of whatever they sell. The VAT margin scheme works differently: instead of charging VAT on the whole selling price, a business only accounts for VAT on the difference between what it paid for an item and what it later sells it for — the gross margin. This matters most for businesses that deal in eligible second-hand goods, where the original item may have already carried VAT, or been bought from someone who wasn’t VAT-registered at all.
To find the gross margin, take the selling price and subtract the purchase price. If that figure is positive, VAT is due on it. Here’s the part people often get wrong: the margin figure under the scheme is treated as VAT-inclusive, meaning the 20% standard rate is already baked into it. So rather than multiplying the margin by 20%, the correct approach is to divide it by six — this is the VAT fraction, and it gives the same result as applying 20% to the VAT-exclusive portion.
The scheme is generally available for goods such as second-hand items, antiques, works of art and collectors’ items, though eligibility depends on the specifics of the purchase. Always confirm whether your stock qualifies before relying on the scheme, and treat any figure this calculator produces as an estimate rather than formal tax advice.
How to Calculate VAT on a Margin
The calculation has two steps. First, work out the gross margin:
Gross margin = Selling price − Purchase price
Then apply the VAT fraction to that margin:
VAT due = Gross margin ÷ 6
The margin is split into six equal parts. One part is VAT — the other five are what’s left as profit before other costs.
If the selling price is equal to or lower than the purchase price, there’s no positive margin, so VAT due is £0.00. The scheme never produces a negative VAT figure or a refund on a loss-making sale.
VAT Margin Calculator Example
Here’s a worked example using the same method the calculator above uses.
In plain terms: the item made £1,000 more than it cost, one-sixth of that (£166.67) goes to VAT, and the remaining £833.33 is profit before any other costs are taken into account.
Who Can Use a VAT Margin Scheme?
The margin scheme is aimed at businesses reselling specific categories of goods, most commonly:
Not every purchase or sale within these categories automatically qualifies — eligibility depends on things like how the item was originally acquired and whether VAT was already reclaimed on it elsewhere in the supply chain. If you’re unsure whether a particular item or category of stock is eligible, check current HMRC guidance or speak with an accountant before applying the scheme.
Important VAT Margin Scheme Notes
This calculator provides an estimate for general information and is not tax or accounting advice.
Frequently Asked Questions
What is a VAT margin scheme?
A VAT margin scheme lets a business charge VAT only on the difference between what it paid for an item and what it sells it for, rather than on the full selling price. It’s commonly used for eligible second-hand goods, antiques, art and collectors’ items.
How do I calculate VAT on a margin?
Subtract the purchase price from the selling price to get the gross margin. Under the standard UK margin scheme, that margin is treated as VAT-inclusive, so VAT due is the margin divided by six.
Is VAT on the margin 20%?
Not directly. The standard VAT rate is 20%, but because the margin already includes VAT, working it out as one-sixth of the margin gives the same result as 20% of the VAT-exclusive amount. Simply multiplying the margin by 20% overstates the VAT due.
What happens if I sell an item for less than I paid?
If the selling price is equal to or below the purchase price, there’s no positive margin, so no VAT is due. The scheme doesn’t create a VAT refund on a loss.
Can I use this calculator for second-hand goods?
Yes, this calculator is designed for exactly that kind of sale, along with other eligible categories such as antiques, works of art and collectors’ items, provided the margin scheme applies to your circumstances.
Does every second-hand item qualify for the margin scheme?
No. Eligibility depends on factors such as how the item was acquired and whether VAT was already reclaimed on it. Check your specific situation against HMRC guidance or speak to an accountant before relying on the scheme.
VATCalculatorX is an independent tool and isn’t affiliated with HMRC. For the official rules on the margin scheme, including the one-sixth VAT fraction used here, see GOV.UK’s VAT margin schemes guidance.