VAT margin scheme calculator

Work out the VAT on a second-hand phone in one step, and see exactly how the figure was reached. Free, no sign-up, and it works whether or not you ever use our software.

VAT you owe on this sale

£10.00

Margin (sale − purchase): £60.00
VAT at one sixth: £10.00
Margin after VAT: £50.00

How that was worked out

1. Find the margin. The scheme taxes the difference, not the whole sale price.
£240.00 − £180.00 = £60.00
2. Take one sixth of it. The margin is VAT-inclusive, so the VAT inside it is one sixth — 16.67%, not 20% of the margin.
£60.00 ÷ 6 = £10.00
3. What is left is yours.
£60.00 − £10.00 = £50.00

Why one sixth and not 20%? Because the margin already includes the VAT. Twenty per cent of a VAT-exclusive amount is the same money as one sixth of the VAT-inclusive total — taking 20% of the margin would overstate what you owe.

Before you rely on it

When the margin scheme applies

The arithmetic is simple. Whether you are entitled to use it is the part worth checking.

It covers second-hand goods: The scheme can be used for second-hand goods, works of art, antiques and collectors' items. A used handset bought from a member of the public is the ordinary case in this trade.
Not if you were charged VAT on it: If you bought the item on a VAT invoice showing a separate VAT amount, it is not eligible for the margin scheme. You reclaim that VAT and sell the item under normal VAT rules instead.
Repairs and parts stay outside the margin: You cannot add what you spent on repairs, parts, accessories or business overheads to the purchase price. Where you were charged VAT on those, reclaim it on your VAT return in the normal way.
The margin already includes the VAT: That is why the figure is one sixth of the margin — 16.67% — rather than 20% of it. Charging 20% of the margin would overstate what you owe on every sale.
A loss on one item is not a credit on another: Under the standard margin scheme you cannot set a loss on one sale against the margin on a different one. The alternative global accounting scheme works differently.
Records are the condition, not the paperwork: The scheme requires a stockbook tracking each item individually, plus purchase and sales invoices for all of them. Miss the records and VAT is due on the full selling price, not the margin.
The invoice must not show VAT separately: A margin scheme sales invoice shows the total price only. Showing a separate VAT amount on it is not permitted, which catches out anyone whose till prints a standard VAT breakdown by default.

General information, not tax advice. Check the guidance that applies where you trade, or speak to your accountant about your circumstances.

Where these figures come from

Every rule on this page is taken from the tax authority's published guidance, linked below so you can check it yourself. Rates and thresholds differ by country — these are the figures the worked example uses. Checked 4 August 2026.

VAT margin schemes: overview(opens in a new tab)
The scheme taxes the difference between what you paid and what you sold it for. VAT is 16.67% (one sixth) of that difference.
VAT margin schemes: eligibility(opens in a new tab)
Which goods qualify, and that overheads, repairs, parts and accessories cannot be included in margin calculations.
VAT margin schemes: keeping records(opens in a new tab)
The stockbook requirement, and that a margin scheme invoice must not show VAT separately.
VAT rates(opens in a new tab)
The standard rate of VAT is 20%. The one-sixth fraction is what 20% looks like inside a VAT-inclusive amount.

One point is stated here without a live source. That no VAT is due when an item sells at or below cost appeared explicitly in a notice that was withdrawn on 23 December 2021. We have kept it because it follows directly from the definition above — a sale at or below cost produces no difference to tax — but we would rather tell you that than cite a withdrawn notice as though it were current.

Common questions

What people get wrong about margin VAT

Mostly the same four things.

Not if you are using the margin scheme and the item qualifies. VAT is due on the difference between what you paid and what you sold it for, at one sixth of that difference. If the scheme's requirements are not met, VAT becomes due on the full selling price instead.

Because the margin is a VAT-inclusive amount. One sixth of a VAT-inclusive figure is the same money as 20% of the VAT-exclusive amount underneath it. Applying 20% to the margin would charge you VAT on the VAT, and overstate what you owe on every sale.

No. Repairs, parts, accessories and business overheads cannot be included in the margin calculation, so they do not reduce the VAT. Where you were charged VAT on them, you reclaim that on your VAT return in the normal way instead.

There is no margin, so there is nothing to tax on that sale. You cannot then set that loss against the margin you made on a different item — under the standard scheme each sale stands alone. The separate global accounting scheme treats losses differently.

No. A margin scheme sales invoice shows the total price and must not show VAT separately. This trips up shops whose till prints a standard VAT breakdown automatically, because the wrong paperwork can cost the scheme on that sale.

No separate registration is required. You start using it by keeping the correct records — a stockbook tracking each item individually, with purchase and sales invoices — and reporting it on your VAT return.

Doing this on every handset, by hand

One sale is a thirty-second sum. The difficulty is that the margin scheme is a per-item scheme: the VAT depends on what that specific handset cost you, so a shelf of the same model bought at four different prices is four different calculations, each needing its own record.

That is the work — not the arithmetic, but keeping a cost against every individual device from the day it arrives to the day it leaves, so the figure is still there when the return is due.

See how device-unit stock works