Vinted and eBay resellers: VAT on the margin, not the price

Resellers who buy second-hand stock from private sellers and sell it on Vinted, eBay or Depop can pay VAT on their margin rather than on the full price, under HMRC's margin scheme for second-hand goods. The catch comes one step earlier. Whether you have to register at all is decided by your full sales, not your margin.

Registration counts every pound of sales

The VAT registration threshold has been £90,000 since 1 April 2024. You must register for VAT if your taxable turnover for the last 12 months goes over it, or if you expect it to go over it in the next 30 days alone. Gov.uk defines taxable turnover as "the total value of everything you sell that is not VAT exempt or 'out of scope'". HMRC's notice on who should register gives a margin-based rule to one group, tour operators. It gives none to second-hand dealers, so a reseller of second-hand clothes is measured on the selling price of every item.

That is why a reseller can reach the threshold while the profit still feels like a side income. Fees, postage and the cost of the stock all come off profit, but none of them comes off the figure that decides registration. If the Budget on 28 October changes the threshold, gov.uk will show the new figure and the date it starts.

Once registered, VAT on the margin

The VAT margin scheme lets you pay VAT at one-sixth of the difference between what you paid for an item and what you sold it for. It covers second-hand goods, which HMRC describes as goods that can still be used, or could be after repair. You cannot use it for anything you were charged VAT on when you bought it, which is why it suits stock bought from private sellers and house clearances.

It works item by item. Each sale has its own margin and its own VAT, and an item sold for less than it cost has a margin of nil. Repairs, cleaning, packaging and platform fees stay out of the calculation. Where they carry VAT, you reclaim it on your return in the normal way.

The records are the scheme

There is no application. You start using it by keeping the right records, and HMRC says you will pay VAT on the full selling price of an item if you do not meet all the scheme's requirements. For each item that means:

• a line in a stockbook, with its own stock number, the purchase date, price and invoice number, the seller's name, a description, and later the sale date, price and invoice number, the buyer's name, the margin and the VAT;

• a purchase invoice showing the seller's name and address, which you can make out yourself when you buy from a private seller;

• a sales invoice that does not show VAT separately and carries the words "margin scheme - second hand goods".

Our guide on how to run a margin scheme stockbook, column by column works through a resale quarter with every figure in place.

What it looks like over a year

Illustration, not a real client. Zara buys pre-loved designer clothes from private sellers and house clearances and sells them on Vinted and eBay from her flat in Leyton. In the 12 months to 30 September 2026 her sales come to £96,000. The items she sold cost her £54,000, and every one sold for more than it cost.

Her taxable turnover is £96,000, which first passed the threshold in September, so she must register by 30 October, and her registration takes effect on 1 November. Her margin of £42,000 does not change that.

Once she is registered, the scheme decides what a year of the same trading would cost her in VAT:

• VAT on the full price: £96,000 divided by six, which is £16,000.

• VAT on the margin, with a complete stockbook: £42,000 divided by six, which is £7,000.

The £9,000 between those two figures rests on her stock qualifying and her records being complete. Any item she cannot trace from purchase to sale goes back to VAT on its full price.

Before the next busy season

1. At each month end, total the previous 12 months of sales from the platforms' own reports. It is sales that count, not profit and not payouts.

2. Start the stockbook before you need it, with a stock number on every item as it comes in.

3. Record the seller's name and address at the point you buy, because the purchase record needs both.

4. If you are within reach of the line, read up on the 30-day registration deadline and how the effective date is set, so the date does not decide for you.

The margin scheme is generous, but only to the reseller who can prove every margin. The stockbook is the price of the discount.

About the author

Harvey Dhillon is the founder and CEO of Zmartly, a UK accountancy firm for ecommerce sellers. He grew up in West London and began his career in investment banking finance at Barclays, before going full-time on Zmartly in 2020. He is a Chartered Management Accountant (ACMA, CGMA).

Featured photo by Fujiphilm on Unsplash.