Understanding the Second-Hand Margin Scheme in the Jewellery Trade
Second-hand diamond jewellery has its advantages — better value, more sustainable, and often more interesting. At S Weissbart, we regularly supply second-hand pieces to the trade using the VAT margin scheme. It lets you sell without charging VAT on the full price — just the profit. That means a sharper deal for your customer, and the same margin for you. Here’s a quick Q&A covering how it works and what to keep in mind.
What is the VAT margin scheme, and how does it work?
The VAT margin scheme applies to a variety of second-hand goods — including diamond jewellery. It lets you sell without charging VAT on the full sale price. Instead, VAT is only due on the difference between your purchase price and your selling price — your profit margin.
What’s the benefit of using the margin scheme?
Your customer ends up paying a lot less VAT, so the final price is lower than a fully taxed new item. Meanwhile, your profit stays the same. It helps keep second-hand jewellery competitive and easier to sell.
This sounds complicated. Can you give me an example?
Sure. Say you buy a ring for £1,000 and sell it for £1,600. Under the margin scheme, you only pay VAT on the £600 profit — that’s 1/6th of the margin, or about £100. Your net profit is £500.
Why is this a better deal than charging VAT on the full selling price?
If you charged VAT on the full sale price, you’d add 20% VAT to the £1,500 (cost plus desired profit), making the price £1,800. That’s £200 more than the margin scheme price — a significant saving for your customer, with no difference to your profit.
That’s a big saving! But aren’t customers a little wary of buying “old” goods?
Sometimes, yes. But once you explain the savings, most people are convinced. You can also highlight the sustainability side of reusing jewellery. If they don’t like the original setting, you can offer to refashion the diamond into a new piece—and even offset the value of the old metal against the new design. Just remember to invoice separately for any work done, with VAT added to that.
I’ve got a few more questions...
Here are some of the common ones we hear about eligibility, paperwork, and VAT returns.
If I buy second-hand jewellery but get charged VAT, can I still sell it on the margin scheme?
No—you must charge VAT on the full selling price. To qualify for the margin scheme, your purchase invoice must show the item is second-hand and sold without VAT, whether you bought it from a dealer or a private seller.
Does it involve more paperwork?
You do need to be organised. Keeping a detailed stockbook for each item, along with purchase and sales invoices, is essential. You probably already do this anyway, but with the margin scheme, it’s important to keep everything matched up carefully.
Will using the margin scheme affect my VAT return?
As long as you keep good records, your accountant should have no trouble accounting for the VAT due. It just means being a bit more organised — but nothing complicated.
Is there anywhere I can find out more information?
Definitely. The HMRC website has detailed guides on the margin scheme and record-keeping:
And of course, you can always ask us if you want to chat it through.
How do I find out what second-hand items you have available?
We have hundreds of second-hand diamond jewellery pieces in stock. Just get in touch to ask about anything specific or to see what’s available. If you’re after new diamonds, we have separate stock lists for those too. We’re always here to help.
If you have any more questions or want to chat, just get in touch or drop us a message on Instagram — we’re always happy to talk diamonds.