Get this scheme right and you only pay VAT on your profit. Get it wrong and HMRC can tax your entire turnover.
Quick answer. Under the Margin Scheme you pay VAT only on your profit, not the full sale price: the VAT due is the margin (sale price minus purchase price) divided by six. Sell an item at a loss and there’s no VAT to pay on it.
VAT is where a trading card business quietly wins or loses real money. Because most card stock is bought second-hand — from collections, private sellers and other collectors — the way you account for VAT makes a genuine difference to what you keep. The VAT Margin Scheme, and its bulk-friendly cousin the Global Accounting Scheme, are almost always the right tools for the job. This guide explains exactly how they work, how to calculate the VAT, and how to stay on the right side of HMRC.
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In this guide
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When do you have to register for VAT?
You must register for VAT once your taxable turnover passes £90,000 in any rolling 12-month period (the threshold since April 2024), or if you expect to pass it within the next 30 days. Crucially, that figure includes everything you sell — second-hand singles, sealed product, accessories, across every channel combined. Below the threshold you don’t charge VAT at all; above it, you must account for VAT on your sales.
The Margin Scheme itself has no turnover limit — it’s simply the method you use to account for VAT on eligible second-hand goods once you are registered. You don’t need to apply to HMRC to use it; you just have to keep the right records and account for it correctly on your return.
Standard VAT vs the Margin Scheme
Under standard VAT accounting, you charge 20% on the full selling price of an item and reclaim the VAT on your costs. That works fine when you buy stock from VAT-registered suppliers who give you a VAT invoice to reclaim against.
The problem for card dealers is that most second-hand stock is bought from private individuals or non-registered sellers — people clearing a collection have no VAT to charge you, so there’s no input VAT for you to reclaim. Under standard rules you’d then pay 20% on the whole resale price with nothing to offset, effectively taxing goods that have already been through the VAT system once. That’s the double taxation the Margin Scheme exists to prevent.
The Margin Scheme fixes it by charging VAT only on the difference between what you paid and what you sold for. It’s optional and you can apply it item by item — running some sales under the scheme and others under normal VAT rules — provided your records keep the two clearly apart.
How the margin is calculated — a single item
For an individual item, the margin is the selling price minus the purchase price, and the VAT due is one-sixth of that margin. It’s one-sixth because the margin is treated as VAT-inclusive, and at 20% the VAT element of any gross figure is 1/6 (16.67%).
Worked example: you buy a card from a private seller for £100 and sell it for £160. Your margin is £60, and the VAT you owe is £60 divided by 6, which is £10 — so you keep £150. Under standard VAT you’d have owed £26.67 (£160 divided by 6, with no input VAT to reclaim), keeping only £133.33. On this one sale the scheme saves you £16.67, and that difference repeats across every second-hand sale you make.
If you sell an item for less than you paid, there’s no VAT to pay on it — but you can’t reclaim the shortfall either. And the trade-off across the board is that you cannot reclaim VAT on the purchase of the goods you sell under the scheme.
One practical point on invoicing: a margin-scheme invoice must not show VAT as a separate line. Instead it shows the gross selling price and a note such as “Margin scheme — second-hand goods”. That suits card businesses selling to consumers, who couldn’t reclaim the VAT anyway.
The Global Accounting Scheme — built for bulk singles
Tracking the buying and selling price of every card individually is impractical when you’re shifting thousands of low-value singles. The Global Accounting Scheme is the simplified version built for exactly that. Instead of working item by item, you total your eligible purchases and your eligible sales for the VAT period and pay VAT on the overall margin.
Worked example: in a quarter you buy £5,000 of eligible second-hand stock and sell £8,000. Your global margin is £3,000, and the VAT due is £3,000 divided by 6, which is £500. No need to match each sale to a specific purchase.
Two rules matter most here. First, the scheme only covers items with a purchase price of £500 or less — anything you buy for more than £500 has to be handled item by item under the standard Margin Scheme instead. Second, if your eligible purchases exceed your sales in a period (a negative margin), you don’t lose it: you carry that negative margin forward to the next period and add it to that period’s purchases. You can also bring your existing eligible stock into the scheme when you start, by including its purchase price in your first period’s purchases.
For card sellers, Global Accounting is usually the sensible default for singles and bulk, with any high-value individual cards (over £500) tracked separately. Your descriptions still need to be meaningful — “assorted Pokémon singles” is fine, but a bare “assorted goods” isn’t enough for HMRC.
What qualifies for the scheme — and what doesn’t
To use either scheme, the goods must be eligible and bought under the right circumstances. In practice, that means second-hand goods and collectors’ items acquired without VAT charged on the invoice — typically from private individuals or non-registered dealers. Second-hand singles and collections you buy from the public are the classic qualifying stock.
What doesn’t qualify:
- New or sealed product bought from a VAT-registered distributor: you’ll have a VAT invoice, so this goes through standard VAT and you reclaim the input VAT instead — the scheme would actually cost you here.
- Imported stock: goods you’ve imported and accounted for import VAT on generally can’t go through the Margin Scheme, and are handled under normal rules (see the overseas-buying guide).
- Anything you’ve used personally: goods put to private use don’t qualify even if they’re eligible by type.
This is why many card businesses run both systems side by side — the Margin Scheme on second-hand singles and collections, and standard VAT on new sealed product from distributors. The key is that your records clearly separate the two.
You can still reclaim VAT on your other costs
A common worry: does using the Margin Scheme mean you lose VAT recovery on everything? No. The no-reclaim rule applies only to the margin-scheme goods themselves. All your other business costs are recovered in the normal way, provided you hold a valid VAT invoice — platform and marketplace fees, payment processing, software subscriptions, packaging, postage, professional fees and equipment. So you get the margin saving on your stock without losing recovery on your overheads.
The records HMRC requires
Records are not an afterthought here — they are the scheme. If HMRC can’t verify the margins you’ve declared, VAT becomes due on the full selling price of the goods. You need to keep everything for at least six years.
- A stock book (item-by-item scheme): for each item, the date acquired, purchase price, supplier’s name and address, a description, and then the date sold, selling price and customer.
- Period totals (Global Accounting): your total eligible purchases and sales for each VAT period, with descriptions good enough to identify the goods, backed by purchase and sales evidence.
- Correct margin-scheme invoices: showing the gross price and the “Margin scheme” wording, with no separate VAT line.
Common mistakes to avoid
- Running new or sealed product through the scheme — only genuinely second-hand goods qualify.
- Reclaiming input VAT on margin-scheme stock — explicitly prohibited; you get the margin treatment instead.
- Mixing the standard scheme and Global Accounting on the same type of item — choose one approach per item type and be consistent.
- Treating a loss as a VAT refund — item by item, zero is the floor; under Global Accounting a negative margin carries forward, it isn’t repaid.
- Weak or missing records — the fastest way to have the scheme denied and VAT charged on your whole turnover.
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Key takeaways
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Work with MAP. Operating the Margin Scheme correctly across thousands of second-hand cards is exactly the kind of thing a sector specialist keeps you out of trouble on. We set it up, run it, and make sure you never overpay VAT on stock — or fall foul of the records rules.
Related guides: 2 (stock systems), 5 (selling outside the UK), 15 (sales-report information), 19 (buying stock overseas).
