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Hardly ever. It cannot be combined with the margin scheme. And it charges VAT on the full selling price, including what you paid for the piece yourself.
Written by Griet Coussement, founder of Vintro Pro and Vintiques Export
Which rules? The United Kingdom only. The Flat Rate Scheme is an HMRC scheme. It does not exist in Belgium, the Netherlands or France.
An accountant or a website suggests the Flat Rate Scheme: "simpler, less VAT". For a second-hand business that is almost never true.
On the Flat Rate Scheme you pay HMRC a fixed percentage of your turnover, instead of the difference between the VAT you charge and the VAT you pay. You have to apply for it. It is meant for small businesses: up to £150,000 turnover a year, excluding VAT.
That is the whole difference. One chair, two ways.
Bought for £600, sold for £1,000
Margin scheme
VAT = 1/6 of £400 = £66.67
Flat Rate Scheme
VAT = 7.5% of £1,000 = £75.00
you pay VAT on thisnot on this
HMRC says it itself: the Flat Rate Scheme is “of limited value” if you sell a lot of second-hand goods, because it charges VAT on the full selling price rather than the margin (VAT Notice 733, §2.7).
Four pieces, each sold for £1,000 to a private buyer. For the Flat Rate Scheme we use 7.5%, the rate for “Retailing not listed elsewhere”.
| Purchase price | Margin scheme | Flat Rate 7.5% | Cheaper |
|---|---|---|---|
| £300 | £116.67 | £75.00 | flat rate, £41.67 |
| £600 | £66.67 | £75.00 | margin, £8.33 |
| £900 | £16.67 | £75.00 | margin, £58.33 |
| £1,100 (loss) | £0.00 | £75.00 | margin, £75.00 |
The break-even point. If a piece costs you more than 55% of its selling price, the margin scheme costs less. In your first year of VAT registration, with the 1 point reduction (6.5%), that point moves to 61%.
If you buy very cheaply, as at a house clearance, the flat rate can look lower on paper. Read the three points below before you decide.
In pounds, under UK rules. Take an ordinary piece from your shop.
| VAT under the margin scheme | £0.00 |
| VAT under the Flat Rate Scheme | £0.00 |
| Difference | £0.00 |
You choose for your whole business, not piece by piece: use an ordinary piece, not your best buy. The rate for your sector is on gov.uk. This is a tool, not a VAT return.
VAT on what you paid yourselfThe margin scheme only taxes your profit on the piece. The flat rate taxes the full price, including the part you paid the previous owner.
VAT even on a lossSell below your purchase price and the margin scheme VAT is nil. On the flat rate you still pay the percentage of the selling price.
No VAT back on your costsOn the flat rate you cannot reclaim VAT on your purchases, except certain capital assets over £2,000. Your van, tools and packaging then cost you 20% more.
The Flat Rate Scheme does not exist there. Second-hand goods follow that country's margin scheme.
UK scheme. For second-hand goods: the Belgian margin scheme.
UK scheme. For second-hand goods: the Dutch margin scheme.
UK scheme. For second-hand goods: the French margin scheme.
fixed % of your whole turnover; 7.5% for retail
No. HMRC says so in VAT Notice 733: you cannot use the Flat Rate Scheme with the margin scheme for second-hand goods or the auctioneers' scheme (§2.7). If you use the margin scheme, you cannot join (§3.6).
Rarely. You pay a percentage of the full selling price, including what you paid for the piece. At 7.5%, the margin scheme costs less as soon as a piece costs you more than 55% of its selling price. On a loss, and when you have costs with VAT on them, the margin scheme wins by more.
It depends on your trade sector. 'Retailing not listed elsewhere' is 7.5%. In your first year of VAT registration you get a 1 percentage point reduction. The percentage applies to your VAT-inclusive turnover.
No. The Flat Rate Scheme is a UK scheme run by HMRC and applies only in the United Kingdom. In Belgium, the Netherlands and France, second-hand goods follow that country's margin scheme.
A VAT-registered UK business whose taxable turnover, excluding VAT, will be £150,000 or less in the next year. If your total income for a year is more than £230,000, you must leave. And you cannot use the margin scheme.
Sources — HMRC, VAT Notice 733 Flat Rate Scheme for small businesses, §2.1, §2.7, §3.1, §3.5, §3.6, §4.7 and §6.2 (last updated 18 December 2025); gov.uk, VAT Flat Rate Scheme: Who can join and How much you pay (table of rates, “Retailing not listed elsewhere” 7.5%). Checked on gov.uk on 6 November 2026. This is an explanation, not tax advice.
Vintro Pro tracks purchase price, selling price and margin for every piece. Ready for your accountant.