Accountant for Jewellers: Cash, VAT and Second-Hand Stock

Two registrations catch jewellery businesses before anyone gets near a tax return. The first is high value dealer registration with HMRC, triggered when you accept cash payments of 10,000 euros or more for goods, and it has to be in place before you take that payment. The second is VAT registration, compulsory once taxable turnover passes £90,000 in any rolling 12 months. Neither is optional, both have a date and a number attached, and the second-hand side of the trade then adds a third question about which VAT scheme your stock belongs in. This page is for people who buy and sell jewellery as a business, whether that is a high street shop, a workshop taking commissions, or a dealer working from a private office.

The 10,000 euro cash trigger, and why it bites before the sale

A business that accepts, or makes, cash payments of 10,000 euros or more for goods has to register with HMRC as a high value dealer under the Money Laundering Regulations 2017. The threshold is stated in euros, not pounds, so a payment in sterling is measured against the euro equivalent, and the sensible working assumption is that anything approaching five figures is close to the line.

Three details in that rule are the ones jewellers get wrong.

It counts linked instalments, not just single payments. A customer paying for one ring in three cash visits of £4,000 has made one transaction, and the payments are added together. Splitting a payment does not put you outside the regime, and structuring a payment specifically to stay under a money laundering threshold is its own problem.

It bites before the payment, not after. Registration has to be in place before you accept the first qualifying payment. There is no grace period in which you take the cash and register afterwards, which is why the trigger catches otherwise careful businesses: the obligation arrives at the moment a customer offers to pay, not at the year end when your accountant looks at the books.

It applies to goods, not services. Cash taken for a repair, a valuation or a resizing does not count toward the trigger, and neither does any payment by card, bank transfer or cheque, whatever its size. Registered dealers have to run anti-money-laundering policies, check and record customer identity, and pay an annual registration fee for each premises.

The alternative most dealers actually choose is simpler. They set a hard internal cash-acceptance limit comfortably below the trigger, put it in writing for staff, and take everything above it by card or bank transfer. That keeps the business outside the regime entirely and costs nothing but a till policy. If you would rather register, the conditions and the application sit on the gov.uk high value dealer registration guidance, and registration is a legal obligation you take on directly with HMRC. We describe how the trigger works and where the paperwork goes; we do not provide anti-money-laundering supervision, risk assessments or compliance programmes, and no accountant can register on your behalf as a substitute for you meeting the conditions.

One thing that is not tax at all: hallmarking of precious metal articles is an Assay Office requirement under the Hallmarking Act 1973 and has no bearing on any figure on this page.

The VAT threshold, and what actually counts toward it

You must register for VAT once taxable turnover passes £90,000 in any rolling 12 months, or when you expect to pass it in the next 30 days. The deregistration threshold is £88,000 and the standard rate is 20%. Those figures apply from 1 April 2024 and were current when this page was checked in August 2026.

Rolling 12 months is the trap. It is not your accounting year and not the tax year, so a strong December and a good wedding season can push a jeweller over the line in the middle of a quiet trading year. Repairs, resizing, valuations and commission work all count toward the threshold alongside retail sales, because they are taxable supplies like any other.

Second-hand sales count toward the threshold at the full selling price, not at the margin. That catches dealers who assume the margin scheme reduces their turnover as well as their VAT. It does not. The scheme changes how much VAT you pay on a sale, not how large the sale is for registration purposes.

Making Tax Digital for VAT has applied to every VAT-registered business since April 2022, so registration also means digital records and compatible software from day one, regardless of turnover.

Second-hand jewellery and the margin scheme: what qualifies, what does not

When you buy a piece from a member of the public there is no VAT on the purchase, so you have nothing to reclaim. If you then had to charge 20% on the full resale price, the tax would fall on money that was never your value added. The VAT margin scheme fixes that: you account for VAT at one-sixth (16.67%) of the margin, meaning the selling price minus the purchase price, and you charge no separate VAT to the customer.

The exclusion is where jewellers lose money. Precious metals, investment gold and loose precious stones are outside the scheme. Finished second-hand jewellery qualifies. Scrap gold bought by weight for melting does not. Investment gold has its own VAT treatment. Unmounted diamonds and loose coloured stones do not qualify either, however clearly second-hand they are. A dealer who runs the whole counter through the margin scheme because most of it is jewellery is under-declaring VAT on the part of the counter that is metal and stones, and the stock book is exactly where that shows up.

The paperwork is not administrative tidiness, it is the scheme. You need a purchase invoice in the scheme format for every item, including for a private seller who has never issued an invoice in their life, a sale invoice that does not show VAT separately, and a stock book recording each item with its purchase and sale details. Eligibility is lost item by item where those records fail, and it is also lost where you bought the piece on a VAT invoice from another business, because then you have input VAT to reclaim and the ordinary rules apply. The mechanics, the stock book discipline and the per-item rule are set out in full on our VAT margin scheme guide, which works the same scheme through vehicles; the gov.uk VAT margin schemes page and VAT Notice 718 are the underlying authorities.

Worked example: one second-hand ring, inside and outside the scheme

Farah runs a jewellery shop in Colchester and is VAT registered. She buys a second-hand diamond solitaire over the counter from a private customer for £1,800 and sells it four months later for £3,000. All figures are 2026/27 and every line can be redone with your own numbers.

Under the margin scheme, her margin is £3,000 minus £1,800, which is £1,200. VAT is one-sixth of that margin, so £1,200 divided by 6, which is £200. After paying HMRC, Farah keeps £3,000 minus £1,800 minus £200, which is £1,000.

Now take the same ring outside the scheme, because the stock book entry was never made and the private purchase invoice does not exist. The £3,000 selling price is treated as VAT inclusive, so output VAT is £3,000 divided by 6, which is £500. There is no input VAT to set against it, because the purchase from a private individual carried none. Farah keeps £3,000 minus £1,800 minus £500, which is £700.

The missing paperwork costs £300 on one ring, which is 25% of the gross margin on that sale.

Now test the exclusion. Suppose Farah spends the same £1,800 on scrap gold bought by weight, or on a parcel of unmounted stones, and sells the lot for £3,000. Neither is eligible for the margin scheme at all, so the VAT is £500 rather than £200 regardless of how good her records are. Same money in, same money out, different answer, because the scheme follows what the goods are and not what they cost.

Low-value stock: global accounting for items bought at £500 or less

Tracking every item individually is unworkable if you buy job lots of second-hand silver, costume pieces or estate oddments. Global accounting is the sub-scheme for that. Instead of a per-item calculation you total your eligible purchases and eligible sales for the VAT period, take purchases away from sales, and pay one-sixth of the resulting gross margin.

The gate is the purchase price: you cannot bring an individual item into global accounting if its purchase value is over £500, checked on the gov.uk global accounting VAT margin scheme guidance in August 2026. Items above that stay on the ordinary margin scheme with their own stock book entries. Motor vehicles, boats, caravans, aircraft and horses are excluded from global accounting outright, and so is anything shown with VAT separately on the purchase invoice, or an eligible item you use to make something that is not eligible. The precious metals, investment gold and loose stones exclusion still applies underneath all of this, so a tray of second-hand silver jewellery at £80 a piece can go into global accounting while a tray of scrap silver cannot.

In practice most jewellers run both: global accounting for the low-value flow, item-by-item margin scheme records for anything of real value. That is allowed, provided the two populations are kept clearly apart in your records.

Stock, deposits and the valuation your insurer uses

Jewellery businesses carry an unusual amount of value in a very small space, and the accounting consequences are specific.

Stock goes into your accounts at the lower of cost and net realisable value, not at retail price and not at the replacement figure on your insurance schedule. An insurance valuation is a claims document. It is not evidence of what your stock is worth for tax, and a business that quietly starts using it will overstate profit and pay tax on money it has not made. Where a piece has sat unsold for years and the realistic sale price has fallen below what you paid, writing it down to net realisable value is not aggressive accounting, it is the rule.

Customer deposits on commissioned pieces are the second point. If you are VAT registered, a deposit is normally a tax point, so VAT is due on the deposit in the period you receive it and not when the finished piece is collected. Commissioned new work is a standard-rated supply at 20%, entirely separate from anything on the second-hand side, and it cannot go through the margin scheme because you made it.

Third, stocktaking. A physical count reconciled to the stock book at each year end is what supports both your accounts and your margin-scheme position, and it is the one piece of housekeeping that pays for itself when HMRC asks a question about a particular item three years later.

If you also have a shop counter

A jeweller selling a mix of items across a till, rather than writing up each sale, may need a retail VAT scheme to work out output VAT. There are three: point of sale, apportionment and direct calculation. Apportionment Scheme 1 and Direct Calculation Scheme 1 are open to retail turnover up to £1 million; Scheme 2 versions run up to £130 million; above £130 million a bespoke scheme agreed with HMRC is compulsory. Those gates are set out in gov.uk Notice 727 and were current at August 2026. The choice between the three moves the VAT bill, so it is worth calculating rather than defaulting, and the arithmetic is in our retail VAT schemes guide. A retail scheme and the margin scheme can operate alongside each other, with margin-scheme sales kept outside the retail scheme calculation.

Structure and the tax that follows

Most jewellery businesses start as sole traders and some should stay there. A sole trader pays income tax on trading profit at 20%, 40% or 45% above the £12,570 personal allowance, with the basic-rate band running to £50,270, plus Class 4 National Insurance at 6% on profits between £12,570 and £50,270 and 2% above that. Those are the 2025/26 figures and they were still current when this page was checked in August 2026. Class 2 National Insurance has not been payable since 6 April 2024 for profits at or above the Small Profits Threshold.

A limited company pays corporation tax instead: 19% where augmented profits are £50,000 or less, 25% where they exceed £250,000, and marginal relief tapering between the two so that the slice in the middle carries an effective 26.5%. Those limits are shared between associated companies and time-apportioned for short periods, which catches owners running a retail company and a separate workshop company. Both rates apply for financial years 2025 and 2026. Corporation tax is due 9 months and 1 day after the period end.

The jewellery-specific angle on structure is liability and stock. A business holding six figures of stock, taking customer property in for repair and running a public counter has a genuine liability question that a spreadsheet comparison of tax rates will not answer. Run both sides at your actual profit level before deciding.

If your business is more shop than dealer

If your business is primarily a shop with a jewellery specialism, start with our retail accounting overview. If the second-hand side is the bulk of what you do, global accounting, set out above, is the mechanism that does the most work for a jeweller, and our margin scheme guide is the deeper read on the core scheme underneath it, worked through a different trade. And if you want someone to look at your stock book and tell you whether it would survive a VAT visit, talk to us.