VAT for Depop Sellers: When Do You Need to Register?

If your Depop shop is growing quickly, you might be wondering whether you need to register for VAT. For most Depop sellers, the answer is no, at least while turnover is comfortably below the VAT registration threshold.

But once your taxable turnover goes over the VAT threshold, registration becomes compulsory. This guide explains how VAT works for Depop sellers, when you need to register, when voluntary registration may or may not help, and how the VAT margin scheme can apply to second-hand goods.

What Is VAT?

VAT, or Value Added Tax, is a tax on goods and services. In the UK, the standard VAT rate is 20%.

When you are VAT-registered, you usually:

• Charge VAT on taxable sales.
• Collect VAT from customers as part of the selling price.
• Submit VAT returns to HMRC.
• Pay HMRC the VAT you owe.
• Reclaim VAT on eligible business purchases.

For consumer-facing platforms like Depop, the VAT position needs careful thought because buyers usually see VAT-inclusive prices and cannot reclaim VAT themselves.

When Do Depop Sellers Need to Register for VAT?

You must register for VAT if your taxable turnover goes over the current VAT registration threshold in any rolling 12-month period, or if you expect it to go over the threshold in the next 30 days alone.

The current threshold is £90,000. HMRC confirms the threshold and registration rules on its VAT registration guidance.

What counts as taxable turnover?

Taxable turnover is the total value of sales that are not VAT exempt or outside the scope of VAT. For Depop sellers, this usually includes:

• Sales of clothing, accessories, handmade goods and stock.
• Shipping charges collected from buyers.
• Sales on other platforms such as Vinted, eBay, Etsy, Whatnot or Shopify.
• Sales made through markets, pop-ups or your own website.

Rolling 12-month test

The VAT threshold is checked on a rolling 12-month basis. It is not based only on the tax year or your accounts year. If your taxable sales in any 12-month period go over the threshold, you need to act.

If you go over the threshold, you normally need to register within 30 days of the end of the month in which you crossed it. Your effective date of registration is usually the first day of the second month after you went over.

Can You Register for VAT Voluntarily?

Yes. You can choose to register for VAT even if your turnover is below the threshold. This is called voluntary registration.

Voluntary registration can be useful if you reclaim a lot of VAT on business purchases. But if your buyers are consumers and your stock is mostly second-hand, the benefit is often less obvious.

How Does VAT Work for Depop Sellers?

Once registered, you need to account for VAT on sales from your effective date of registration. For consumer-facing listings, prices are normally VAT-inclusive.

Standard VAT accounting

Under standard VAT accounting:

• You charge VAT on taxable sales.
• You reclaim VAT on eligible purchases where you have valid VAT invoices.
• You submit VAT returns showing output VAT and input VAT.
• You pay HMRC the difference, or receive a repayment if input VAT is higher.

For example, if you charge £2,000 of output VAT on sales and reclaim £800 of input VAT on purchases, you pay HMRC £1,200.

Special VAT Rules for Resellers: The Margin Scheme

Many Depop sellers buy second-hand clothes from individuals, charity shops, car boot sales or non-VAT-registered sellers. In those cases, you may be able to use the VAT margin scheme.

HMRC's VAT margin scheme guidance explains that margin schemes tax the difference between what you paid for an item and what you sold it for, rather than the full selling price. The VAT due is one-sixth of the margin.

Example: standard VAT vs margin scheme

Say you buy a vintage jacket for £20 from a non-VAT-registered seller and sell it for £60.

• Purchase price: £20.
• Selling price: £60.
• Margin: £40.
• VAT under margin scheme: one-sixth of £40 = £6.67.

Without a margin scheme, VAT may be due on the full VAT-inclusive selling price, and there may be no input VAT to reclaim because the original seller did not charge VAT. That can make standard VAT accounting much less attractive for second-hand resellers.

When can Depop sellers use the margin scheme?

The margin scheme may apply where you sell eligible second-hand goods, works of art, antiques or collectors' items. For Depop sellers, second-hand clothing and accessories can often be the relevant category.

You normally need to:

• Buy eligible goods from private individuals or non-VAT-registered sellers.
• Keep detailed purchase and sale records.
• Calculate VAT on the margin correctly.
• Avoid reclaiming VAT on goods bought under the scheme.
• Follow margin scheme invoice and record rules.

This is one area where advice is worth getting. The scheme can save VAT, but only if the records are right.

What Happens If You Do Not Register for VAT?

If your turnover goes over the threshold and you do not register, HMRC can backdate your registration to the date you should have been registered. You may then owe VAT on sales you already made, even if you did not charge customers extra at the time.

HMRC may also charge penalties and interest. This can become expensive quickly, especially if your margins are already tight.

How to Register for VAT

You can usually register online through HMRC. For a sole trader, HMRC says you will typically need information such as your National Insurance number, identity details, bank details, Unique Taxpayer Reference if you have one, and turnover estimates.

HMRC explains the process on its VAT registration page.

Once registered, you receive a VAT registration number and need to keep VAT records from your effective date of registration.

VAT and Depop: Practical Considerations

Prices are usually VAT-inclusive

Depop is consumer-facing, so your listed prices are usually treated as VAT-inclusive. If VAT applies, part of the sale price belongs to HMRC.

You may need better bookkeeping

VAT means your bookkeeping needs to be much cleaner. You need to track sales, fees, refunds, postage, stock purchases, VAT invoices and margin scheme records where relevant.

You must use Making Tax Digital

VAT-registered businesses generally need to keep digital VAT records and file VAT returns through compatible software. HMRC has guidance on Making Tax Digital for VAT.

VAT affects margins

If you cannot increase prices, VAT effectively comes out of your margin. Before registering voluntarily, it is worth modelling your numbers properly.

Do You Need to Worry About VAT If You Are Under the Threshold?

If your turnover is under the VAT threshold, you do not need to register unless you choose to. But you should still monitor it, especially if your shop is growing or you sell across multiple platforms.

Focus on:

• Tracking monthly sales across all platforms.
• Keeping stock and purchase records.
• Understanding whether your goods could use the margin scheme later.
• Claiming allowable expenses correctly for Income Tax.
• Getting advice before crossing the threshold, not after.

How Simplr Accounting Can Help

VAT can be confusing, especially when you are dealing with second-hand resale goods, shipping, platform fees and multiple income streams.

At Simplr Accounting, we help Depop sellers understand when they need to register, whether the margin scheme applies, how to set up bookkeeping, and how to stay compliant without overpaying VAT.

If you are approaching the VAT threshold, or you are already over it, book a free discovery call and we will help you get set up properly.