A consignment shop costs far less to start than a conventional resale shop because you do not buy the stock: the consignor keeps ownership until the piece sells, and you take a commission - in published UK examples anywhere from 20% on high-value handbags to 50% on ordinary designer clothing. The money goes on premises, fit-out, insurance that covers goods you do not own, authentication, and software that can tell you at any moment whose item is where. The two things that sink new consignment shops are not the rent: they are a vague agreement and a VAT position nobody thought about before the first payout.

What a consignment shop legally is

You are a bailee and a selling agent. The consignor hands you goods; you hold them, display them and sell them on their behalf; title passes from the consignor to the buyer, never through you. Your income is the commission. This has four practical consequences.

  1. Consigned stock is not your asset and does not go on your balance sheet. Our consignment accounting article covers the bookkeeping.
  2. You owe the consignor a duty of care for the piece while you hold it, and your standard stock insurance may not cover it.
  3. Under the Factors Act 1889, a mercantile agent in possession of goods with the owner's consent can pass good title to a buyer acting in good faith. That protects your customers, and it means you must be sure the consignor actually owns what they bring in.
  4. For VAT, you are either an agent (accounting for VAT on your commission only) or, if you sell in your own name, treated as buying and reselling the goods. Which one you are is decided by the agreement and the invoicing, not by what you call yourself. More below.

How much does it cost to start?

Honest answer: the fixed costs are ordinary retail costs and the variable cost of stock is zero. Below is a checklist with the figures we could verify; the rest depends on your town and your taste.

Cost line What we can say (August 2026)
Company formation £100 online at Companies House, £124 by post. Optional - many consignment shops start as sole traders.
Premises Rent is local. Business rates: 100% small business rate relief on a rateable value of £12,000 or less, tapering to nil at £15,000.
Fit-out and security Rails, cabinets, a safe for watches and jewellery, CCTV, a counter. Budget to your street; there is no national figure.
Insurance Stock (owned), goods in trust (consigned), public liability, employers' liability if you hire. Brokers quote; no published rate.
E-commerce Shopify Basic £25 a month (or £19 billed annually), Grow £65, Advanced £344; online card rate 2% + 25p on Basic. Shopify POS Pro £69 per location if you want the till.
Accounting Xero UK from £16 a month (Ignite) to £65 (Ultimate), ex VAT. Sage Accounting £20 to £59 ex VAT after the promotional period.
Authentication Entrupy from $139 a month (Petit, 25 tokens, 10% off annually) for bags and sneakers; Real Authentication $30 per item; LegitGrails from $15 per luxury bag. See the authentication article.
Consignment software From roughly $10 a month for a Shopify consignment app to $139 to $339 a month for dedicated systems. See best consignment software UK.
Working capital Payouts go out monthly regardless of whether your own cash has cleared. Three months of overheads is the usual rule.

What you do not need: a stock budget, beyond a small bought-in core if you want the rails full on day one.

What must the consignment agreement say?

Everything that will be argued about later. Published UK examples are useful as a template of what a working agreement contains. Sign of the Times in London holds items "for 12 months on a sale or return basis", cannot discount in the first two months, then may discount up to 30% after two months, 50% after four, 70% after six and 90% after twelve, and pays "at the end of the month for all the items sold in that month via bank transfer" with a £20 minimum balance. Shush London displays items for three months, then contacts the consignor to reduce the price or collect. Both are written down and public, which is the point.

Your agreement needs, at minimum:

  • Ownership. The consignor warrants they own the item and have the right to sell it, and that it is genuine. Title stays with them until sale.
  • Term. How long you hold it - 60, 90, 180 days or 12 months - and what happens at the end: collection, return at whose cost, donation, or disposal. Uncollected goods are governed by the Torts (Interference with Goods) Act 1977, which lets a bailee sell after proper written notice; get the notice wording from a solicitor.
  • Pricing authority. Who sets the price, and what discounts you may apply and when. A markdown schedule like Sign of the Times' avoids a conversation per item.
  • Split and what it is calculated on. Net of VAT, net of card fees, net of marketplace fees? Shush states "50-50 basis, after VAT". Say it.
  • Payout timing. Monthly in arrears is common, and after any online returns window has closed - Sign of the Times pays online sales "on the first opportunity after the seven day returns window has expired".
  • Loss, damage and theft. Who bears it, at what value (agreed price? payout value?) and whose insurance responds.
  • Authentication. That you may have the item authenticated, who pays, and that a failed authentication ends the consignment and may be reported.
  • Returns from buyers. A consumer return re-opens the consignment; the agreement should say the payout is reversed or delayed.
  • Data and records. You will hold the consignor's name, address and bank details and a record of the item; say how long.

What are typical UK consignment splits?

Published figures, as of August 2026:

Source Split Notes
Shush London 50/50 "after VAT"; 70/30 in consignor's favour for "very rare and expensive items" Three-month display period
Sign of the Times, London Consignor receives "up to 80%", rising with price; FAQ says its rate "starts from 60%" for lower-priced items Markdown schedule, monthly payout
Reloved Again "Up to 70 percent of each sale" to the consignor; says most London shops charge 40% to 60% commission Self-description
S&R Jewellers, London (handbags) Commission "typically 20% of the final sale price"; bags "fully insured while in our possession" Handbag consignment page, average sale time 59 days
Vestiaire Collective (online) 12% selling fee plus 3% payment processing on items £83 to £16,667 The online benchmark consignors compare you with

The pattern is consistent: the higher the ticket, the smaller the shop's percentage. A £200 dress at 50% earns you £100; a £6,000 Birkin at 20% earns £1,200 for less handling. Set tiers by price band and write them down.

How do payouts work?

Monthly in arrears is the norm, by bank transfer, after the online returns window. Build three things into the process from day one:

  • A statement per consignor per month listing each item sold, the sale price, the deductions and the amount due. This is also your audit trail for the VAT return.
  • A minimum payout (Sign of the Times uses £20) so you are not paying bank charges on £4.
  • A clear rule for reversals when a buyer returns.

If you are VAT-registered and acting as agent, the payout is not a purchase and the consignor's share is not your income; only your commission is. If you are treated as principal, the payout is your purchase price for the margin scheme. This is why the VAT position has to be decided before the first statement goes out.

What is the VAT position of a consignment shop?

Two questions: are you registered, and are you an agent or a principal?

Registration. You must register when taxable turnover in the last 12 months passes £90,000. If you are a true agent, your taxable turnover is your commission, not the gross sales; if you sell in your own name, HMRC treats the whole sale as yours. That single distinction can be the difference between registering in month three and not registering for two years.

Agent or principal. VAT Notice 700 section 22 says you are an agent if you act for a principal in arranging supplies, you are not the owner of the goods, and you can show HMRC you are arranging transactions for the principal rather than trading on your own account. Your supply is your service to the consignor - your commission - and it is standard-rated (paragraph 22.4.1). If instead you issue invoices in your own name for the goods (an undisclosed agent), paragraph 22.6 says that "for VAT purposes only, you must treat the transaction as though it was both a supply to you and a supply by you".

The margin scheme when you act as principal. VAT Notice 718 section 17 is written for exactly this trade. Paragraph 17.1 says dealers who sell goods for others and "retain a percentage of the selling price" are acting as agent; 17.3 says an agent acting in their own name "can use a Margin Scheme when you sell eligible goods" and that the margin "will be equal to the charges you make for your services as an agent". If you invoice your commission separately to the consignor you must issue two invoices - one with VAT for your charges and one margin-scheme invoice for the goods (17.4). If you deduct your commission from the proceeds, your purchase price is the total received less your charges and the margin is your commission (17.5). Either way you pay VAT on your margin and none on the goods themselves, and you must keep the stock book and invoice records in sections 4 and 5 of the notice, which have the force of law. Note paragraph 2.8: precious metals, investment gold and precious stones cannot go through the margin scheme, so loose stones and bullion-value pieces need separate treatment.

This is the part to take to an accountant before you open, with your draft agreement in hand, because the agreement and the invoice layout are what make you one thing or the other.

What records do you need from day one?

  • An item record per piece: consignor, date in, description, serial or date code, condition, agreed price, photographs, authentication result and reference, location, date out, sale price, buyer, payout.
  • A consignor ledger: what is held, what sold, what was paid and when.
  • If you use the margin scheme, the stock book fields in Notice 718 section 5 - see margin scheme stock book requirements.
  • If you take cash of £10,000 or more for a single item or a linked series, High Value Dealer registration applies - see do I need to register as a high value dealer.
  • VAT records for six years; most consignment disputes arrive within twelve months.

A spreadsheet does this for the first hundred items. The day it stops working is the day a consignor asks where their bag is and three people have three answers.

What we could not verify

  • A national figure for fit-out or rent. None exists that is worth quoting; get three local quotes.
  • Insurance premiums for goods in trust. Not published by any broker we could find. Our workshop insurance article explains what to ask.
  • Sign of the Times' full commission chart. Its sell page says "up to 80%" and its FAQ says the rate "starts from 60%"; the detailed table is referred to but not reproduced online.
  • Whether any UK consignment shop publishes a complete agreement. We found terms pages, not full contracts. Have yours drafted.

Sources

This is general information, not legal, tax or financial advice. Consignment agreements, the agent/principal distinction and the margin scheme turn on the facts of your arrangement and the wording of your documents. Have the agreement drafted or reviewed by a solicitor and the VAT position confirmed by an accountant before you take your first item in.

Milleso records consignment and memo stock separately from owned stock, with the consignor, agreed split, authentication record and VAT treatment held against each piece, and produces the monthly consignor payout statement from the sales that actually completed.