Why sellers should understand the buyer's premium
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A buyer's premium is an additional buyer charge under the auction terms. It is separate from the hammer price. Sellers should understand it because buyers consider their total purchase cost when deciding how much to bid.
Do not assume the premium is the seller's fee, or that it is automatically paid to the seller. The selling agreement should explain the seller's charges and settlement separately.
Read the actual fee basis
BidSpotter's glossary defines buyer's premium and hammer price. The amount, calculation and tax treatment in a particular sale must come from its conditions.
Ask whether the published buyer charges are clear and how they are shown to bidders. Also ask which charges the seller pays. A general conversation about commission can become confusing if one person means the buyer premium and another means the seller fee.
Use the selling-agreement checklist to record those distinctions before instructions are final.
A fictional buyer-budget example
Suppose a hypothetical buyer sets a £1,200 budget for the hammer price plus buyer's premium, before considering VAT, transport or other costs. Suppose the fictional sale terms use a premium equal to 20% of hammer price.
At a £1,000 hammer price, the example premium is £200. The total is £1,200. At a £1,100 hammer price, it becomes £1,320. The fee rate is invented for illustration and is not stated as UK Auction Group's rate or a typical market rate.
The arithmetic explains why a buyer may stop bidding before the hammer figure reaches their overall budget. It does not predict their exact behaviour, willingness to pay or the final result.
Add the rest of the buyer's commitment
A real buyer may also consider taxes, transport, disconnection and installation. Those depend on the item, location and agreed responsibilities. Do not estimate them casually or treat every bidder as having the same costs.
HMRC's VAT guide provides the general framework for VAT questions. Confirm the actual transaction and fee treatment with the relevant adviser; this example deliberately avoids making a VAT calculation.
For the seller, the useful question is whether the overall offer is clear enough for buyers to assess before they bid. Unexplained charges or collection obligations can complicate that decision.
Keep reserve and seller proceeds separate
The estimate, reserve and hammer-price guide distinguishes the main numbers. When discussing a reserve, ask how the proposed auction terms fit the valuation and sale assumptions. Do not add or subtract a buyer premium arbitrarily to create the reserve.
Use the seller net-proceeds worksheet for the money your business expects to receive. It should use your seller charges and actual agreement, not simply deduct every charge mentioned in the buyer information.
Ask UK Auction Group to explain both sides of the fee structure for the proposed sale. You can then understand the buyer's budget and your own settlement without confusing them.
Explore the auctions and private sales guides.
Sources
- UK Auction Group: asset disposal Checked
- HMRC: VAT guide, Notice 700 Checked
- BidSpotter: jargon buster Checked
This guide gives general information. Equipment-specific, legal, tax and safety decisions may need a qualified adviser or competent specialist. The guides do not promise sale prices, fees or results.