How the profit margin calculator works
Pick what you already know. With cost and price the calculator works out your profit, margin and markup. With cost and margin or cost and markup it tells you what to charge. Tick the VAT box if you're VAT registered and your selling price includes VAT, and the calculator strips the VAT out before working out your margin, because VAT is money you collect for HMRC, not profit.
Margin vs markup: what's the difference?
Both compare profit with a price, but they use a different starting point. Margin is profit as a share of the selling price. Markup is profit as a share of the cost. That's why the markup is always the bigger number.
Margin % = profit ÷ selling price × 100
Markup % = profit ÷ cost × 100
Say you buy a product for £60 and sell it for £100. Your profit is £40. The margin is 40 ÷ 100 × 100 = 40%, but the markup is 40 ÷ 60 × 100 = 66.67%. Mixing the two up is one of the most common pricing mistakes: if you want a 40% margin and add 40% to cost instead, you'd charge £84 and make a margin of just 28.57%.
How to calculate selling price from a margin
For a 25% margin on a £60 cost, divide by 0.75: £60 ÷ 0.75 = £80. Your profit is £20, which is 25% of £80. A margin can never reach 100%, because that would mean the item cost you nothing.
How to calculate selling price from a markup
A 50% markup on a £50 cost gives £50 × 1.5 = £75. The profit is £25, which is a margin of 33.33%.
Margin and markup conversion table
| Markup | Equals margin of | Price on a £100 cost |
|---|---|---|
| 20% | 16.67% | £120 |
| 25% | 20% | £125 |
| 33.33% | 25% | £133.33 |
| 50% | 33.33% | £150 |
| 66.67% | 40% | £166.67 |
| 100% | 50% | £200 |
To convert yourself: margin = markup ÷ (1 + markup), and markup = margin ÷ (1 − margin), using decimals.
Profit margin and VAT
If you're VAT registered, you charge VAT on your sales and can usually reclaim the VAT on your costs, so both should be compared without VAT. The UK standard rate is 20%. A £120 price including VAT is £100 before VAT (120 ÷ 1.2), so a £60 cost still gives a 40% margin, not 50%. If you work out margin on the VAT-inclusive price, you'll overstate your profit.
If you're not VAT registered, leave the box unticked. VAT you pay on stock is then part of your cost, so enter the cost including VAT. Registration is compulsory once your taxable turnover goes over £90,000 in a rolling 12-month period. The VAT calculator handles adding or removing VAT on its own.
Tips for pricing
- Include every cost: postage, packaging, card fees and marketplace commission all eat into your margin. Add them to the cost price for a true figure.
- Plan for discounts: a 20% sale on a product with a 25% margin leaves you with almost nothing. Check sale prices with the discount calculator.
- Gross vs net margin: this calculator gives gross margin on a single item. Your net margin, after rent, wages and overheads, will be lower.
Frequently asked questions
How do I calculate profit margin?
Take the cost away from the selling price to get the profit, then divide the profit by the selling price and multiply by 100. Selling for £50 something that cost £30 gives a profit of £20 and a margin of 40%.
What is the difference between margin and markup?
Margin is profit as a percentage of the selling price, and markup is profit as a percentage of the cost. A £100 item that cost £60 has a 40% margin but a 66.67% markup.
What markup gives a 50% margin?
A 100% markup gives a 50% margin. You double the cost, so an item costing £20 sells for £40 and the £20 profit is half the selling price.
How do I add a 30% margin to a cost price?
Divide the cost by 0.7. A £70 cost becomes a £100 selling price, and the £30 profit is 30% of £100. Multiplying by 1.3 instead gives a 30% markup, which is only a 23.08% margin.
Should profit margin include VAT?
No. If you're VAT registered, work out margin on prices excluding VAT, because the VAT you charge belongs to HMRC. At 20% VAT, divide a VAT-inclusive price by 1.2 first.
Last reviewed October 2026 using 2026/27 figures. This calculator gives an estimate for guidance only.