Profit Margin & Markup Calculator
Calculate profit margin, markup percentage and selling price from cost and revenue.
Source: GOV.UK – Set Up a Business
By Konstantin Iakovlev · Founder, Calks.uk
Last updated: · Verified against HMRC and GOV.UK 2026/27 rates
Profit Margin Calculator
Markup Calculator
Disclaimer
This calculator is provided for informational purposes only and should not be considered as financial or tax advice. All calculations are performed locally in your browser — no personal data is collected or sent to our servers. Rates and thresholds are sourced from HMRC and GOV.UK and are updated for the current tax year. Always verify results with HMRC or consult a qualified professional before making financial decisions.
How It Works
Profit margin and markup are both measures of profitability but use different denominators, which is a frequent source of confusion in business. Margin is calculated as: (Revenue − Cost) ÷ Revenue × 100. It tells you what percentage of the selling price is profit. Markup is calculated as: (Revenue − Cost) ÷ Cost × 100. It tells you what percentage above cost you have charged. The same transaction produces very different numbers: selling at £100 with a cost of £60 gives a 40% margin but a 66.7% markup.
To convert between the two: Margin = Markup ÷ (1 + Markup), and Markup = Margin ÷ (1 − Margin). A 50% markup equals a 33.3% margin. A 100% markup equals a 50% margin. These formulas are essential when pricing products—if your target gross margin is 30%, you need to apply a 42.9% markup to your costs, not 30%.
Gross margin uses only direct costs (cost of goods sold) and reflects production efficiency. Net margin includes all overheads, tax, and interest, showing true bottom-line profitability. UK retail averages range from 2–5% net margin (supermarkets) to 50–70% gross margin (software). Tracking margin per product line, per client, or per period highlights where your business generates and erodes value.
Markup vs margin — different calculations. Markup = (selling price − cost) ÷ cost × 100. Margin = (selling price − cost) ÷ selling price × 100. Example: cost £40, sell £100. Markup = £60 ÷ £40 = 150%. Margin = £60 ÷ £100 = 60%. Same profit, different ratio. Margin always < 100% (assuming profit); markup can exceed 100%. Convert: margin = markup ÷ (1 + markup); markup = margin ÷ (1 − margin). 50% markup = 33% margin; 100% markup = 50% margin.
UK industry standard margins. Supermarket retail: 25-35% gross margin (food); 40-60% (non-food). Restaurants: 60-70% gross on food; 75-80% on drinks. Clothing retail: 50-60% gross. Pubs: 70-75% gross on beer. Tech/software: 70-90% gross (low marginal cost). Manufacturing: 25-40% gross. Construction: 15-25% gross. Consultancy/services: 50-75% gross. Net margins (after all costs) typically 5-15% for mature businesses; 20%+ for software; under 5% for retail and food service.
Calculating the right selling price. Cost-plus pricing: cost × (1 + markup %) = price. Example: cost £40, want 60% markup → £40 × 1.6 = £64 price. Margin pricing: cost ÷ (1 − margin %) = price. Same £40 cost, want 60% margin → £40 ÷ 0.4 = £100 price. Notice the dramatic difference — 60% margin requires 150% markup. Confuse these and you'll undersell. Always check: does your final margin work for the business after ALL costs (overheads, marketing, taxes)?
Gross vs operating vs net margin. Gross margin = (revenue − cost of goods sold) ÷ revenue. Operating margin = (revenue − COGS − overheads) ÷ revenue. Net margin = profit after tax ÷ revenue. Sample UK retailer: gross £100, COGS £60 → 40% gross margin. Less rent/staff/marketing £25 → £15 operating margin (15%). Less interest/tax £5 → £10 net profit (10% net). Track all three: gross shows pricing power; operating shows operational efficiency; net shows ultimate profitability.
VAT and margin — common confusion. Margins typically calculated on net (ex-VAT) prices for business. Selling B2C with VAT-inclusive prices: must remove VAT first to find true margin. £120 gross price ÷ 1.2 = £100 net. Cost £40. Gross margin = £60 ÷ £100 = 60%. Wrong calculation (using gross): £80 ÷ £120 = 67% — overstates margin by 7 points. International sellers (UK businesses on Etsy/Amazon): UK customer pays inc VAT; non-UK customer ex VAT — different margins per customer type.
Margin and markup on a product sold for £45
- Selling price: £45.00. Cost of goods: £27.00.
- Gross profit: £45.00 − £27.00 = £18.00.
- Margin: £18.00 ÷ £45.00 × 100 = 40.0%.
- Markup: £18.00 ÷ £27.00 × 100 = 66.7%.
- To achieve a 40% margin on a new product costing £30, set price at £30 ÷ (1 − 0.40) = £50.00.
Source: GOV.UK – Set Up a Business
Frequently Asked Questions
- What does the Profit Margin & Markup Calculator do?
- Calculate profit margin, markup percentage and selling price from cost and revenue.
- Margin vs Markup — what's the difference?
- Margin = profit ÷ revenue (e.g. £20 profit on £100 sale = 20% margin). Markup = profit ÷ cost (e.g. £20 profit on £80 cost = 25% markup). A 50% margin equals 100% markup. A 25% margin equals 33% markup. Retailers usually quote in markup (because they know cost), customers think in margin (off the retail price). Confusing the two is one of the most common pricing mistakes.
- What's a healthy margin in my industry?
- Typical UK net margins: Software/SaaS 15-30%, Professional services 10-20%, Retail 2-8%, Restaurants 3-6%, Construction 2-5%, Manufacturing 5-10%. Gross margins are higher (especially digital products: 70-90% gross is normal). If you're well above industry average — congrats; if well below — investigate pricing, costs, and competitive positioning. Use Companies House published accounts of competitors as benchmarks.
- Why is margin more important than revenue?
- £1m revenue at 5% margin = £50k profit. £500k revenue at 20% margin = £100k profit. Doubling revenue is hard; improving margin by 5% is often achievable through better pricing, cost control, or product mix. Investors and acquirers value high-margin businesses more (often 3-5× revenue for SaaS at 70% margin vs 0.5-1× for services at 15% margin). Focus on margin growth before revenue scale.