Calculate your profit, gross margin, and markup percentage based on the cost and selling price of a product.
A margin calculator works out the profit, gross margin percentage, and markup percentage on a product or service, based on its cost price and selling price. Margin and markup are both ways of expressing the same profit, but as a percentage of different figures — this calculator shows both, since businesses and pricing tools sometimes use one or the other.
Profit is simply the selling price minus the cost price. Gross margin expresses this profit as a percentage of the selling price — it answers "what percentage of each pound of revenue is profit?" Markup expresses the same profit as a percentage of the cost price — it answers "by what percentage did I increase the cost to set the price?" These two percentages will always differ (except when profit is zero), and confusing them is a common pricing mistake.
Formula: Profit = Selling Price − Cost Price. Gross Margin % = (Profit ÷ Selling Price) × 100. Markup % = (Profit ÷ Cost Price) × 100.
Example: An item costing £50 to produce, sold for £80, has a profit of £30. The gross margin is 37.5% (£30 ÷ £80), while the markup is 60% (£30 ÷ £50). Notice these are quite different figures for the same £30 profit — a common source of confusion in pricing decisions. (Note: this example is for illustration purposes only.)
Confusing margin and markup is a common pricing error — for example, applying a 50% "markup" to a £50 cost gives a £75 selling price (a 33.3% margin), not a 50% margin as some might assume. If you're aiming for a specific gross margin percentage, you need to calculate the required markup differently (Markup % = Margin % ÷ (1 − Margin %)). For VAT-registered UK businesses, it's important to be consistent about whether your cost and selling prices include VAT — comparing a VAT-inclusive selling price against a VAT-exclusive cost price will distort your margin calculation, since the VAT portion of the selling price isn't part of your actual revenue (it's collected on behalf of HMRC). For an accurate margin calculation, use figures excluding VAT for both cost and selling price, or be consistent about including it in both.
Margin expresses profit as a percentage of the selling price, while markup expresses the same profit as a percentage of the cost price. Because the selling price is always higher than the cost price (when there's a profit), the markup percentage is always higher than the margin percentage for the same profit amount.
No. A 50% markup on a £50 cost gives a £75 selling price (cost plus 50% of cost), but the resulting margin is only 33.3% (£25 profit ÷ £75 selling price). Markup and margin percentages are always different (except when profit is zero), which is a common source of pricing confusion.
For an accurate margin calculation, it's best to exclude VAT from both your cost price and selling price, since VAT collected on sales isn't part of your actual revenue — it's passed on to HMRC. Mixing VAT-inclusive and VAT-exclusive figures will distort your margin and markup percentages.
Use the formula: Markup % = Target Margin % ÷ (1 − Target Margin %). For example, to achieve a 40% margin, you'd need a markup of 40% ÷ 60% ≈ 66.7%. This calculator shows the resulting margin and markup for prices you enter, which you can adjust until you reach your target margin.
This varies enormously by industry — retail, hospitality, manufacturing, and services businesses typically have very different typical margins due to differing cost structures. There's no universal benchmark; it's most useful to compare your margins against others in your specific industry or against your own historical performance.
No. This calculator compares only the cost price and selling price you enter — it doesn't separately account for overheads, marketing, staff costs, or other business expenses. The "gross margin" shown reflects only the direct cost and selling price relationship; your overall business profitability also depends on these other costs.
Disclaimer: The information and figures provided on this page are for educational and illustrative purposes only and do not constitute financial, accounting, or tax advice. This calculator does not account for VAT, overheads, or other business costs beyond the cost and selling price entered. Always consult a qualified accountant for guidance on pricing, margins, and VAT treatment specific to your business.