Margin Calculator

What is a margin, in plain terms?

Margin is the slice of a sale you keep. Sell a jacket for £70 that cost you £42 and you keep £28, which is 40% of what the customer handed over. That 40% is the margin, and it is the figure every tool on Margin Calculator UK is built around.

The same £28 can be described a second way. Measure it against the £42 you paid rather than the £70 you charged and it comes out at 66.67%. That is markup. One sale, one profit, two percentages, and a great deal of confusion in pricing meetings. Our margin versus markup guide pulls the two apart with worked figures.

One thing to clear up before the calculators. Search for this phrase and you get two unrelated subjects: profit margin in accounting, and margin requirement in leveraged trading, where a broker lends against your account. Nothing here concerns the second one. No SPAN, no exposure margin, no maintenance calls. Every tool on this page works on cost, price and profit.

How do you read the results panels?

The first calculator asks two questions before it asks for numbers. Step one picks the figure that lands in the green band. Step two picks the pair you already hold, and only workable pairs stay on screen, so you cannot accidentally ask it to find margin from margin.

The grey bands underneath carry the other four figures. They are there because nobody stops at one number. You look up a margin and immediately want to know what markup that implies, and what it leaves you in actual pounds.

The second calculator drops the steps. Type into any two boxes and it fills in the rest, marking the pair it is using. Touch a third box and it switches to your two most recent entries. That behaviour exists because people correct typos far more often than they start again from scratch.

Which formulas do these calculators use?

Four equations drive everything here. None of them is clever and you can check any result on the back of an envelope.

Profit

Profit = Revenue − Cost. Every other figure is built from this one.

Margin

Margin % = (Profit ÷ Revenue) × 100. Revenue goes underneath, which caps margin at 100%.

Markup

Markup % = (Profit ÷ Cost) × 100. Cost goes underneath instead, so markup climbs without any ceiling as the price rises.

Selling price from a target margin

Price = Cost ÷ (1 − margin as a decimal). A £42 cost at a 40% target gives £42 ÷ 0.6 = £70. Add 40% to the cost instead and you get £58.80, a margin of 28.57%, and a range that earns a third less than you planned. Our margin formula page works through every rearrangement, including the awkward ones where all you hold is a profit and a markup.

How does the VAT option change the answer?

Tick the VAT box in the first calculator and it treats your revenue as a shelf price, divides by 1.20 at the standard rate, and works the margin out on what remains. A £120 price against a £70 cost reads as 41.67% with the tax left in. Take the £20 out and the honest figures are £100 of revenue, £30 of profit, and a 30% margin.

Almost twelve percentage points, on a retail line with nothing unusual about it. VAT-registered traders should never price from gross figures for that reason alone. The money you collect at the till is HMRC's, passing through. Our VAT and profit margin guide covers the reduced and zero rates, what changes if you are not registered, and how the flat rate scheme complicates all of it.

Which margin should you be looking at?

Depends how far down the profit and loss account you have got. Four figures matter to most UK businesses, and they answer questions that only look similar.

Gross margin

Revenue minus the cost of goods sold, as a percentage of revenue. It tells you whether the product makes money before any overhead touches it. Our gross margin calculator is the page for this, and the GP calculator gives the same thing in pounds.

Operating margin

Gross profit after rent, wages, software and everything else that keeps the lights on. It tells you whether the business makes money, which is a harder question than whether the product does. Our operating margin calculator has room for the extra line.

Net profit margin

Whatever survives interest and tax. Banks and buyers ask for this one, and our net profit margin calculator produces it from two inputs.

Contribution margin

Price minus variable cost per unit. The break-even calculator uses it to answer a different sort of question: how many units cover your fixed costs before a single penny becomes profit.

A shop can hold a comfortable 45% gross margin and still lose money all year if the operating margin has gone negative. Reading one figure and ignoring the others is how a business grows its turnover and shrinks its bank balance at the same time. Our gross profit and net profit comparison shows where each one lands on a set of accounts.

Where do UK traders usually get margin wrong?

The same handful of errors, over and over, and each one flatters the number rather than deflating it. That is what makes them so persistent.

• Adding the target margin to the cost. Adding 30% produces a 23.08% margin, not 30%. Divide by 0.7 instead, or use the target margin calculator further up.
• Leaving VAT in the selling price. Covered above, and it inflates every line on the range at once.
• Forgetting carriage and card fees. Delivery in, delivery out, and a 1.5% payment fee all belong in the true cost of a sale. On a £4 item they can be a quarter of it.
• Pricing on last year's cost. Suppliers move prices more often than retailers re-check them. A line that opened at 42% can drift to 31% with nobody making a decision.

It helps to know what normal looks like in your trade before you change anything. Our guide to what counts as a good margin gives typical UK ranges by sector, and how to calculate profit margin walks the method through on paper if you would rather not take a screen's word for it.