Gross Margin & Markup Calculator

Turn a cost and a price into gross profit, margin and markup — or work backwards from the margin you want.

What do you know?

Cost price (excluding VAT)

Selling price (excluding VAT)

Quantity

Optional — for totals across a batch.

Gross margin

60%

Profit per unit: £60.00
Gross margin: 60%
Markup: 150%
Total revenue (1 units): £100.00
Total cost: £40.00
Total gross profit: £60.00

What this means

At a cost of £40.00 and a price of £100.00, you keep £60.00 per unit before overheads. That is a 60% margin, or a 150% markup on cost. Gross profit still has to cover rent, wages, software and everything else before it becomes profit you can take out.

Quick answers

Is a 50% markup a 50% margin?: No. A 50% markup on a £60 cost gives a £90 price and a 33.3% margin. Markup is calculated on cost, margin on selling price, so the same profit produces two different percentages.
What markup gives a 40% margin?: A 66.7% markup gives a 40% margin. For example, a £60 cost marked up by 66.7% gives a £100 price, and £40 profit on £100 is a 40% margin.
Why can markup exceed 100% but margin cannot?: Markup compares profit to cost, and profit can be many times the cost, so markup has no ceiling. Margin compares profit to selling price, and profit can never exceed the selling price, so margin approaches but never reaches 100%.
How do I calculate selling price from a target margin?: Divide the cost by (1 minus the margin as a decimal). For a 40% margin: price = cost ÷ 0.60. A £60 cost needs a £100 price to hit a 40% margin.
How do I calculate gross margin from cost and price?: Subtract cost from price to get gross profit, then divide by the selling price. A £60 cost and £100 price gives £40 profit, and £40 ÷ £100 = 40% margin.

Know your margin before setting your price

Small changes in price, supplier cost or card-processing fees can materially change gross margin.

It is worth rechecking margin whenever a supplier price changes, rather than only when you set the price originally.

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How we calculated it

Gross profit = selling price − cost price. Margin = gross profit ÷ selling price × 100. Markup = gross profit ÷ cost price × 100.

To hit a target margin, price = cost ÷ (1 − margin ÷ 100). To hit a target markup, price = cost × (1 + markup ÷ 100). Prices exclude VAT — see the VAT calculator if you need the VAT-inclusive figure.

How this calculator works

Margin is profit as a percentage of selling price. Markup is profit as a percentage of cost. They are easy to confuse and the difference is expensive: a 50% markup on a £40 item gives a £60 price and a 33.3% margin, while a 50% margin needs a price of £80.

Use margin when you are thinking about how much of your revenue you keep, which is how accounts and comparisons across a sector are usually expressed. Use markup when you are pricing up from a supplier cost — it is the quicker mental sum at the counter. Once you have settled on a price, the break-even calculator shows how many sales at that price cover your fixed costs, and the VAT calculator adds VAT on top if you need the price customers actually pay.

Worked examples

Cost £60, sell £100

Gross profit is £100 − £60 = £40. Margin is £40 ÷ £100 = 40%. Markup is £40 ÷ £60 = 66.7%. The same £40 of profit looks smaller expressed as a margin than as a markup, because margin is measured against the higher figure — the selling price.

Target margin of 40% on a £60 cost

Price = cost ÷ (1 − margin ÷ 100) = £60 ÷ (1 − 0.40) = £100. Checking it: £40 profit on a £100 price is exactly a 40% margin, confirming the price is correct.

Target markup of 50% on a £60 cost

Price = cost × (1 + markup ÷ 100) = £60 × 1.50 = £90. That £30 of profit on a £90 price is only a 33.3% margin — noticeably lower than the 40% margin the £100 price gave above, even though both examples started from the same £60 cost. This is the trap: a 50% markup never equals a 50% margin, and a 50% margin always needs a bigger markup than 50%.

Homeware shop example

A homeware shop buys a lamp for £24 and sells it for £60. Gross profit is £36 per lamp. Margin is £36 ÷ £60 = 60%. Markup is £36 ÷ £24 = 150%. If the supplier raises the cost to £30 and the shop wants to keep a 60% margin, the new price is £30 ÷ (1 − 0.6) = £75 — not £66, which is what simply adding the £6 increase would suggest.

Key terms explained

Gross margin: Gross profit expressed as a percentage of selling price: (price − cost) ÷ price × 100. It shows how much of every pound of revenue is kept before overheads.
Markup: Gross profit expressed as a percentage of cost: (price − cost) ÷ cost × 100. It shows how much has been added on top of what you paid.
Gross profit: The cash difference between selling price and cost price, before rent, wages and other overheads are deducted.

Common mistakes

Treating a markup percentage as if it were a margin
A 50% markup and a 50% margin need different prices — £90 versus £120 on a £60 cost. Using the wrong one systematically underprices stock.
Including VAT in the cost or price
VAT is not part of your profit calculation. Work from prices and costs excluding VAT, then add VAT separately once the price is set.
Confusing gross margin with take-home profit
Gross margin only covers the direct cost of the item sold. Rent, salaries, software and other overheads still have to come out before what is left is real profit.
Adding the cost increase straight onto the price
If a supplier cost rises by £6 and you simply add £6 to the price, your margin percentage falls. To keep the same margin, recalculate the price from the new cost using price = cost ÷ (1 − margin).

Common questions

What is the difference between margin and markup?

Margin measures profit against the selling price; markup measures the same profit against the cost. A £40 item sold for £100 has a 60% margin and a 150% markup. Margin can never reach 100%, whereas markup has no upper limit.

What price do I need for a 50% margin?

Double your cost. A 50% margin means half the selling price is profit, so price = cost ÷ 0.5. A 50% markup is different — that only adds half the cost on top, giving a 33.3% margin.

Should I include VAT in these figures?

No. Work with prices and costs excluding VAT, otherwise VAT distorts the percentages. If you are not VAT registered, use the prices you actually pay and charge.

Is gross margin the same as profit?

No. Gross margin only accounts for the direct cost of what you sell. Rent, salaries, insurance, software and other overheads come out of gross profit before you reach net profit.

How do I calculate markup from cost and price?

Subtract cost from price to get gross profit, then divide by the cost price. A £60 cost and £100 price gives £40 profit, and £40 ÷ £60 = 66.7% markup.

Why does the same profit give different margin and markup figures?

Because they use different denominators. Margin divides profit by the (larger) selling price, so the percentage is always lower than markup, which divides the same profit by the (smaller) cost price.

Last reviewed: 7 September 2026. This calculator is information only and is not tax, accounting or financial advice.