Break Even Calculator UK

Break Even Calculator UK 2026/27

A break even calculator helps you work out how much your business needs to sell before it starts making a profit. It shows the point where your total sales cover your total costs, so you are no longer making a loss.

For UK businesses, this is useful when setting prices, launching a product, planning ad spend, hiring staff or checking whether a business idea is financially realistic.

Break even is not the same as cash flow or taxable profit. It is a planning figure that shows when sales income covers fixed costs and variable costs. Once your sales go above that point, each extra sale should contribute towards profit, as long as your prices and costs stay the same.

What Is Break Even?

Break even is the point where:

Total revenue = Total costs

At this point, your business has made neither a profit nor a loss.

For example, if your fixed costs are £3,000 per month and each sale contributes £10 after direct costs, you need 300 sales per month to break even.

The simple formula is:

Break even units = Fixed costs ÷ Contribution per unit

Contribution per unit = Selling price per unit minus variable cost per unit

If you sell services instead of products, the same logic applies. Instead of units, you may calculate break even using billable hours, projects, subscriptions or monthly revenue.

How to Use the Break Even Calculator

To use the Break Even Calculator, enter your selling price, your variable cost per sale and your fixed costs.

Your selling price is the amount charged to the customer before considering your costs. Your variable cost is the cost linked directly to each sale, such as stock, packaging, delivery, platform fees, card fees or materials. Your fixed costs are regular overheads such as rent, software, insurance, wages, website costs and accountancy fees.

The calculator then estimates how many units you need to sell, or how much revenue you need to generate, before your business reaches break even.

Break Even Formula

The main break even formula is:

Break even units = Fixed costs ÷ (Selling price per unit − Variable cost per unit)

Example:

Selling price per unit: £25

Variable cost per unit: £13

Contribution per unit: £12

Monthly fixed costs: £4,800

Break even units = £4,800 ÷ £12 = 400 units

This means the business needs to sell 400 units per month before it starts making profit.

Break even revenue = Break even units × Selling price

In this example:

400 × £25 = £10,000

So the business needs £10,000 in monthly sales to break even.

Fixed Costs vs Variable Costs

Fixed costs are costs your business pays even if sales are low. These may include rent, salaries, insurance, subscriptions, software, storage, accountancy fees and website costs.

Variable costs change with each sale. These may include product cost, raw materials, packaging, shipping, fulfilment fees, marketplace commission, payment processing fees and sales commission.

For ecommerce sellers, variable costs are especially important. A product may look profitable before delivery fees, advertising costs and platform charges, but the real contribution per sale may be much lower.

VAT and Break Even in 2026/27

VAT can affect your pricing and break even calculation, especially if your prices include VAT.

For 2026/27, the UK VAT registration threshold is £90,000 of taxable turnover. Businesses must register for VAT if their taxable turnover goes over £90,000.

If your business is VAT registered and you sell a product for £120 including 20% VAT, the net sales value is £100 before business costs. The remaining £20 is output VAT collected for HMRC, subject to normal VAT rules and input VAT recovery.

This means VAT inclusive pricing can reduce the sales income available to cover your costs. You can use the VAT Calculator and Reverse VAT Calculator alongside your break even calculation to check net and gross prices.

Corporation Tax and Break Even

Break even is usually calculated before Corporation Tax because Corporation Tax is charged on taxable profits, not on sales.

For the 2026 financial year, the small profits Corporation Tax rate is 19% for companies with profits under £50,000, and the main rate is 25% for companies with profits over £250,000. Marginal Relief can apply between those limits.

This means your break even point shows when your business starts making profit before tax. Your after tax profit depends on taxable profits, allowable expenses, reliefs and company structure.

For company profit planning, use the Corporation Tax Calculator after estimating your profit above break even.

Payroll Costs and Employer National Insurance

If you employ staff, payroll costs should be included in your break even calculation.

For 2026/27, the employer National Insurance secondary threshold is £5,000 per year, and the employer Class 1 National Insurance rate is 15% above the relevant threshold.

The National Living Wage for workers aged 21 and over from April 2026 is £12.71 per hour.

If you are planning to hire, include gross wages, employer National Insurance, pension costs, holiday pay and payroll software costs. For more accurate employment cost planning, use the Payroll Cost Calculator, Employer NI Calculator and Employer Pension Calculator.

Break Even Example for a UK Business

A small UK ecommerce business sells a product for £29.99.

Selling price: £29.99

Product cost: £8.50

Packaging: £0.80

Shipping: £3.60

Payment and platform fees: £2.10

Variable cost per sale: £15.00

Contribution per sale:

£29.99 − £15.00 = £14.99

Monthly fixed costs:

Software: £120

Storage: £250

Insurance: £50

Accountancy: £100

Advertising base budget: £1,500

Admin and other costs: £480

Total fixed costs: £2,500

Break even units:

£2,500 ÷ £14.99 = 167 units

Break even revenue:

167 × £29.99 = £5,008.33

This business needs around 167 sales per month, or about £5,008 of monthly revenue, to break even.

How to Lower Your Break Even Point

You can lower your break even point by increasing your selling price, reducing variable costs or reducing fixed costs.

Increasing your selling price improves contribution per sale, but only if customers are still willing to buy. Reducing variable costs can also help, especially if you can negotiate better supplier prices, improve delivery rates or reduce platform fees.

Reducing fixed costs can make the business easier to sustain, but do not cut essential costs that protect product quality, customer service or growth.

The aim is not simply to spend less. The aim is to understand which costs support profitable sales and which costs make the business harder to scale.

Common Break Even Mistakes

One common mistake is using revenue instead of contribution. Revenue alone does not show whether a sale is profitable because it ignores direct selling costs.

Another mistake is forgetting owner pay. If you work full time in the business but do not include your own wage target, the business may look profitable while still not paying you properly.

A third mistake is ignoring VAT, payroll costs, pension costs and employer National Insurance. These costs can make a big difference to your real break even point.

You should also update your calculation regularly. Supplier prices, shipping fees, wage rates, advertising costs and platform charges can change during the year.

Who Should Use a Break Even Calculator?

A break even calculator is useful for sole traders, limited companies, ecommerce sellers, freelancers, agencies, consultants, restaurants, retailers and startups.

It is especially useful when you are launching a product, setting prices, planning paid ads, hiring employees, comparing wholesale and retail pricing, reviewing low margin products or setting monthly sales targets.

If you are self employed, you can also use the Self Employed Tax Calculator to estimate how business profit may affect Income Tax and National Insurance.