Markup Calculator UK
How this calculator works
Markup is added to cost to set the selling price. Margin compares profit with the selling price, so markup and margin are not the same percentage.
Example calculation
A £100 cost with 50% markup gives a £150 selling price, £50 gross profit and a 33.3% gross margin.
What the Calculator Results Mean
The calculator shows several key figures that help you set profitable prices.
Cost is the amount you pay to produce or acquire the goods you sell. This includes direct costs such as materials, labour, and shipping.
Markup percentage is the percentage added to the cost to determine the selling price. For example, a 50% markup on a £100 cost gives a selling price of £150.
Selling price is the price you charge customers. It is the cost plus the markup amount.
Gross margin is the difference between the selling price and the cost, expressed as a percentage of the selling price. For example, a £150 selling price with a £100 cost gives a gross margin of 33.3%.
Understanding the difference between markup and margin is essential. A 50% markup does not mean a 50% margin. If you want a 50% margin, you need a 100% markup.
The calculator shows cost, markup percentage, selling price, and gross margin. Markup and margin are different. A 50% markup gives a 33.3% margin. To achieve a 50% margin, you need a 100% markup.
Markup Formula and Example
The markup formula is used to calculate the selling price when you know the cost and the desired markup percentage.
Formula: Selling Price = Cost × (1 + Markup Percentage)
For example, if your cost is £100 and you want a 50% markup, the selling price is £100 × (1 + 0.50) = £150. The markup amount is £50.
The gross margin from this price is the markup amount divided by the selling price: £50 / £150 × 100 = 33.3%.
To calculate the markup needed to achieve a target margin, use the reverse formula: Markup = Target Margin / (1 - Target Margin). For example, to achieve a 40% margin, the required markup is 0.40 / (1 - 0.40) = 66.7%.
The markup formula is Selling Price = Cost × (1 + Markup %). A 50% markup on £100 gives a £150 selling price and a 33.3% margin. To achieve a 40% margin, you need a 66.7% markup.
Markup vs Margin: The Key Difference
Markup and margin are often confused, but they mean different things. Understanding the difference is essential for correct pricing.
Markup is profit expressed as a percentage of the cost. If you buy an item for £100 and sell it for £150, your markup is (£150 - £100) / £100 × 100 = 50%.
Margin is profit expressed as a percentage of the selling price. Using the same figures, your margin is (£150 - £100) / £150 × 100 = 33.3%.
The table below shows the relationship between markup and margin.
| Markup | Margin | Price = Cost × |
|---|---|---|
| 20% | 16.7% | 1.20 |
| 25% | 20.0% | 1.25 |
| 33.3% | 25.0% | 1.333 |
| 42.9% | 30.0% | 1.429 |
| 50% | 33.3% | 1.50 |
| 66.7% | 40.0% | 1.667 |
| 100% | 50.0% | 2.00 |
A common pricing mistake is using markup when you mean margin. If your direct cost is £1,000 and you apply a 20% markup, you price at £1,200, giving a margin of only 16.7%. To achieve a 20% margin, you must price at £1,250.
Markup is profit as a percentage of cost. Margin is profit as a percentage of selling price. A 50% markup gives a 33.3% margin. To achieve a 20% margin, you need a 25% markup.
When to Use Markup vs Margin
Both markup and margin have their uses in business. Understanding when to use each helps you set prices correctly and understand your profitability.
Use markup when setting prices. If you know your cost and want to set a selling price that achieves a desired profit, markup is the tool to use. For example, if your cost is £100 and you want a 50% markup, you price at £150.
Use margin when measuring profitability. If you want to know how much profit you keep from each sale, margin is the better measure. Margin tells you the percentage of the selling price that is profit.
Markup is useful for pricing decisions because it is based on your costs. Margin is useful for financial analysis because it shows your profit relative to sales.
Use markup for pricing decisions based on costs. Use margin for profitability analysis based on sales. Both are important for different aspects of your business.
How Tax Affects Your Pricing
Your markup and margin calculations should account for the taxes your business pays. The tax you pay depends on your business structure.
Sole traders pay Income Tax at 20% to 45% on profits above the personal allowance of £12,570, plus Class 4 National Insurance at 6% on profits between £12,570 and £50,270, and 2% above that.
Limited companies pay Corporation Tax at 19% on profits up to £50,000 and 25% on profits over £250,000, with marginal relief in between. You then pay dividend tax on what you take out of the company.
When setting prices, you need to ensure your markup is sufficient to cover both your direct costs and your tax liability. A markup that generates a gross margin of 20% may not leave enough profit after tax if your costs are high.
Whether incorporation is more tax-efficient depends on profit levels, remuneration strategy, available tax reliefs, ownership structure, administrative costs, and personal circumstances. There is no single profit threshold where incorporation becomes preferable.
Our Self-Employed Tax Calculator can help you estimate your tax bill, and our Corporation Tax Calculator helps with company tax planning.
Tax affects your net profit. Sole traders pay Income Tax and Class 4 NI. Limited companies pay Corporation Tax and dividend tax. Your markup must cover both costs and tax to achieve your target profit.
Common Markup Mistakes
Several common mistakes can lead to incorrect pricing or reduced profitability. Understanding these helps you avoid costly errors.
Confusing markup and margin. As explained above, using markup when you mean margin leads to under-pricing. Always check which figure you are using.
Forgetting to include all costs. Your cost should include materials, labour, shipping, and any overheads that vary with production. Missing costs leads to under-pricing.
Not accounting for returns and discounts. These costs can reduce your effective margin. If you offer a 10% discount, your margin is lower than the calculator shows.
Setting prices based only on costs. While cost-plus pricing is a good starting point, your prices should also consider market conditions, competitors, and customer demand.
Not reviewing prices regularly. Costs change over time. If your costs increase but your prices stay the same, your markup and margin will shrink. Review your pricing regularly.
Common mistakes include confusing markup and margin, forgetting to include all costs, not accounting for returns, and setting prices based only on costs. Regular price reviews are essential.
Markup Calculator FAQs
What is the difference between markup and margin?+
How do I calculate markup?+
How do I calculate selling price from cost and markup?+
What markup do I need to achieve a target margin?+
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Important information
This calculator gives an estimate only and should not be treated as accounting, financial or tax advice. Check official HMRC guidance or speak to a qualified adviser for complex cases.