Markup and margin calculator
Enter your cost and either a markup, a margin or your selling price. You'll see the price, profit, markup and margin together, with an optional VAT line, so you never confuse a 25% markup with a 25% margin.
Markup vs margin: the difference
Both describe the same profit, measured against a different base.
- Markup is profit as a percentage of your cost: (price − cost) ÷ cost.
- Margin is profit as a percentage of your selling price: (price − cost) ÷ price.
Because the price is bigger than the cost, margin is always the smaller number. A 25% markup is only a 20% margin. The mix-up costs tradespeople money: if you want to keep 30% of what the customer pays and add 30% to your costs, you only keep 23.08%.
To convert: margin = markup ÷ (1 + markup), and markup = margin ÷ (1 − margin). A 100% margin is impossible, because it would need an infinite price.
Quick conversion table
| Markup | Equals margin | Margin | Needs markup |
|---|---|---|---|
| 10% | 9.09% | 10% | 11.11% |
| 20% | 16.67% | 20% | 25.00% |
| 25% | 20.00% | 25% | 33.33% |
| 30% | 23.08% | 30% | 42.86% |
| 50% | 33.33% | 40% | 66.67% |
| 100% | 50.00% | 50% | 100.00% |
Worked examples
1. Marking up materials. You buy £200 of materials and add 20%. Price = £200 × 1.20 = £240.00. Profit is £40, which is a 16.67% margin. Add VAT at 20% and the customer pays £288.00.
2. Aiming for a margin. You want a 30% margin on materials that cost you £500. Price = £500 ÷ (1 − 0.30) = £714.29. Profit £214.29 is 30% of the price, and 42.86% of your cost.
3. Working back from a price. A part costs £80 and you sell it for £100. Profit is £20: a markup of 25% and a margin of 20%.
4. A job with labour and materials. Materials cost £1,200 and you add 15% markup, which comes to £1,380.00. Labour is 4 days at £165 = £660.00. Quote £2,040.00, plus VAT if you charge it. Marking up materials is normal practice but you should say so. If the contractor is paying you under CIS, only the labour portion has CIS deducted, and the materials must be shown at cost. See what counts as materials under CIS.
Using it for quotes
For labour, work out your day rate first (see the day rate calculator) and treat it as a cost-plus number rather than a markup. A useful rule: markup is how most merchants and builders think ("cost plus 20%"), while margin is how accountants and software report profit. If an accountant says your margin is 20%, it means you added 25% to your costs.
Remember that the difference between price and cost is not your take-home. It has to pay for overheads (van, insurance, tools, phone), your tax and National Insurance, and time spent quoting and chasing payments. Our self-employed tax calculator shows the tax side. If you are VAT registered, your cost and your price should both be shown without VAT, and VAT added at the end, as in the final row of the calculator.
Common pitfalls
- Adding 20% to get a 20% margin. You need 25%.
- Working out margin on a VAT-inclusive price. Strip the VAT off first. VAT isn't your money.
- Forgetting returns, waste and delivery. Add them to cost first.
- Rounding too early. Keep full precision and round the final price.
Frequently asked questions
What is the difference between markup and margin?
Markup is profit divided by cost. Margin is profit divided by the selling price. A 25% markup gives a 20% margin.
How do I get a 20% margin?
Divide your cost by 0.8. A £100 cost needs a £125 price, which is a 25% markup.
How do I turn a margin into a markup?
Markup = margin ÷ (1 − margin). A 30% margin is a 42.86% markup.
How do I add markup to materials?
Multiply the cost by 1 plus the markup. £200 plus 20% is £200 × 1.2 = £240. Add VAT afterwards if you are VAT registered.
Is profit margin the same as profit?
No. Profit is an amount in pounds. Margin is that profit as a percentage of the selling price, before your overheads and tax.
Sources
This guide is general information, not legal, tax or financial advice. Rules and rates change, so check the linked GOV.UK pages for the current position.