What is the difference between margin and markup?
Margin is profit as a share of the selling price; markup is profit as a share of cost. Buy at £10 and sell at £25 excluding VAT, and the margin is 60% while the markup is 150%.
Profit Margin and Markup Calculator.
Profit margin is gross profit divided by your selling price excluding VAT. Markup is gross profit divided by product cost. Enter a cost and a price, a target margin or a markup, and the calculator gives the other figures. It takes VAT out of a UK or Irish shelf price first, and you can add shipping, fees and ad cost per order to see what each sale really leaves you.
Calculator
Your margin
- Gross margin
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- Markup
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- Price excluding VAT
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- VAT in the price
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- Price including VAT
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- Gross profit
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After selling costs
- Margin after selling costs
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- Profit per order after selling costs
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Markup needs a cost above 0.
Know your margin after selling costs? Find the ROAS your ads need to break even with the break-even ROAS calculator.
Margin to markup converter.
Type either one. Markup = margin ÷ (1 − margin). Margin = markup ÷ (1 + markup).
| Margin | Markup |
|---|---|
| 10% | 11.1% |
| 20% | 25% |
| 25% | 33.3% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100% |
| 60% | 150% |
Margin vs markup.
Margin and markup describe the same gross profit from different sides. Margin is profit as a share of the selling price excluding VAT. Markup is profit as a share of product cost. Buy at £10 and sell at £25 excluding VAT, and the profit is £15: the margin is 60% (£15 ÷ £25) and the markup is 150% (£15 ÷ £10).
The same profit is a smaller markup than people often expect once the margin rises. A 20% margin is a 25% markup, because 0.20 ÷ (1 − 0.20) = 0.25. A 50% margin is a 100% markup. The converter turns either figure into the other. It is arithmetic for the cost and price you enter, not a figure for your category.
How it works.
Once you know the margin after selling costs, the break-even ROAS formula is 1 ÷ that margin. This page stops at the margin. It does not work out ROAS.
- Price excluding VAT, when the price you enter includes it, = price ÷ (1 + VAT rate). VAT in the price = price − price excluding VAT. HMRC calls that share the VAT fraction: the rate of tax divided by (100 + rate of tax). At 20% the fraction is 1/6, so £30 × 1/6 = £5. See VAT Notice 700.
- When the price you enter excludes VAT, the price including VAT = price × (1 + VAT rate). If you do not charge VAT, nothing is taken out.
- Gross profit = price excluding VAT − product cost. Gross margin = gross profit ÷ price excluding VAT. Markup = gross profit ÷ product cost. Markup needs a cost above 0.
- Price for a target margin, with no selling costs, = product cost ÷ (1 − target margin). Add VAT if you charge it. Price from a markup = product cost × (1 + markup), then add VAT. A markup price is cost-plus: selling costs do not change it, and the result shows the margin those costs leave.
- Selling costs are shipping and packaging, ad cost per order and other variable costs, plus a marketplace or referral fee, payment fees and a returns allowance. The referral fee is a percentage of the price including VAT or excluding VAT, as you set. Payment fees are a percentage of the price the customer pays. The returns allowance is a percentage of the price excluding VAT. Profit after selling costs = price excluding VAT − product cost − those costs. Margin after selling costs = that profit ÷ price excluding VAT.
- With selling costs, the price for a target margin is the price excluding VAT that leaves that margin after the costs. If the target margin plus the percentage fees is 100% or more, no price reaches it.
This is gross margin, or the margin after the selling costs you enter. It is not net profit margin. Overheads, salaries and corporation tax are left out.
US prices are entered before sales tax, which is added at checkout. Rates shown are standard rates, last checked 10 November 2026. Reduced and zero rates apply to some goods, for example children's car seats at 5% or most food at 0% in the UK, so change the rate if yours differ. See GOV.UK.
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Example.
Example: a VAT-registered UK seller. The product costs £10 excluding VAT and sells for £30 including 20% VAT.
- Price excluding VAT = £30 ÷ 1.20 = £25.00.
- VAT in the price = £30 − £25.00 = £5.00. Check: £30 × 20/120 = £5.00.
- Gross profit = £25.00 − £10 = £15.00.
- Gross margin = £15.00 ÷ £25.00 = 60%.
- Markup = £15.00 ÷ £10 = 150%.
If you forget to take VAT out, (£30 − £10) ÷ £30 = 66.7%. That overstates the margin by about 7 points.
Add selling costs: shipping £3, a payment fee of 2% of the £30 the customer pays (£0.60), and an ad cost per order of £4. Profit after selling costs = £25.00 − £10 − £3 − £0.60 − £4 = £7.40. Margin after selling costs = £7.40 ÷ £25.00 = 29.6%.
Price for a target margin. Cost £10, target margin 50%, no selling costs. Price excluding VAT = £10 ÷ (1 − 0.50) = £20.00. Price including VAT = £20.00 × 1.20 = £24.00. The markup check is £10 ÷ £10 = 100%, the same as 0.50 ÷ (1 − 0.50).
Ireland. Cost €10, price €30 including 23% VAT. Price excluding VAT = €30 ÷ 1.23 = €24.39. VAT in the price = €5.61. Gross profit = €14.39. Gross margin = 59.0%. Markup = 143.9%.
These are illustrative numbers, not client data.
Common questions.
How do I convert margin to markup?
Divide the margin by one minus the margin: markup = margin ÷ (1 − margin). A 20% margin is a 25% markup. To go back, margin = markup ÷ (1 + markup), so a 100% markup is a 50% margin.
How do I work out a selling price for a target margin?
Divide your cost by one minus the target margin, then add VAT if you charge it. For a 40% margin on a £12 cost: £12 ÷ 0.6 = £20 excluding VAT, or £24 with UK VAT at 20%.
Is the VAT I charge part of my profit margin?
Not if you are VAT-registered. You pay HMRC, or Revenue in Ireland, the VAT you charge less the VAT you have paid, so it is not your money. Work out margin on the price excluding VAT.
Is this the same as the VAT margin scheme?
No. HMRC's VAT margin schemes are for second-hand goods, works of art, antiques and collectors' items, and tax the difference between buying and selling price. This calculator works out the commercial margin on any product.
Why is my margin lower once shipping, fees and ad costs are included?
Gross margin only takes product cost off the price. Shipping, marketplace and payment fees, and the ad cost of winning each order also come out of every sale, so the margin left after those costs is lower.
VAT rates and formulas last checked 10 November 2026.
This calculator is a guide to the arithmetic, not tax or accounting advice. VAT rules depend on what you sell and where. Check GOV.UK or Revenue, or ask your accountant.
- GOV.UK, VAT rates: UK standard rate 20%.
- Revenue, current VAT rates: Ireland standard rate 23%.
- Australian Taxation Office, how GST works: GST 10%.
- Inland Revenue, GST: GST 15%.
- UAE Ministry of Finance, VAT: standard rate 5%.
- EU VAT rules and rates, for another EU country.
- GOV.UK, VAT margin schemes, which are a different calculation from this one.
US prices are entered before sales tax. To see margin by channel, see analytics and optimisation.
Use the margin in the account.
Talk to us about Amazon fees and the ad cost in the margin you just worked out.