Skip to main content
GovMath.

Business & Self-Employment · Pricing tool

Gross Profit Margin Calculator

Margin and markup are different beasts. Margin is profit as a share of selling price; markup is profit as a share of cost. Confuse them and you’ll underprice.

£
£

Gross margin

60%

Profit per unit: £60.00 · Markup: 150%

Breakdown

  • Selling price
    £100
  • Cost
    −£40
  • Gross profit
    £60

How we calculated your result

Profit = price − cost. Margin % = profit ÷ price. Markup % = profit ÷ cost. A 50% margin equals 100% markup — they grow apart fast.

Official UK rules in simple English

  • Both figures should be ex-VAT for a fair comparison.
  • Cost = direct cost of goods sold (COGS). Excludes overheads, marketing, salaries.
  • Gross profit funds overheads → operating profit → net profit.

Common pitfalls to watch out for

  • ⚠ Don’t confuse margin with markup

    ‘A 30% markup’ means cost × 1.3. ‘A 30% margin’ means cost ÷ 0.7. The latter is much higher pricing.

  • ⚠ VAT trips up new traders

    If you’re VAT-registered, charge VAT on top of your ex-VAT price. Don’t calculate margin on the VAT-inclusive figure.

  • ⚠ Gross margin isn’t profit

    From gross you still have to pay rent, staff, ads, tax. Healthy retail gross margins are 40–60%; net might be 5–10%.

Frequently asked questions

What's a good gross margin?
Depends on sector: software 70–90%, restaurants 60–70%, retail 30–50%, wholesale 15–25%.
Can margin exceed 100%?
No — margin is capped at 100% (when cost is zero). Markup has no cap.

Pricing model only. Strategic pricing also considers competition, elasticity and positioning.

Related calculators

More tools in Business & Self-Employment.