Profit Margin Calculator
Enter your cost and selling price to see your gross margin, markup, and effective margin after fees and VAT.
Understanding your profit margin is essential for pricing decisions, whether you sell products, offer services, or trade through online marketplaces. This calculator shows you the real margin on every sale — including the impact of fees, VAT, and discounts.
You can also use it in reverse: enter a target margin and find out what selling price you need to charge.
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What this calculator does
This calculator works out your gross profit, gross margin percentage, markup percentage, and effective margin after marketplace or payment processing fees. It supports VAT-inclusive pricing and a target-margin mode that tells you the selling price needed for a desired margin.
Who it is for
Business owners, online sellers, freelancers, and anyone who needs to understand profitability. Especially useful for Amazon, Etsy, and eBay sellers who need to factor in platform fees.
How to use it
Enter your cost price and selling price. Optionally toggle VAT, add marketplace fees, packaging costs, and any discount. Switch to target margin mode if you want to find the right selling price for a desired margin.
How the calculation works
Gross margin = (selling price – total cost) ÷ selling price × 100. Markup = (selling price – total cost) ÷ total cost × 100. Effective margin deducts marketplace/payment fees from gross profit before calculating. VAT is excluded from margin calculations when enabled.
Worked example
Cost £10, selling price £25 (ex-VAT), 2.9% PayPal fee, £1.50 packaging: Total cost = £11.50. Gross profit = £13.50. Gross margin = 54%. Markup = 117%. After 2.9% fee (£0.73): Effective profit = £12.78. Effective margin = 51.1%.
Assumptions and limitations
- Margin is calculated on the ex-VAT selling price when VAT is enabled
- VAT default rate is 20% (UK standard rate)
- Break-even price accounts for marketplace fees
- Does not include fixed overheads like rent, wages, or insurance
- This is a per-unit calculation — does not include volume-based fee tiers
Frequently asked questions
What is the difference between margin and markup?
Margin is profit as a percentage of the selling price. Markup is profit as a percentage of the cost price. A 50% markup equals a 33.3% margin. They are not interchangeable.
How do I calculate profit margin?
Profit margin = (selling price – cost) ÷ selling price × 100. For example, selling at £20 with a cost of £12 gives a margin of 40%.
What is a good profit margin?
This varies by industry. Retail typically aims for 30–50% gross margin, while services can achieve 50–80%. The key is to ensure your margin covers all overheads and leaves a net profit.
Should I calculate margin before or after VAT?
Always calculate margin on the ex-VAT price. VAT is not your income — it belongs to HMRC. Including VAT in margin calculations will overstate your profitability.
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- Etsy Fee Calculator — Etsy charges multiple fees per sale: £0.16 listing, 6.5% transaction, 4% + 20p payment processing, and 1.15% regulatory. Enter your item pri
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Related guides
- Profit Margin vs Markup Explained: What Every Business Needs to Know — Understand the critical difference between margin and markup, and learn which to use for pricing, reporting, and profitability analysis.
- How PayPal Fees Affect Your Pricing — Understand how PayPal transaction fees work and how to factor them into your pricing strategy.
- How Holiday Pay Is Calculated in the UK — A guide to understanding your holiday pay entitlement, including regular workers, part-time, and zero-hours contracts.
- Inside vs Outside IR35 Explained — Understand the difference between inside and outside IR35, and how it affects your take-home pay as a contractor.
- Markup vs Margin Explained — Understand the difference between markup and margin, why it matters, and how to use each when pricing your products.
- Understanding Etsy Fees for UK Sellers — A complete breakdown of every fee Etsy charges UK sellers, with strategies to price profitably.
Sources and references
HMRC VAT rates (https://www.gov.uk/vat-rates)
Last updated
Last reviewed: 2025-04-12.