Margin calculator and markup calculator
Work out the profit margin and markup on a job from what it costs you and what you charge, or the price you need to hit a target. Free for any trade to use, with no login. The figures you enter stay in your own browser and are never sent to us.
- Margin and markup side by side
- Price from a target margin or markup
- Shows the price with and without VAT
Pick what you know: cost and price, cost and a target margin, or cost and a markup.
The working
| Price | £3,000.00 |
|---|---|
| Less cost | -£2,400.00 |
| Profit | £600.00 |
| Margin: profit ÷ price | 20% |
| Markup: profit ÷ cost | 25% |
Margin is a share of the price; markup is a share of the cost. A 30% markup only gives a 23.1% margin.
How to calculate margin and markup
Margin is your profit as a share of the price. Markup is the same profit as a share of the cost. Take the cost away from the price to get the profit, then divide it by the price for margin, or by the cost for markup. Same pound notes, two different percentages.
Take the figures the calculator opens with: a job that costs you £2,400 and that you price at £3,000, both before VAT, with VAT at 20%.
- Profit: £3,000 − £2,400 = £600.
- Margin: £600 ÷ £3,000 = 20%.
- Markup: £600 ÷ £2,400 = 25%.
- With VAT at 20%: the customer pays £3,000 × 1.2 = £3,600, of which £600 is VAT you pass to HMRC. Your margin is still worked out on the £3,000.
- Price from a target margin: price = cost ÷ (1 − margin). For a 25% margin on £2,400: £2,400 ÷ 0.75 = £3,200.
- Price from a markup: price = cost × (1 + markup). For a 25% markup on £2,400: £2,400 × 1.25 = £3,000.
Margin vs markup: the difference
Markup is always the bigger number, because it divides the profit by the smaller figure. A 25% markup gives a 20% margin. A 100% markup, doubling the cost, gives a 50% margin. Margin can never reach 100%, because that would mean the job cost you nothing.
To turn one into the other, work in decimals. Margin = markup ÷ (1 + markup). Markup = margin ÷ (1 − margin). So a 30% margin needs 0.3 ÷ 0.7, a 42.86% markup. The pairs below come up most often.
- 10% markup gives a 9.09% margin. A 10% margin needs an 11.11% markup.
- 20% markup gives a 16.67% margin. A 20% margin needs a 25% markup.
- 25% markup gives a 20% margin. A 25% margin needs a 33.33% markup.
- 30% markup gives a 23.08% margin. A 30% margin needs a 42.86% markup.
- 50% markup gives a 33.33% margin. A 40% margin needs a 66.67% markup.
- 100% markup gives a 50% margin. A 50% margin needs a 100% markup.
A bathroom priced the trade way: materials marked up, labour priced
Most trades price a job in two halves. Materials and anything bought in get a markup on what you paid. Your own labour is priced from your day rate, which already carries your wage and the cost of running the business. Mixing those two halves up is where quotes go wrong, so keep them apart.
Here is a VAT-registered plumber pricing a bathroom refit, with a tiler brought in for three days.
- Materials: suite, tiles, valves and fittings cost £2,400 before VAT. Marked up 20%, they go on the quote at £2,880. That is a 16.67% margin on the materials.
- Tiler: three days at £200 a day costs you £600. Charged at £250 a day, that line is £750: a 25% markup and a 20% margin.
- Your labour: four days at a £320 day rate is £1,280. There is no markup on this, because the day rate is already your price. Work yours out with the day rate calculator.
- Quote before VAT: £2,880 + £750 + £1,280 = £4,910. VAT at 20% adds £982, so the customer pays £5,892.
- What the markups earned: £480 on materials and £150 on the tiler, £630 in all. On the £3,630 of bought-in lines that is a 17.36% margin, on top of your day rate.
Why mark up materials at all
The markup pays for the trip to the merchant, the returns, the broken tile, the fitting that turns out to be wrong and the money you are out of pocket until the customer pays. Supplying at cost means doing all of that for nothing.
If it is CIS work
On construction work for a contractor, CIS is taken from everything except the cost of materials, meaning what you actually paid for them. Your markup is not part of that cost, so expect CIS to be taken from it too. The CIS calculator shows what you will be paid.
Why mixing up margin and markup costs you money
If you decide you need a 30% margin and then add 30% to your costs, you have used a markup. You get a 23.08% margin instead, and the gap comes straight out of your profit.
On £2,400 of bought-in costs, a 30% markup prices the job at £3,120. A true 30% margin needs £2,400 ÷ 0.7 = £3,428.58, rounded up to the penny. That is £308.58 less on one job, and it repeats on every job priced the same way.
Discounts hit margin harder than people expect. Take the £2,400 job priced at £3,000, a 20% margin. Knock 10% off for the customer and the price is £2,700. The cost has not moved, so profit falls from £600 to £300. A 10% discount has halved what you make on the job. The calculator shows this if you put the discounted price in.
It also works the other way. An accountant or a supplier who talks about a 25% margin means a bigger markup than 25%. Ask which one they mean before you agree a number.
Margin, markup and VAT
Work out margin and markup on prices before VAT. VAT is not your money: if you are registered, you collect it on HMRC's behalf. That is why the calculator shows your price both ways but bases every percentage on the figure before VAT. The standard rate is 20%, with 5% and 0% for some goods and services, so the calculator lets you pick 20%, 5% or 0%.
What counts as your cost depends on whether you are registered. A registered business can reclaim the VAT on what it buys for the business, so enter costs before VAT. If you are not registered you cannot reclaim it, so the VAT is part of your cost. A merchant invoice for £2,000 plus £400 VAT is a £2,400 cost to you, and your markup has to go on the £2,400.
To add or strip VAT from a single figure, the VAT calculator does it both ways.
One thing this page is not: the VAT margin schemes for second-hand goods, art and antiques. Those let a dealer pay VAT on the difference between buying and selling price. They have nothing to do with pricing a trade job.
Where the numbers stop
It works out gross margin on one job: the price less the costs you enter. It does not know about your van, insurance, phone or accountant unless you put them in the cost, so a healthy margin here can still leave you short over a year. Your day rate is where the yearly running costs belong.
It also does not tell you what margin you should make. No published, current figure for UK trades is good enough to quote, and the right number depends on how much of the job is materials and how much is your time. A job that is mostly a boiler needs a different markup from one that is mostly labour. This is a pricing aid, not accounting or tax advice.
- Quoting from markup but checking against margin. Pick one, and use the conversion above when you switch.
- Forgetting the VAT on costs when you are not registered.
- Marking up your own labour on top of a day rate that already includes your profit.
- Leaving out the extras: skip hire, delivery charges, waste disposal and parking all belong in the cost.
- Discounting without re-running the numbers. Put the new price in and look at the profit, not just the percentage.
Common questions
How do I calculate my profit margin?
Take the cost away from the price to get the profit, then divide the profit by the price and multiply by 100. A job that costs £2,400 and sells for £3,000 makes £600, a 20% margin. Use prices before VAT.
What is the difference between margin and markup?
Both use the same profit. Margin divides it by the selling price; markup divides it by the cost. £600 profit on a £2,400 cost and £3,000 price is a 20% margin and a 25% markup.
What is a 30% markup?
Adding 30% to your cost. Something that costs you £100 sells for £130. The £30 profit is 23.08% of the price, so a 30% markup is a 23.08% margin, not 30%.
How do you add a 20% markup?
Multiply the cost by 1.2. A £450 cylinder becomes £540. That gives a 16.67% margin. If you want a 20% margin instead, divide the cost by 0.8: £450 becomes £562.50.
How do I convert a 33% margin to markup?
Divide the margin by one minus the margin, in decimals: 0.33 ÷ 0.67 = 0.4925, a 49.25% markup. Check: £100 cost × 1.4925 = £149.25, and £49.25 ÷ £149.25 is 33%.
What is the difference between gross and net profit margin?
Gross margin takes off only the direct costs of the job: materials, subcontractors, hire. Net margin takes off everything else as well, such as the van, insurance, wages and tax. This calculator gives gross margin on a job. Net margin is a whole-business figure from your accounts.
Should margin be worked out with or without VAT?
Without. VAT you charge goes to HMRC, so it is not income. If you are VAT registered, use costs and prices before VAT. If you are not registered, include the VAT you paid in your costs, because you cannot reclaim it.
What markup should a tradesperson put on materials?
There is no official or reliably published figure, and it varies by trade and by item. Work out what the markup has to pay for: collection time, returns, breakages and waiting to be paid. Then check the margin it gives in the calculator.
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