Calculate gross profit, profit margin and markup from your cost price and selling price.
This calculator uses direct cost only. Overheads, discounts, returns, VAT and other taxes are not included unless you add them to your figures.
How to use the Profit Margin Calculator
Enter the cost price, selling price and quantity. The calculator shows total revenue, total cost, gross profit, profit margin and markup. Use quantity 1 when you only need the figures for one product or service.
Profit margin and markup formulas
| Result | Formula |
|---|---|
| Gross profit | Selling price − cost price |
| Profit margin | Gross profit ÷ selling price × 100 |
| Markup | Gross profit ÷ cost price × 100 |
| Total profit | Profit per item × quantity |
Profit margin versus markup
Margin measures profit as a percentage of the selling price. Markup measures profit as a percentage of cost. They use the same profit amount but different denominators, so their percentages are not interchangeable. HMRC’s gross profit rate guidance also expresses the gross profit rate as profit on sales.
Example profit margin calculation
If an item costs £40 and sells for £65, the profit is £25. The gross profit margin is 38.46%, while the markup on cost is 62.50%. Selling 100 items produces £6,500 revenue, £4,000 direct cost and £2,500 gross profit.
What costs should you include?
For a product, direct costs can include the purchase price, raw materials, packaging and production labour. A complete business profitability review should also consider overheads such as rent, software, insurance and marketing. Keep VAT separate when comparing net sales and costs.
Related calculators
Separate VAT with the United Kingdom VAT Calculator. Check percentage changes with the Percentage Calculator, compare business figures using the Ratio Calculator, or estimate a business value with the Business Valuation Calculator. Browse all tools on the United Kingdom Calculator homepage.
Frequently asked questions
What is profit margin?
Profit margin is the profit expressed as a percentage of the selling price or revenue.
What is the difference between margin and markup?
Margin divides profit by selling price. Markup divides profit by cost price.
Can profit margin be negative?
Yes. A selling price below cost produces a loss and a negative profit margin.
Should I include VAT in the selling price?
For business analysis, use figures consistently. VAT-registered businesses commonly compare values excluding VAT.
Does gross profit include overheads?
No. Gross profit normally subtracts direct costs. Net profit accounts for operating expenses and other costs.