Margin and markup are not the same percentage
Both start from the same two numbers, what something cost you and what you sold it for, and both describe the same profit. Where they split is the number they divide that profit by. Margin divides by the selling price. Markup divides by the cost. Confuse the two and you can under-price a product for months without noticing, which is why this mix-up gets called one of the most expensive spreadsheet mistakes a small business makes: type "25%" into the wrong column of a pricing sheet and every invoice that follows quietly loses money.
Take a £10 cost sold for £15. The profit is £5 either way. As a margin, that's £5 ÷ £15 = 33.3%, because the £15 price is the number on the bottom. As a markup, it's £5 ÷ £10 = 50%, because the £10 cost is the number on the bottom. Same sale, same £5, two genuinely different percentages, and markup is always the bigger one because it's dividing by the smaller figure.
Why the mix-up is expensive
The trap springs when someone asks for "a 40% margin" and gets a 40% markup instead. Mark a £10 cost up by 40% and the price is £14, but the actual margin on that price is only 28.6%, not the 40% that was asked for. Aim for a 40% margin properly and the price needs to be £16.67. Multiply that gap across thousands of units and a business can spend a whole year pricing everything against the wrong target, covering less overhead than the numbers on the spreadsheet suggested.
Converting between the two
Because both percentages come from the same £5-on-£10-and-15 arithmetic, one converts into the other with a short formula, not a lookup table you have to memorise.
A 25% markup becomes a 20% margin: 25 ÷ 1.25 = 20. A 20% margin becomes a 25% markup: 20 ÷ 0.8 = 25. The Markup tab on this page builds that whole conversion table live from whatever cost and price you type in, with your own figure highlighted against the standard reference pairs, so you don't have to do the division by hand.
Why margin can't reach 100%, and markup has no ceiling
Push the cost of something towards zero while holding the price steady, and the margin creeps towards 100% but never actually lands on it while the cost is still above zero. That's baked into the formula: margin is (price − cost) ÷ price, and the only way that ever equals exactly 100% is if the cost is exactly zero, meaning the entire price is profit. A genuine cost of nothing is rare outside pure digital goods, so in practice a margin sitting at 90% or higher is already an unusually thin-cost business, and 100% stays a horizon rather than a destination.
Markup has no such limit. Because it's measured against the smaller cost figure rather than the larger price, a £1 cost sold for £11 is only a 90.9% margin but a 1,000% markup, and the number keeps climbing the further the price pulls away from the cost. Seeing "1,000%" and "90.9%" describing the exact same £10 profit is the clearest illustration of why the two percentages should never be read as interchangeable.
This is gross margin, not the whole profit picture
Every figure on this page is gross margin: the profit left once the direct cost of the item itself is covered, before anything else touches it. Net margin goes further, subtracting the operating costs that keep the business running, rent, wages, software, marketing, delivery, the electricity for the till, whatever the business actually spends to open its doors. A product can carry a healthy 50% gross margin and the business behind it can still lose money overall if those operating costs run higher than what the gross margin leaves behind. This calculator only ever answers the cost-and-price question it's built for; it does not attempt a full profit-and-loss statement, and treating a strong gross margin as proof of overall profitability is its own separate mistake.
Working from VAT-inclusive prices overstates your margin
A shelf price charged to a UK customer usually includes VAT, and VAT was never the seller's money to keep. Feed a VAT-inclusive price straight into the margin formula and the calculation treats that tax as if it were profit, handing back a margin that looks better than the real one. Strip the VAT out first, using the net price the business actually keeps, and the margin shown here becomes the true figure. The VAT calculator on this site does exactly that conversion, pulling VAT back out of a gross price so the net figure can be brought here.
Working backwards to a pricing floor
Turn the margin formula around and it answers a different, arguably more useful question: given a known cost and a margin target, what does the price need to be? Rearranging (price − cost) ÷ price = target margin for price gives a straightforward division.
A £10 cost with a 40% margin target needs a price of £10 ÷ 0.6 = £16.67, not £14, which is what a 40% markup would have produced instead. The "Price for a target margin" box on this page runs exactly that division against whichever cost is currently entered, functioning as a pricing floor: charge less than the figure it shows and the margin target isn't actually being met, whichever tab produced the cost.
Choosing which figure to solve for
Each tab can solve for any one of the three figures once the other two are known. Setting a price for a new product usually means knowing the cost and the margin or markup target, and solving for price. Checking whether an existing price is actually hitting its target means knowing the cost and the price, and solving for the percentage. Working out the highest cost a supplier can charge before a fixed shelf price stops being worthwhile means knowing the price and the required percentage, and solving for cost. Pick whichever field is genuinely unknown; the calculator hides that box and fills it in once the other two are entered.
Reading the results panel
The answer at the top always states whichever figure was solved for, with the working shown directly underneath in plain arithmetic. The bars compare cost, price and profit at their real size, turning red if the sale is actually a loss. Below that, the Margin tab lays out the same cost against a spread of common margin targets, and the Markup tab runs the star feature of this page: the full markup-to-margin conversion table, your own figure slotted in and highlighted among the standard reference pairs, plus a plain-English sentence built from your own numbers.
Questions people ask
Is a 50% margin the same as a 50% markup?
No, and they're a long way apart. A 50% markup on a £10 cost gives a £15 price, which is a 33.3% margin. A genuine 50% margin on that same £10 cost needs a £20 price instead, which is a 100% markup. The two only ever match at 0%, where there's no profit either way.
How do I convert markup to margin, or margin to markup?
Margin = markup ÷ (1 + markup ÷ 100) × 100, and markup = margin ÷ (1 − margin ÷ 100) × 100. A 25% markup converts to a 20% margin; a 20% margin converts back to a 25% markup. The Markup tab builds this conversion live from whatever numbers you enter.
Can a margin be 100% or more?
Not while the cost is genuinely above zero. Margin is (price − cost) ÷ price, which only reaches exactly 100% when the cost is zero, meaning the whole price is profit. As the cost shrinks towards zero the margin creeps towards 100% but a real, positive cost always keeps it just under. Markup has no such ceiling and can run into the thousands of percent.
What does a negative margin mean?
The price is below the cost, so every sale loses money. The calculator still computes it and shows the figure plainly rather than blocking it, since spotting a loss-making price is exactly the kind of thing this tool should surface, not hide.
Should I calculate margin on a price that includes VAT?
No. VAT was collected on the government's behalf, not earned as profit, so including it in the price inflates the margin shown. Strip the VAT out to the net price first, using the VAT calculator on this site, then work out the margin from that net figure.
What's the difference between gross margin and net margin?
Gross margin, which is what this calculator works out, only accounts for the direct cost of the item sold. Net margin goes further and subtracts every other operating cost the business carries, rent, wages, marketing and the rest, so a healthy gross margin doesn't automatically mean the business as a whole is profitable.
How do I work out the price I need to charge for a target margin?
Divide the cost by one minus the target margin, expressed as a decimal: price = cost ÷ (1 − target margin ÷ 100). A £10 cost with a 40% margin target needs a price of £10 ÷ 0.6 = £16.67.
This calculator works out gross margin and markup from a single cost and price. It does not account for VAT, discounts, shipping or operating costs unless you have already built those into the cost figure you enter.