This free profit margin calculator turns two numbers you already know — your selling price and your cost — into the three figures that actually tell you how a sale is performing: gross profit in pounds, profit margin as a percentage, and markup as a percentage. Change either box and every result updates as you type.
How to calculate profit margin
Profit margin is your profit shown as a percentage of the price you sell at. There are two quick steps:
- Work out gross profit: selling price minus cost.
- Turn it into a margin: divide the gross profit by the selling price, then multiply by 100.
So the formula is margin % = (selling price − cost) ÷ selling price × 100. Because margin is measured against the selling price, it can never be more than 100%.
Margin vs markup — the difference that trips people up
Margin and markup describe the same pounds of profit, but they divide by different numbers, so they give different percentages. Mixing them up is the single most common pricing mistake for small businesses.
- Margin is profit as a share of the selling price. Formula: profit ÷ selling price × 100.
- Markup is profit as a share of the cost. Formula: profit ÷ cost × 100.
The same sale always shows a higher markup than margin. If your supplier or accountant talks in one and you price in the other, you can badly under-charge without realising. A 50% markup, for instance, is only a 33.3% margin.
A worked example
Say you sell a product for £99 that costs you £60 to buy or make:
| Selling price (revenue) | £99.00 |
| Cost | £60.00 |
| Gross profit (100 − 60) | £40.00 |
| Profit margin (40 ÷ 100) | 40.0% |
| Markup (40 ÷ 60) | 66.7% |
Same £40 profit, two very different percentages. That is why it always pays to be clear about which one you are quoting.
Gross vs net profit margin
People often search for a gross profit margin calculator and a net profit margin calculator as if they were the same thing, but they answer two different questions. The tool above is a gross profit margin percentage calculator: it compares your selling price to the direct cost of the item, so it shows how much each sale contributes before your running costs.
- Gross profit margin uses only the direct cost of the product or service. It tells you whether your pricing works at the level of a single sale.
- Net profit margin then takes off overheads — rent, wages, software, marketing and tax — so it is always lower than the gross figure and shows what the business actually keeps.
A quick way to think about it: gross margin is the sale, net margin is the business. Because a sales margin calculator like this one works from the selling price, it is the fastest check that a price is high enough before overheads are even in the picture. If your gross margin is thin, no amount of cost-cutting elsewhere will fix the underlying pricing.
Frequently asked questions
What is the difference between profit margin and markup?
Margin and markup both measure profit on a sale, but against different figures. Margin is profit as a percentage of the selling price, so it can never be more than 100%. Markup is profit as a percentage of the cost, so it can be well over 100%. A £40 profit on an item that sells for £99 and costs £60 is a 40% margin but a 66.7% markup.
How do I calculate profit margin?
First work out gross profit by taking the cost away from the selling price. Then divide that profit by the selling price and multiply by 100. For example, a £99 sale with a £60 cost gives £40 profit; £40 divided by £99 times 100 is a 40% profit margin.
What is a good profit margin for a small business?
It depends on the industry. Retail and hospitality often run on tight single-digit to 20% margins, while service businesses and digital products can see 50% or more. There is no universal number; compare your margin to typical figures for your own sector rather than a blanket target.
Is this gross margin or net margin?
This calculator works out gross margin, which uses only the direct cost of the product or service. Net margin also subtracts overheads such as rent, wages, marketing and tax, so it will always be lower than the gross figure shown here.
How do I convert a markup into a margin?
Divide the markup percentage by 100, add 1, then divide the markup percentage by that result. For example, a 50% markup becomes 50 divided by 1.5, which is a 33.3% margin. It is easier to just enter your prices into the calculator above and read both figures at once.
Does the calculator handle VAT?
No. Enter your figures excluding VAT for an accurate margin. VAT is a tax you collect on behalf of HMRC, not profit, so including it would overstate your margin. Use the net (ex-VAT) selling price and net cost.
How do I work out profit margin as a percentage?
Take your selling price away from your cost to get the gross profit, then divide that profit by the selling price and multiply by 100. That final number is your profit margin as a percentage. The gross profit margin calculator above does this for you as you type, so you can read the percentage without touching a formula.
Can I use this as a UK sales margin calculator?
Yes. It works in pounds and gives you the gross sales margin on any product or service. Enter your ex-VAT selling price and cost and it shows gross profit, margin and markup for the UK. For net profit margin, remember to also account for overheads such as rent, wages and tax, which sit outside this gross figure.
