How to Calculate Profit Margin in the UK: Step-by-Step Guide

Introduction

Small UK businesses live and die by a handful of numbers: margin, break-even and cash flow. Staff also need to know their statutory rights on pay.

This guide explains how to calculate profit Margin in the UK, step by step. Calculate gross profit, margin and markup from cost and selling price. You'll see the formula, a fully worked example and practical tips for UK readers.

What this calculation covers

Calculate gross profit, margin and markup from cost and selling price.

Clear numbers help you price profitably, chase late invoices with confidence and understand statutory pay entitlements.

The method and formula

Margin = profit ÷ selling price. Markup = profit ÷ cost. They are different: a 50% markup is a 33.3% margin.

Every figure on our profit Margin Calculator follows this method, so you can check the working yourself.

Worked example

Here's a typical example using these figures:

Running them through the method gives:

The headline figure is gross margin: 40.00%. Change any input and the result will move with it.

How to use the calculator

1. Enter or choose cost (£).
2. Enter or choose selling price (ex VAT) (£).
3. Read your results. The main figure is shown at the top, with a breakdown underneath.
4. Try different values to compare scenarios side by side.

Tips for UK readers

• Price from margin, not markup, if you want to hit a target profit percentage.
• Quote prices to businesses ex VAT and to consumers inc VAT.
• You can legally claim statutory interest on late B2B invoices.
• Statutory pay rates usually change every April – check GOV.UK.

Frequently asked questions

What's the quickest way to work out profit Margin?

Use our free profit Margin Calculator. It applies this method automatically: Margin = profit ÷ selling price. Markup = profit ÷ cost. They are different: a 50% markup is a 33.3% margin.

Are statutory pay figures up to date?

Rates are editable on each calculator. Defaults reflect recent published rates; always confirm current figures on GOV.UK.

Do these work for sole traders?

Yes. Margin, markup and break-even apply to any business size.

Is this legal advice?

No. For disputes about pay, redundancy or debts, contact Acas, Citizens Advice or a solicitor.

Summary

To work out profit Margin, follow the method above: Margin = profit ÷ selling price. For a quick, accurate answer with your own figures, use the calculator.

Next, read Profit Margin: Common Mistakes, Tips and FAQs.