In the UK and EU consumer prices include VAT, so remove VAT before calculating margin. A VAT-registered business reclaims the VAT it pays on costs, so cost should be entered without VAT.
How to use the Margin and VAT Calculator
- Cost (excluding VAT)
- Pricing by
- Margin / markup
- VAT rate
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the cost (excluding VAT), choose margin or markup and its percentage, and the VAT rate.
Tips
- Know the difference between margin (profit ÷ price) and markup (profit ÷ cost).
- Apply successive discounts one after another – they do not simply add up.
- Check whether prices already include sales tax or VAT.
- Round prices only at the very end of the calculation.
Common mistakes to avoid
- Adding discount percentages together.
- Pricing from a target margin using the markup formula.
- Forgetting payment-processing and shipping fees.
Inputs explained
| Field | What to enter |
|---|---|
| Cost (excluding VAT) | Amount in your currency |
| Pricing by | Choose one: Margin, Markup |
| Margin / markup | In % |
| VAT rate | In % |
What each result means
- VAT = [Net price (excluding VAT)]×[VAT rate]÷100
- Gross price (including VAT) = [Net price (excluding VAT)] + [VAT]
- Profit = [Net price (excluding VAT)] – [Cost (excluding VAT)]
- Margin = [Profit]÷[Net price (excluding VAT)]×100
- Markup = [Profit]÷[Cost (excluding VAT)]×100
Example values
How the main result changes when Cost changes and everything else stays at the example values above:
| Cost (excluding VAT) | Gross price (including VAT) |
|---|---|
| 20 | 36.92 |
| 30 | 55.38 |
| 40 | 73.85 |
| 50 | 92.31 |
| 60 | 110.77 |
| 80 | 147.69 |
Formula
Net price = cost ÷ (1 − margin)VAT = net price × VAT rateGross price = net price × (1 + VAT rate)From a gross price: net = gross ÷ (1 + VAT)Worked example
Inputs — Cost (excluding VAT): $40; Pricing by: Margin; Margin / markup: 35 %; VAT rate: 20 %.
Results — Net price (excluding VAT) = $61.54; VAT = $12.31; Gross price (including VAT) = $73.85; Profit = $21.54; Margin = 35 %; Markup = 53.85 %.
Frequently asked questions
Should margin be calculated with or without VAT?
Without – VAT isn't your income.
How do I remove VAT from a price?
Divide by (1 + VAT rate), e.g. ÷ 1.2 for 20%.
What is the UK VAT rate?
20% standard, 5% reduced, 0% zero rate.
What formula does the Margin and VAT Calculator use?
Net price = cost ÷ (1 − margin).