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Business

Margin, Markup and VAT Pricing Calculator

Compare actual profit percentages or price a product to a target margin or markup. Enter the relevant VAT rates and recovery treatment; mixed supplies and special margin schemes require another model.

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Download margin and VAT formula template (CSV for Excel) ↗

How the calculation works

Calculate margin or markup using cost and selling prices on a consistent VAT basis. You can review a known sale or solve for a price, but tax rates and input-VAT recovery are supplied assumptions, not decisions made by this tool.

Business cost excludes recoverable VAT but includes non-recoverable VAT. Profit = net sales − business cost. Margin = profit / net sales; markup = profit / business cost. Target-margin price = cost / (1 − margin); target-markup price = cost × (1 + markup).

  1. Establish economic cost

    If cost is gross, divide by one plus the input-VAT rate to find the net amount. Recoverable input VAT is excluded from cost; non-recoverable VAT remains included.

  2. Establish net selling price

    For an actual gross sale, divide by one plus the entered output-VAT rate. In target modes, solve net price from the chosen margin or markup before adding output VAT.

  3. Compare profit with its denominator

    Subtract economic cost from net selling price. Margin divides profit by net selling price; markup divides profit by economic cost. A zero denominator cannot provide a meaningful ratio.

Worked example: Recoverable VAT

Sample inputs demonstrate the method. They are not a forecast or product offer.

Gross cost of €123 at 23% becomes €100 when input VAT is recoverable. Gross sale price of €184.50 becomes €150 net. Profit is €50: a margin of 33.3333% on sales and a markup of 50% on cost.

Pricing task
Calculate actual margin and markup
Purchase cost
123
Purchase cost entered
Including VAT
Purchase VAT rate (%)
23
Purchase VAT treatment
Recoverable input VAT
Selling price
184.5
Actual sale price entered
Including VAT
Sales VAT rate (%)
23

Expected result

Business cost after VAT treatment
€100.00
Gross trading profit
€50.00
Profit margin
33.33%
Markup on business cost
50%
Worked example: Non-recoverable target

Sample inputs demonstrate the method. They are not a forecast or product offer.

Pricing task
Set price for target margin
Purchase cost
100
Purchase cost entered
Excluding VAT
Purchase VAT rate (%)
20
Purchase VAT treatment
Non-recoverable input VAT
Sales VAT rate (%)
0
Target margin or markup (%)
25

Expected result

Business cost after VAT treatment
€120.00
Selling price excluding VAT
€160.00
Gross trading profit
€40.00

Understanding your result

The resulting profit is the difference between this selling price and this cost basis. It does not deduct every business overhead or determine profit after income tax.

Gross customer price and net revenue serve different purposes. Keep output VAT separate from margin rather than treating tax collected as money earned on the sale.

Questions you might have

Why can VAT change my margin when purchase VAT is not recoverable?

Non-recoverable VAT is part of the business cost. Recoverable VAT is excluded from that cost, while VAT collected on sales is excluded from revenue.

Choosing the right inputs

Purchase cost entered
Select whether the cost entered includes VAT. For a gross cost, the supplied input rate separates the tax component before the recovery choice is applied.
Purchase VAT treatment
Choose recovery only when appropriate to your circumstances. Non-recoverable input VAT remains part of economic cost; the form does not establish entitlement or partial recovery.
Pricing task
Review an actual sale, target a margin on net selling price, or target a markup on economic cost. These percentage bases produce different prices.

Common mistakes to avoid

  • Do not assume all input VAT is recoverable merely because a rate can be entered.
  • Do not interchange markup and margin, or compare a gross selling price with a net cost without the corresponding VAT treatment.

Assumptions to check

  • Use amounts in one currency and one reporting period. Results are labelled EUR; the arithmetic also works for another consistent currency.
  • Rates are supplied inputs. Mixed supplies, margin schemes and partial input-tax recovery need a separate model.

Sources and method

Read our calculation and testing approach.