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Profit Margin Calculator

Calculate gross, operating and net profit margins from revenue and cost figures. See how efficiently your business converts sales into profit at each level.

Last reviewed 15 August 2026Source: HMRC — Running a business

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Calculator inputs

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Related to this calculation

Set aside self-employed tax

Separate current tax, balancing payment and January and July cash targets.

Rates & sources

UK company rates (Corporation Tax, VAT, payroll NI) as published by HMRC and Companies House.

Source: HMRC — Running a business — check the linked guidance and any live quote before acting.

When to use this calculator

  • Before pricing a job, setting margin targets or reviewing hiring costs.
  • When you want to test sensitivity around volume, tax, markup or overheads.
  • When you need a practical estimate before committing to a budget or proposal.
  • When you are modelling break-even volume as costs or prices change.

A realistic UK planning example

Use these sample inputs as a quick scenario test, then change one variable at a time to compare outcomes.

A realistic UK planning example
InputValue
Revenue (£)50000
Total Costs (£)£500

After entering these figures, review profit, margin and markup together rather than in isolation. Then rerun the tool with one input adjusted.

How to read your results

Profit

The figure produced by this output for the inputs you entered. Change one variable at a time if you want to see what drives it.

Margin

The figure produced by this output for the inputs you entered. Change one variable at a time if you want to see what drives it.

Markup

The figure produced by this output for the inputs you entered. Change one variable at a time if you want to see what drives it.

Method & assumptionsAuthoritative sources

This calculator works on the standard gross profit margin formula: (Revenue − Cost of Goods Sold) ÷ Revenue × 100. Enter your sales revenue and the direct costs associated with producing or delivering your product or service. Direct costs typically include raw materials, stock purchased for resale, and any labour directly tied to production. The calculator does not factor in overheads such as rent, insurance, or administrative salaries — those belong in a net profit calculation.

UK businesses should enter VAT-exclusive figures if VAT-registered. Sole traders and limited companies may have different allowable cost definitions under tax authority rules, so consult your accountant when classifying costs for tax purposes. Use this tool for quick decision-making and pricing reviews rather than as a substitute for formal management accounts.

Common mistakes

  • !Using optimistic assumptions without testing a more cautious scenario.
  • !Using revenue in place of gross profit when calculating margin.
  • !Treating the result as a final quote instead of a planning estimate.
  • !Forgetting employer on-costs when modelling the true cost of a hire.

What to do next

  • Try at least one more scenario so you can compare a realistic range.
  • Use the related calculators below to cross-check the decision from another angle.
  • Write down the key outputs from your best scenarios before you decide.
  • If the result surprises you, change one input at a time to isolate the driver.

Frequently asked

Gross margin = (revenue - cost of goods sold) / revenue - it shows product profitability. Operating margin deducts overheads and operating expenses too. Net margin deducts interest, tax, and everything else, giving the final bottom-line margin. A healthy small business typically targets 50%+ gross, 15-20% operating, and 10%+ net depending on sector.

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