Markup vs margin: what's the difference?
Markup = profit ÷ cost. Margin = profit ÷ price. Buy something for £80 and sell it for £100: the £20 profit is a 25% markup but a 20% margin. The margin is always the smaller number, which is why pricing to a margin with a markup leaves you short.
| Markup | Is a margin of | Margin | Needs a markup of |
|---|---|---|---|
| 10% | 9.1% | 10% | 11.1% |
| 15% | 13% | 15% | 17.6% |
| 20% | 16.7% | 20% | 25% |
| 25% | 20% | 25% | 33.3% |
| 30% | 23.1% | 30% | 42.9% |
| 40% | 28.6% | 40% | 66.7% |
| 50% | 33.3% | 50% | 100% |
How to calculate markup
Price = cost × (1 + markup). £500 at a 20% markup is £600. To go back from a price to the cost before markup, divide: £125 ÷ 1.25 is £100.
How to calculate profit margin in the UK
Margin = (price − cost) ÷ price. To price for a margin, divide the cost by (1 − margin): £100 of cost at a 30% margin is £142.86. Gross margin is after materials and the direct costs of the job; net margin is after your overheads too. Sleepless Tradesman puts a healthy net margin for a trade business at 15 to 25% and a gross margin at 40 to 60%, and calls a gross margin under 30% underpriced.
How much should tradespeople mark up materials?
| Materials | Markup |
|---|---|
| Standard domestic materials | 15 to 20% |
| Specialist materials | 20 to 30% |
| Urgent, retail-sourced or with a delivery surcharge | 25 to 40% |
| Small consumables and specialist fixings | 30 to 50% |
The markup is not extra profit on the job. It pays for sourcing, collecting and storing the materials, buying them before the customer pays, and the risk of damage, theft and price rises.
Pricing a job: materials, labour, overheads and profit
Take a job with £1,200 of materials at a 20% markup, 3 days' labour at £280, a £500 subcontractor at 15%, a £250 skip at 10% and overheads of £15 an hour for 24 hours. The costs are £3,150 and the price comes to £3,490 plus VAT: a gross profit of £340, a 9.7% margin. That is thin for a job with this much risk. To make 25%, quote £4,200. Put the lines into a quote, and record the real hours and materials on a job sheet so the next price is better.
Why a 10% discount is not a 10% problem
The discount comes straight off your profit. Take 10% off the £4,200 quote and it is £3,780: the profit falls from £1,050 to £630, 40% less, and the margin drops to 16.7%.
Markup, margin and VAT
If you are VAT registered, work in prices excluding VAT, reclaim the VAT on your materials, and add VAT to the quote. If you are not, the VAT you pay on materials is a cost, so it goes into the materials figure, and you add no VAT. You must register once your taxable turnover goes over £90,000 in 12 months. Most building work is at 20%; new homes can be zero-rated and some conversions and empty homes are at 5% (HMRC VAT Notice 708).
"Add 20%" can mean two things: a 20% markup, which is profit, or 20% VAT, which is tax you pass on. Both turn £500 into £600. Registered but buying few materials? Compare the VAT flat rate scheme, and see what your profit costs in tax with the self-employed tax calculator.
Markup and CIS
Working for a contractor under CIS, the deduction comes off the labour, not the materials. Keep them on separate lines so the contractor deducts the right amount: see the CIS tax calculator.
What hourly rate should I charge?
Enough to pay you, the tax and National Insurance on it, and your costs, over the hours you can actually bill. The charge-out tab gives a quick answer; the day rate calculator does it in full, with holidays, weather and unpaid time.
Frequently asked questions
How do you calculate a markup?
Divide the profit by the cost. To add a markup, multiply the cost by 1 plus the markup: 20% is × 1.2.
What is a 30% markup?
Adding 30% to the cost: £100 becomes £130. That is a 23.1% margin.
What is a 25% markup on $100?
In pounds, £100 with a 25% markup is £125, a 20% margin.
How do you do a 20% markup?
Multiply the cost by 1.2. £500 becomes £600.
What is a 20% markup on $500?
£500 with a 20% markup is £600, a 16.7% margin.
How do I add 20% onto my price?
Multiply by 1.2. If you mean VAT, that is also × 1.2, but it is tax you pass on, not profit.
How to calculate profit margin in the UK?
(Price − cost) ÷ price × 100. Work in prices excluding VAT.
How do you calculate a 20% margin?
Divide the cost by 0.8. £100 of cost at a 20% margin is £125.
What is a 40% gross margin?
Keeping 40p of every pound after the job's direct costs: a 66.7% markup on cost.
How can I calculate my margin?
Take the cost from the price, then divide by the price. The calculator does it from any two figures.
What is an easy way to calculate profit margin?
Enter the cost and the price in the calculator above: the margin fills in.
How do I calculate a 70% profit margin?
Divide the cost by 0.3. £100 of cost at a 70% margin is £333.33, a 233.3% markup.
Is a 30% margin good for a tradesperson?
As a gross margin, it is at the bottom: Sleepless Tradesman calls anything under 30% underpriced and 40 to 60% common for a well-run trade business.
Should I mark up labour?
Usually not, if your day rate already covers your pay, tax, costs and profit. Mark up the things you buy in.
Do I show my markup on the quote?
No. Show materials, labour and VAT as lines if the customer wants detail, priced with your markup already in.
Sources
- Sleepless Tradesman: material markup guide (July 2026) (opens in a new tab)
- Sleepless Tradesman: profit margin calculator and benchmarks (opens in a new tab)
- GOV.UK: when to register for VAT (opens in a new tab)
- HMRC: VAT Notice 708, buildings and construction (opens in a new tab)
An estimate for pricing. Your accountant knows your real overheads and margins.
By Janusz Wozniak, Founder & Lead Developer
Built because every markup calculator online is for shops. A trade job has materials, labour, subcontractors and VAT, each priced differently.
Last updated .
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