Markup vs Margin: A Practical Guide for UK Tradespeople
Confusing markup with margin can produce a lower selling price than intended. Both start with cost, but use different denominators.
Definitions
Cost is what the job consumes. Selling price is what the customer is charged before any clearly stated VAT treatment. Gross profit is selling price minus cost. Markup percentage is profit ÷ cost × 100. Margin percentage is profit ÷ selling price × 100.
£100 example
With cost of £100 and 20% markup, profit is £20 and selling price is £120. The margin is £20 ÷ £120 = 16.67%, not 20%. To achieve a 20% margin on £100 cost, divide £100 by 0.80: the selling price is £125 and profit is £25.
Static comparison
On £100 cost: 10% markup gives £110 selling price and 9.09% margin; 20% markup gives £120 and 16.67%; 25% markup gives £125 and 20%; 50% markup gives £150 and 33.33%.
Job-level use
Apply the chosen method to a clearly defined cost base. If labour, travel, consumables or overhead are missing from cost, a mathematically correct percentage still produces a weak price. Be consistent about whether the percentage is markup on cost or target margin on sales.
Limitations
There is no universal builder or trade profit percentage. Capacity, risk, competition, warranty exposure and overhead differ. Use the free calculator as an organising tool and take accounting advice where needed.
Continue from guidance to your own figures
Use the free calculator with your own costs. Document credit use varies by the document type shown inside Cloudfyre.