Margin and VAT Calculator
Enter your cost and target margin alongside the applicable VAT rate and the calculator works out your net selling price, VAT amount, gross price, profit and markup in one step. You can also reverse-solve: enter the gross price you need to hit and your margin, and the calculator finds the maximum cost you can afford. All figures update as you type.
What this calculator does
The margin and VAT calculator solves two common pricing problems at once: it finds your profit margin and applies VAT to give you the final gross price your customer sees. In most VAT-registered countries, the price shown to consumers must include tax, so knowing both your margin and the VAT-inclusive figure is essential for quoting, invoicing and setting price lists. The calculator handles three modes: find the net selling price when you know your cost and target margin; find the maximum cost you can afford when you know your selling price and required margin; or find the implied margin when you already know both cost and selling price.
How profit margin and markup differ
Margin and markup both measure profitability on a transaction but they use different denominators. Margin is profit divided by the net selling price, expressed as a percentage. Markup is profit divided by cost. Because the selling price is always higher than the cost (assuming a profit), markup is always larger than margin for the same deal. For example, if cost is 80 and net price is 100, the profit is 20. Margin is 20 / 100 = 20%. Markup is 20 / 80 = 25%. Confusing the two is one of the most common pricing mistakes: setting a 25% markup does not give you a 25% margin. This calculator shows both so you can quote whichever figure your business requires.
VAT and how it applies to your selling price
Value-added tax is charged on the net selling price, not on cost and not on profit. If your net price is 100 and the VAT rate is 20%, the VAT amount is 20 and the gross price is 120. Crucially, VAT does not affect your profit: the extra 20 is collected on behalf of the tax authority and passed on in your VAT return. Your margin is calculated on the net price only. However, when setting a gross price target (for example, to undercut a competitor's shelf price), you need to work backwards: net price = gross price / (1 + VAT rate as a decimal). Entering your gross price target in the reverse-solve mode does exactly that, then checks whether your cost still leaves the margin you need.
Worked example
You buy a product for 80. You want a 25% profit margin. The applicable VAT rate is 20%. Step 1: net selling price = 80 / (1 - 0.25) = 80 / 0.75 = 106.67. Step 2: profit = 106.67 - 80 = 26.67. Step 3: markup = 26.67 / 80 = 33.33%. Step 4: VAT = 106.67 x 0.20 = 21.33. Step 5: gross price = 106.67 + 21.33 = 128.00. Your customer pays 128.00, you keep 26.67 profit after covering the 80 cost, and you remit 21.33 to the tax authority.
Standard VAT rates by country (selected)
| Country | Standard VAT rate | Common reduced rate |
|---|---|---|
| Hungary | 27% | 5% / 18% |
| Denmark | 25% | 0% |
| Sweden | 25% | 6% / 12% |
| Finland | 25.5% | 10% / 14% |
| Norway | 25% | 12% / 15% |
| Greece | 24% | 6% / 13% |
| Ireland | 23% | 9% / 13.5% |
| Portugal | 23% | 6% / 13% |
| Italy | 22% | 4% / 5% / 10% |
| Austria | 20% | 10% / 13% |
| Belgium | 21% | 6% / 12% |
| France | 20% | 5.5% / 10% |
| Netherlands | 21% | 9% |
| Germany | 19% | 7% |
| Spain | 21% | 4% / 10% |
| United Kingdom | 20% | 5% / 0% |
| Canada (GST) | 5% | 0% |
| Australia (GST) | 10% | 0% |
| United States | 0% | Sales tax varies by state |
These are the standard VAT rates as of 2025. Reduced rates may apply to certain goods such as food, books and medicines.
Frequently asked questions
What is the difference between margin and markup?
Margin is profit expressed as a percentage of the selling price. Markup is profit expressed as a percentage of cost. For a product that costs 80 and sells for 100, the profit is 20. The margin is 20%, the markup is 25%. Markup is always higher than margin when a profit is made, so never apply a markup percentage and call it a margin. Use the formula: markup = margin / (1 - margin) to convert, or let this calculator show both.
Does VAT affect my profit margin?
No. VAT is collected from the customer on behalf of the tax authority and passed on in your periodic VAT return. It is not revenue you keep and it is not a cost. Your profit margin is calculated entirely from net price and cost, before VAT is considered. The calculator shows margin on the net price so the figure is unaffected by the VAT rate you enter.
How do I find the net price from a gross (VAT-inclusive) price?
Divide the gross price by (1 + VAT rate as a decimal). For a 120 gross price at 20% VAT: 120 / 1.20 = 100 net price. The VAT amount is the difference: 120 - 100 = 20. Use the reverse-solve mode in this calculator to do that automatically.
What VAT rate should I use?
Use the standard rate for your country unless the goods or services qualify for a reduced or zero rate. UK standard rate is 20%, EU rates vary from 17% (Luxembourg) to 27% (Hungary), Australia charges 10% GST, and the US has no federal VAT but collects sales tax at the state level (typically 5-10%). When in doubt, check with your local tax authority or accountant.
What is a good profit margin?
It depends heavily on industry. Grocery retail typically operates on margins below 5%, software and SaaS businesses often exceed 60%, and manufacturing commonly sits between 10% and 25%. A rule of thumb is that below 10% leaves little room for unexpected costs, 15-30% is considered healthy for many product businesses, and above 40% is strong. Benchmark against competitors in your specific sector rather than using a universal target.
How does the reverse-solve mode work?
Instead of calculating the net price from cost and margin, you provide the desired net price and required margin, and the calculator finds the maximum cost you can afford to still hit that margin. This is useful when you are tendering at a fixed price or matching a competitor and need to know whether your suppliers are priced correctly.