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Profit Margin Calculator

Enter your revenue and costs to calculate gross, operating and net profit — in cash and as a percentage of revenue — with a full profit-and-loss breakdown.

Revenue and costs

Total sales income, excluding VAT where applicable.
Materials, direct labour, subcontract work, delivery and other costs directly required to provide the product or service.
Overheads such as rent, administration, indirect wages, marketing, insurance, software, utilities and depreciation.
Finance costs, bank charges, exceptional costs and other non-operating expenses.
Tax basisEstimate tax as a percentage of profit before tax if you do not know the amount.
Enter a known or estimated tax amount.
%
Applied to profit before tax, for planning only — actual tax depends on business structure, location, allowances, reliefs and other income.
Net profit
£18,400.00
Gross profit
£55,000.00
Operating profit
£25,000.00
Net margin
18.40%
Gross margin
55.00%
Operating margin
25.00%
Total costs
£81,600.00
Costs as a share of revenue
81.60%
Tax expense
£4,600.00 · entered
Revenue
£100,000.00
Less cost of sales
-£45,000.00
Gross profit
£55,000.00 · 55.00%
Less operating expenses
-£30,000.00
Operating profit
£25,000.00 · 25.00%
Less interest and other costs
-£2,000.00
Profit before tax
£23,000.00 · 23.00%
Less tax
-£4,600.00
Net profit
£18,400.00 · 18.40%
Where every £1 of revenue goes
Cost of sales per £1
£0.45
Operating expenses per £1
£0.30
Interest and other costs per £1
£0.02
Tax per £1
£0.05
Net profit kept per £1
£0.18

How to use this calculator

  1. Pick your currency at the top of the calculator panel. It sets the formatting only and does not convert the figures.
  2. Enter revenue — total sales income for the period, excluding VAT.
  3. Enter cost of sales (direct costs) andoperating expenses (overheads). The help text under each field lists what belongs where.
  4. Add interest and other costs if they apply.
  5. For tax, leave the tax basis on “Enter amount” and type the figure. If you do not know it, switch to “Estimate using rate” — the field becomes a percentage that is applied to profit before tax. Any blank cost counts as zero.

The results update as you type. The headline figure is net profit or net loss; the overview figures give gross and operating profit with each margin; the summary tab shows the full profit-and-loss stack and where every unit of revenue goes.

How the calculations work

Profit is worked out in three stages, taking away a different group of costs at each stage. Each profit figure is then divided by revenue to give a margin percentage.

Gross profit = Revenue − Cost of sales
Operating profit = Gross profit − Operating expenses
Profit before tax = Operating profit − Interest and other costs
Net profit = Profit before tax − Tax
Margin % = (Profit ÷ Revenue) × 100
Each margin uses the profit at its own level: gross margin from gross profit, operating margin from operating profit, net margin from net profit.

With revenue of £100,000, cost of sales of £45,000, operating expenses of £30,000, £2,000 of interest and other costs and £4,600 of tax:

  • Gross profit is £55,000, a gross margin of 55.00%.
  • Operating profit is £25,000, an operating margin of 25.00%.
  • Profit before tax is £23,000.
  • Net profit is £18,400, a net margin of 18.40%.

Margin is based on revenue. It is different from markup, which measures the same profit as a percentage of cost.

Entering a tax amount or an estimated rate

If you know your tax figure, keep the tax basis on Enter amount and type it in. If you do not, switch to Estimate using rate and give a percentage:

Estimated tax = Profit before tax × Rate ÷ 100 — when profit before tax is above zero
Estimated tax = 0 — when profit before tax is zero or below
The estimate is applied only to a positive profit before tax. On a loss it is zero, and the calculator says so.

A 20% rate on £23,000 of profit before tax gives an estimated £4,600 of tax and £18,400 of net profit — the same as entering £4,600 directly. The rate is your assumption for planning; actual tax depends on business structure, location, allowances, reliefs and other income.

Gross, operating and net margin — what each one tells you

The three margin levels and what each measures
MarginCosts taken awayWhat it tells you
Gross marginCost of sales onlyWhether the product or service itself is priced above what it costs to deliver.
Operating marginCost of sales and operating expensesWhether the core business is profitable once overheads are covered, before finance and tax.
Net marginAll costs, interest and taxWhat is actually left for the owners or to reinvest, per pound of revenue.

A business can have a healthy gross margin and still make a net loss if overheads, interest or tax are too high for the volume of sales. Reading all three together shows which stage is absorbing the profit.

How is margin different from markup?

Margin and markup describe the same profit against a different base. Margin is profit as a share of the selling price; markup is profit as a share of the cost. An item that costs £60 and sells for £100 makes £40 either way — a 40% margin, but a 66.7% markup. Confusing the two leads to underpricing, because a 50% markup is only a 33.3% margin.

Important information

Important: this calculator is for general business planning and is not accounting or tax advice. It uses the figures you enter and standard profit-and-loss arithmetic; it does not apply accounting standards, tax rules or your local definitions of cost of sales. Check the treatment of specific costs with a qualified accountant.

Frequently asked questions

How do you calculate profit margin?

Profit margin is profit divided by revenue, expressed as a percentage. Gross margin is (revenue − cost of sales) ÷ revenue × 100. Operating margin subtracts operating expenses as well. Net margin subtracts interest, other costs and tax on top, so it is net profit ÷ revenue × 100.

What is the difference between margin and markup?

Margin measures profit as a percentage of the selling price; markup measures the same profit as a percentage of the cost. An item that costs £60 and sells for £100 has a 40% margin but a 66.7% markup. Both describe the same £40, against a different base.

What counts as cost of sales rather than an operating expense?

Cost of sales is what varies directly with each unit sold — materials, direct labour, subcontractors, carriage. Operating expenses are the overheads the business carries whether it sells one unit or a thousand — rent, admin salaries, marketing, software, insurance, depreciation.

Is a negative margin possible?

Yes. If costs exceed revenue at any level, the profit and the margin are negative and the result is a loss. The calculator shows losses with a minus sign and labels them, rather than treating them as an error.

What is a good profit margin?

It depends entirely on the sector. Grocery retail runs on net margins of 1–3%, while software businesses can exceed 20%. Compare against businesses of the same type rather than a single benchmark, and track the trend in your own margins over time.

Why do the margin figures show a dash?

Percentage margins are divided by revenue, so they need revenue above zero. Enter a revenue figure and the margins appear. The profit and loss figures in cash still show, because they do not depend on dividing by revenue.

Does changing the currency convert my figures?

No. The currency selector changes the formatting only — the symbol, the grouping and, for the yen, the decimal places. The amounts you enter and every calculated result stay exactly as they are. There is no exchange rate involved.

Does the calculator work out my tax for me?

No. On the "Enter amount" basis you type the tax figure. On the "Estimate using rate" basis you give a percentage and the calculator applies it to profit before tax — but only as a planning estimate. It does not apply corporation tax rates, allowances, loss relief or any jurisdiction-specific rules, and it never estimates tax on a loss.

How is the estimated tax rate applied?

Estimated tax = profit before tax × rate ÷ 100, and only when profit before tax is above zero. If profit before tax is zero or negative, the estimate is zero and the calculator says so. The rate is your assumption, not a tax rule — actual tax depends on business structure, location, allowances, reliefs and other income.

Does revenue include VAT or sales tax?

No. Enter revenue net of VAT or sales tax. That tax is collected on behalf of the government and passed on, so it is neither income to the business nor part of the margin calculation. The Tax expense field is for tax charged on profit, such as corporation tax.