Pricing · markup guide
20% markup: margin and selling price
A 20% markup means the selling price is your cost plus 20% of that cost, so you multiply the cost by 1.2. It gives a profit margin of 16.67%, because the profit is measured against the higher selling price. An item that costs £100 sells for £120.00 and makes £20.00 profit.
VAT rate checked against GOV.UK on .
Profit margin
16.67%
from a 20% markup
Multiply cost by
1.2
to get the price ex VAT
Price on £100 cost
£120.00
before VAT
With 20% VAT
× 1.44
cost to shelf price
Selling prices with a 20% markup
Price with VAT assumes you are VAT registered and the item is standard-rated at 20%.
| Cost | Selling price | Profit | Price with VAT |
|---|---|---|---|
| £1.00 | £1.20 | £0.20 | £1.44 |
| £5.00 | £6.00 | £1.00 | £7.20 |
| £10.00 | £12.00 | £2.00 | £14.40 |
| £25.00 | £30.00 | £5.00 | £36.00 |
| £50.00 | £60.00 | £10.00 | £72.00 |
| £100.00 | £120.00 | £20.00 | £144.00 |
| £250.00 | £300.00 | £50.00 | £360.00 |
| £1,000.00 | £1,200.00 | £200.00 | £1,440.00 |
Nearby markups
Markup, the margin it gives and the multiplier to use on your cost.
| Markup | Margin | Multiplier |
|---|---|---|
| 5% | 4.76% | × 1.05 |
| 10% | 9.09% | × 1.1 |
| 15% | 13.04% | × 1.15 |
| 25% | 20% | × 1.25 |
| 30% | 23.08% | × 1.3 |
| 35% | 25.93% | × 1.35 |
| 40% | 28.57% | × 1.4 |
Markup is not the same as margin
People often mix these up. A 20% markup is a 16.67% margin. If you actually want a 20% margin, you need a markup of 25%, so the price is cost × 1.25.
How far you can discount
With a 20% markup you can take up to 16.67% off the selling price before you are selling at cost. A 10% discount leaves a margin of 7.41%, and 20% off would bring you down to cost or below.
Adding VAT
If you are VAT registered and sell at the 20% standard rate, add VAT after the markup. That makes the shelf price cost × 1.44. The VAT goes to HMRC, so it does not change your 16.67% margin.
Profit in each pound of sales
Out of each pound you take before VAT, about 17p is gross profit. Rent, wages and card fees all have to come out of that before you make any money. After a 10% discount you would need to sell more than twice as many units, 150% more, to make the same gross profit as at full price.
How far apart the markup and margin are
The two figures drift further apart as the markup rises: the margin is 3.33 percentage points below the markup. On a £100 cost, pricing for a true 20% margin would mean charging £125.00 instead of £120.00. Another 10 points of markup would add 6.41 percentage points of margin.
Other markups
- 5% markup (4.76% margin)
- 10% markup (9.09% margin)
- 15% markup (13.04% margin)
- 25% markup (20% margin)
- 30% markup (23.08% margin)
- 35% markup (25.93% margin)
Common questions
What margin is a 20% markup?
16.67%. Divide the markup by 100 plus the markup: 20 ÷ 120 = 16.67%.
How do I add a 20% markup to a price?
Multiply the cost by 1.2. For example, £40 × 1.2 = £48.00. In Excel or Google Sheets, with the cost in A2, use =A2*1.2.
What is a 20% markup on £100?
£20 of profit, so the selling price is £120.00 before VAT, or £144.00 with 20% VAT added.
How do I work out the cost from a price with a 20% markup?
Divide the selling price by 1.2. A price of £60 means a cost of £50.00. If the price includes 20% VAT, divide by 1.2 first.
Sources and assumptions
- Markup = profit ÷ cost. Margin = profit ÷ selling price. Both use prices before VAT.
- Cost means what you pay for the item, excluding any VAT you can reclaim.
Figures are rounded to the nearest penny or to two decimal places.