Pricing · markup guide
5% markup: margin and selling price
A 5% markup means the selling price is your cost plus 5% of that cost, so you multiply the cost by 1.05. It gives a profit margin of 4.76%, because the profit is measured against the higher selling price. An item that costs £100 sells for £105.00 and makes £5.00 profit.
VAT rate checked against GOV.UK on .
Profit margin
4.76%
from a 5% markup
Multiply cost by
1.05
to get the price ex VAT
Price on £100 cost
£105.00
before VAT
With 20% VAT
× 1.26
cost to shelf price
Selling prices with a 5% 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 | £1.05 | £0.05 | £1.26 |
| £5.00 | £5.25 | £0.25 | £6.30 |
| £10.00 | £10.50 | £0.50 | £12.60 |
| £25.00 | £26.25 | £1.25 | £31.50 |
| £50.00 | £52.50 | £2.50 | £63.00 |
| £100.00 | £105.00 | £5.00 | £126.00 |
| £250.00 | £262.50 | £12.50 | £315.00 |
| £1,000.00 | £1,050.00 | £50.00 | £1,260.00 |
Nearby markups
Markup, the margin it gives and the multiplier to use on your cost.
| Markup | Margin | Multiplier |
|---|---|---|
| 10% | 9.09% | × 1.1 |
| 15% | 13.04% | × 1.15 |
| 20% | 16.67% | × 1.2 |
| 25% | 20% | × 1.25 |
Markup is not the same as margin
People often mix these up. A 5% markup is a 4.76% margin. If you actually want a 5% margin, you need a markup of 5.26%, so the price is cost × 1.0526.
How far you can discount
With a 5% markup you can take up to 4.76% off the selling price before you are selling at cost. So even a 10% discount would mean selling at or below cost.
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 × 1.26. The VAT goes to HMRC, so it does not change your 4.76% margin.
Thin margins
A 4.76% margin leaves little room for overheads such as rent, staff and card fees, which all come out of gross profit. Low markups usually only work on high-volume lines.
Profit in each pound of sales
A 4.76% margin is in single figures: less than 10p of each pound you take before VAT is gross profit, and the rest pays for the goods. A 10% discount leaves no profit on any unit, so selling more cannot make up for it.
How far apart the markup and margin are
At a markup this low the two figures are close together: the margin is 0.24 percentage points below the markup. On a £100 cost, pricing for a true 5% margin would mean charging £105.26 instead of £105.00. Another 10 points of markup would still add 8.28 percentage points of margin.
Other markups
- 10% markup (9.09% margin)
- 15% markup (13.04% margin)
- 20% markup (16.67% margin)
- 25% markup (20% margin)
- 30% markup (23.08% margin)
- 35% markup (25.93% margin)
Common questions
What margin is a 5% markup?
4.76%. Divide the markup by 100 plus the markup: 5 ÷ 105 = 4.76%.
How do I add a 5% markup to a price?
Multiply the cost by 1.05. For example, £40 × 1.05 = £42.00. In Excel or Google Sheets, with the cost in A2, use =A2*1.05.
What is a 5% markup on £100?
£5 of profit, so the selling price is £105.00 before VAT, or £126.00 with 20% VAT added.
How do I work out the cost from a price with a 5% markup?
Divide the selling price by 1.05. A price of £60 means a cost of £57.14. 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.