Free tool
Margin and markup calculator
Set a price and see the margin and the markup together - they are not the same number, and mixing them up is the commonest way to under-price.
Questions
Markup is your profit measured against what the item COST you. Margin is the same profit measured against what you SOLD it for. Because the price is bigger than the cost, the margin is always the smaller percentage. A 50% markup is a 33% margin; a 100% markup is a 50% margin. Getting them mixed up is the most expensive small mistake in pricing.
Margin, usually, because it answers the question that matters: of every pound a customer pays you, how much do you keep. Markup is a handy way to set the price from a cost, but judge the result by its margin. This shows both for exactly that reason.
On top, and separately. VAT is not your money - you collect it and pass it on - so your margin is worked out on the price BEFORE VAT. The tax is then added to get the figure the customer actually pays. Folding VAT into the margin is the other common way a price comes out wrong.
Because margin is a share of the selling price, so 100% margin would mean the entire price is profit and the item cost you nothing. You can have a 100% markup - that just means doubling your cost - which is a 50% margin.
No - it works from the cost of the item itself. Your rent, time, payment fees and the rest come out of the margin, which is why a margin that looks healthy on one item can still leave the business short. Treat the margin here as the most it could be, not the money in your pocket.