What Is Markup?

Markup is the amount you add to your cost price when setting a selling price.

If a product costs GBP 100 and you apply 30% markup, the selling price becomes GBP 130.

Markup formula

Use this formula:

Markup % = (Selling price - Cost price) / Cost price x 100

To calculate selling price from cost and markup:

Selling price = Cost price x (1 + Markup %)

Markup vs margin

Markup and margin are related but not the same:

Example with cost GBP 100 and selling price GBP 130:

• Markup = 30%
• Gross margin = 23.1%

This distinction is important when working with cost price and contribution analysis .

Common markup models

Cost-plus pricing

A fixed percentage is added to cost for all products.

Category markup

Different product groups use different markup levels, based on competition and demand.

Dynamic markup

Markup changes by season, stock level, or customer segment.

Practical pricing example

A retailer buys an item for GBP 48.

• Target markup: 40%
• Net selling price: GBP 67.20
• VAT (20%): GBP 13.44
• Gross price to customer: GBP 80.64

For invoicing and VAT handling, align markup with your invoice process .

Accounting implications

Markup itself is a pricing metric, not a posting account. In accounting, the effect appears as:

• Revenue when the sale is booked
• Cost of sales when inventory cost is recognised
• Gross profit as the difference

To keep markup reliable, maintain consistent product costs and regular price reviews.

Typical mistakes

• Mixing up markup and margin in pricing targets
• Setting one markup for all products regardless of risk and overhead
• Ignoring freight, returns, and discount costs
• Calculating markup on gross (VAT-inclusive) prices instead of net prices

Summary

Markup is a core pricing tool for converting cost into selling price. A clear markup policy improves profitability control, supports better budgeting, and makes pricing decisions more predictable.