Start with matching figures
For this menu-item calculation, food cost percentage = ingredient cost per sold portion ÷ selling price before VAT × 100.
Gross profit = selling price before VAT − portion cost. GP margin = gross profit ÷ selling price before VAT × 100.
If portion cost means ingredients alone, GP margin equals 100% minus food cost percentage. If your calculator cost also includes packaging or other direct costs, that shortcut no longer describes ingredient-only food cost percentage. Label the costs you include so that comparisons remain meaningful.
These are recipe-based figures for one item. They do not establish your whole kitchen’s actual food cost percentage, which also depends on what you buy, use, waste and sell.
Worked example: a £10.80 menu item
Assume a café sells a dish for £10.80 including an explicitly assumed 20% VAT rate. Ingredients cost £3.00 per sold portion, excluding recoverable VAT and including any non-recoverable VAT. For this first calculation, no other direct costs are included and no further wastage adjustment is needed. The VAT rate is an arithmetic assumption, not a classification of the dish.
Selling price before VAT = £10.80 ÷ 1.20 = £9.00. Food cost percentage = £3.00 ÷ £9.00 × 100 = 33.33%. Gross profit = £9.00 − £3.00 = £6.00. GP margin = £6.00 ÷ £9.00 × 100 = 66.67%.
The percentages total 100% because both use the same £3.00 cost and £9.00 sales value. The £6.00 is gross profit against the ingredients included here. Staff, rent, energy and other remaining expenses still need to be paid; it is not take-home profit.
Two mistakes that change the answer
First, dividing ingredients by the VAT-inclusive customer price gives £3.00 ÷ £10.80 × 100 = 27.78%. That uses a different denominator and understates food cost as a share of sales before VAT. Remove sales VAT before calculating either percentage.
Second, food cost and total direct cost can differ. Suppose this same sale also needs £0.45 of packaging, measured on the same purchase-VAT basis. The calculator’s portion cost becomes £3.45. Gross profit falls to £5.55 and GP margin becomes 61.67%, while ingredient-only food cost remains 33.33%. The difference is packaging; the two percentages should no longer add to 100%.
If you already include packaging in a supplied portion-cost figure, do not add it again.
Turn an illustrative GP target into a price
Suppose you want to test 65% GP against the original ingredients-only cost of £3.00. This is an example to demonstrate the calculation, not a recommended target.
Target customer price = cost ÷ (1 − GP ÷ 100) × (1 + VAT ÷ 100).
With the assumed figures: £3.00 ÷ (1 − 65 ÷ 100) × 1.20 = £10.285714… . Rounded to pennies, the customer price is £10.29. Checking that actual penny price gives approximately 65.01% GP.
A calculated price is a starting point for a decision. Check the remaining expenses it must support and whether customers will buy at that price. A margin calculation does not predict demand.
Use the calculator with your own costs
Open GP Calculator UK at / and choose Check my GP. Enter £3.00 as cost per portion, £10.80 as customer menu price and 20 as the assumed VAT percentage to reproduce the first example. Then change cost to £3.45 to see the packaging effect.
To reproduce the pricing example, choose Find selling price, enter £3.00 cost, 65% target GP and the assumed 20% VAT rate. Replace every assumption with your own figures before making a pricing decision. The explanation at /#guide provides more help with the inputs.
Keep your cost basis consistent when comparing dishes. If one includes packaging and another excludes it, their displayed margins answer different questions.
Keep VAT treatment separate from pricing arithmetic
Use the VAT rate applicable to your particular sale; neither this example nor the calculator determines it. HMRC’s catering and takeaway guidance explains the relevant distinctions: https://www.gov.uk/guidance/catering-takeaway-food-and-vat-notice-7091
For costs, exclude VAT you can recover and include VAT you cannot recover. Do not assume that all purchase VAT is recoverable simply because a business is registered. HMRC explains recovery conditions and exceptions here: https://www.gov.uk/charge-reclaim-record-vat/reclaim-vat-business-expenses
If you are not adding VAT, enter 0 for VAT in the calculator and use costs including non-recoverable purchase VAT. This guide explains pricing arithmetic, not personalised tax treatment.
Sources
Try the tools
Try your own figures
Use the free GP calculator to check selling prices, compare margins and save menu items on your device. Gross profit is before remaining business expenses.
Open GP Calculator UK →