Remove sales VAT before setting the cost budget
Assume a £12 customer price, an explicitly assumed 20% sales VAT rate, and an illustrative target of 70% GP. The sale before VAT is £12 ÷ 1.20 = £10. A 70% GP target leaves 30% for the costs you include, so maximum portion cost is £10 × 0.30 = £3.
General formula: maximum portion cost = [customer price ÷ (1 + sales VAT percentage ÷ 100)] × (1 − target GP percentage ÷ 100). Enter the rate appropriate to your sale. Neither 20% VAT nor 70% GP is a universal assumption or recommendation.
Separate ingredients from the total entered cost
If your £3 cost budget must include £0.50 packaging, ingredients can use at most £2.50 per sold portion. If the calculator cost includes other direct expenses, deduct those from the same budget too. A £3 ingredient budget plus £0.50 packaging would be a £3.50 total cost and would give 65% GP at the assumed £10 net sale.
Write down what your cost figure includes. Gross profit calculated against ingredients alone cannot be compared directly with gross profit calculated against ingredients, packaging and other costs.
Account for unsold portions before comparing recipes
Suppose the ingredient budget is £2.50 per sold portion, a batch makes ten portions and an assumed 20% are unsold or wasted. That leaves eight expected sales, giving a maximum batch ingredient spend of £2.50 × 8 = £20.
Spending £25 because ten portions were made would mean £25 ÷ 8 = £3.125 ingredients per sold portion. After £0.50 packaging, the cost becomes £3.625 and GP is 63.75% at a £10 net sale. These estimates hold the waste assumption fixed; measure and revise it rather than treating it as certain.
Penny rounding can move you below the target
Consider a £19.95 customer price with the same assumed 20% VAT and 70% GP target. Net sale is £16.625 and the precise maximum cost is £4.9875. Standard display rounding shows £4.99, but a real cost of £4.99 is fractionally above the maximum: GP is about 69.985%.
A £4.98 cost gives about 70.045% GP. In maximum-cost mode the calculator therefore rounds a saved cost down to pennies to protect the target, while the main display uses standard rounding. Use the underlying budget when making a close decision, rather than relying on a percentage displayed to one decimal place.
Use the result to compare decisions
In GP Calculator UK, choose Find maximum cost. Enter customer price 12, target GP 70 and the assumed sales VAT 20 to reproduce the £3 budget. Replace the assumptions with your own figures.
If a recipe costs more than the resulting budget, compare a different portion, ingredient mix, packaging choice or customer price. A lower ingredient bill is not automatically a better product or business decision. The tool does not predict demand, food quality or customer response.
Treat GP as one part of the decision
A target margin does not set an operating-expense budget by itself. Labour, rent, utilities, delivery commissions and other costs outside the entered figure still need to be covered. This guide is pricing arithmetic, not personalised tax or business advice.
Use costs excluding recoverable VAT and including non-recoverable VAT. Check the tax treatment applicable to your sale separately, using HMRC’s guidance where relevant.
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 →