FREE FOOD-BUSINESS PRICING TOOLS
GP calculator with VAT: use the sale before VAT for your margin
When a customer price includes VAT, calculate GP using the sale before VAT. The calculator separates that sale from the VAT amount so the tax collected does not inflate your margin.
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Remove VAT by division, not subtraction
Assume a customer price of £12 and a sales VAT rate of 20%. Net sales are £12 ÷ 1.20 = £10 and the VAT amount is £2. Subtracting 20% from £12 would give £9.60, which is not the correct way to remove VAT included at that rate.
Calculate GP from the net sale
With an entered portion cost of £3, the example’s gross profit is £10 − £3 = £7 and GP margin is £7 ÷ £10 × 100 = 70%. Using the £12 customer price as the denominator and revenue would produce 75%, overstating this example’s GP margin. Markup is £7 ÷ £3 × 100 = 233.33%.
Enter the example in the calculator
Choose Check my GP, enter cost 3, customer menu price 12 and VAT 20. Review Price before VAT, VAT on sale and Gross profit margin. To work the other way, choose Find selling price with cost 3, target 70 and VAT 20; the customer price is £12.
Treat purchase VAT separately
Whether purchase VAT belongs in your cost depends on what you can recover. For example, an invoice of £3.60 containing £0.60 VAT gives an entered cost of £3 if that £0.60 is fully recoverable, or £3.60 if none is recoverable. Recovery can have conditions and exceptions: use your actual treatment rather than assuming registration alone settles every purchase.
Choose the rate for the specific sale
The 20% above is an arithmetic assumption. Food and catering VAT treatment depends on the sale; the calculator does not classify items. If you are not adding sales VAT, use No VAT added or enter 0 and include non-recoverable purchase VAT in cost. Check HMRC guidance for the item and circumstances. This page explains calculation inputs, not individual tax treatment.