Margin and markup are different numbers
Margin is profit as a share of the selling price before VAT. Markup is profit as a share of cost.
An item costs you £60 and sells for £120 including VAT.
Price before VAT£120 ÷ 1.2 = £100.00
Profit£100 − £60 = £40.00
Margin£40 ÷ £100 = 40%
Markup£40 ÷ £60 = 66.67%
If you forget the VAT and work on £120, you would think your margin is 50%. It is 40%.
Price for a target margin
Price before VAT = cost ÷ (1 − margin)
For a 40% margin on a £60 cost: £60 ÷ 0.6 = £100, so £120 including VAT. Type a margin into the calculator and it fills in the price.
If you are not VAT registered
You cannot reclaim VAT on what you buy, so your true cost is the price you paid including VAT. And you do not charge VAT, so your whole selling price is yours. Choose "No VAT" in the calculator and enter your cost including any VAT you paid.
Questions
What is a good profit margin?
It depends on the trade. Supermarkets work on low single figures. Software and consultancy can be over 50%. The number that matters is whether your margin covers your overheads.
Why is markup always bigger than margin?
They share the same profit, but markup divides it by cost, which is always smaller than the selling price when you make a profit.