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Fees, payments and postage
Product margin calculator for UK online shops: profit an order after VAT, fees, postage and returns
Enter price, product cost, postage, fees and return rate to see the profit on an average order and the most you can spend on advertising for one sale.
A product that costs £7.50 and sells for £24 looks like it makes £16.50. By the time VAT, postage, packaging, fees and returns have each taken their share, the shop in the example below keeps £6.72. The calculator shows each step so you can see which one is taking the most.
Free tool
Product margin calculator for UK online shops: profit an order after VAT, fees, postage and returns, and the most you can pay in advertising for one sale
Works in your browser. Nothing you type leaves this device unless you ask us to email you the result.
The sum, line by line
| Line | Sum | Amount |
|---|---|---|
| Price the customer pays | £24.00 | |
| VAT inside that price | £24 ÷ 6 | £4.00 |
| You keep | £24 ÷ 1.2 | £20.00 |
| Product, landed | £7.50 | |
| Packaging | £0.60 | |
| Postage you pay | £3.35 | |
| Fees | 4% of £24, plus 25p | £1.21 |
| Profit before returns | £20.00 − £12.66 | £7.34 |
| Average order with 5% returned | (95% × £7.34) − (5% × £5.16) | £6.72 |
The £5.16 in the last line is what a returned order costs you when the item comes back fit to sell again: the outbound postage, the packaging and the fees, which the calculator assumes are not handed back. If you also pay for the return label, add that to your postage figure before you trust the result. If returned stock cannot be resold, the true cost is higher still.
VAT comes out first
If you are VAT registered, one sixth of every price a UK customer pays belongs to HMRC. Margin worked out on the £24 is margin on money that was never yours. The calculator divides by 1.2 and works from the £20.
When you are registered, enter your costs without VAT, because you reclaim the VAT you pay on stock and postage. When you are not registered, there is no VAT to take out of the price and you enter costs as you pay them. The second test case in our record shows the difference: the same product sold by an unregistered shop makes £11.34 an order before returns, £4 more than the £7.34 above. That gap is why crossing the registration threshold feels like a price cut you gave nobody. Our guide to the VAT threshold for online sellers covers how the turnover test works.
Fees: use your own figures
Fees are the line most often guessed. They are a percentage of what the customer pays, postage included on some platforms, plus a fixed amount per order, and they differ by platform and by plan. The 4% and 25p in the example are placeholders. Our Etsy and Shopify fee calculator works out the real figure for one order on each; take the result, divide by the price to get a percentage, and enter it here.
What you can spend on an advert
The last two lines of the result matter most if you advertise. If the average order makes £6.72, then £6.72 is the most you can pay to win one sale before that sale loses money. Advertising platforms report this the other way up, as return on ad spend: sales value divided by advertising cost. £24 ÷ £6.72 is 3.57. A campaign reporting a return of 3 looks healthy and is losing £1.28 on every order for this product. One reporting 5 is making £1.92.
Two cautions. The platform's sales figure includes VAT and counts orders that are later returned, which is why the break-even is worked on the price the customer pays. And the figure is for a first order only: if customers come back and buy again without an advert, you can afford to pay more for the first sale, but only if you have the repeat-order numbers to prove it.
Which line to work on
Change one input at a time and watch the profit.
- Postage. A 50p rise in postage takes 50p off every order and makes each return dearer. Our guide to the October 2026 Royal Mail price rise has the new rates.
- Price. £1 on the price adds 83p after VAT, less fees.
- Returns. Halving a 5% return rate adds 31p an order here; on clothing, where rates run far higher, it is often the biggest lever. What a customer is entitled to is in our returns rights checker.
- Product cost. A 10% saving from the supplier adds 71p an order after returns, more than the returns change, which is the case for ordering in the quantities that earn it.
Limits
The calculator prices one product on one channel. It leaves out your time, storage, software subscriptions and the stock you never sell; those belong in the overheads the margin has to pay for. It assumes UK sales at 20% VAT. Run it for your ten best sellers first: that is where a wrong price costs the most.
Overlyft can set up an AI assistant that drafts customer replies, listings and reorder lists for a person to approve. It does not set prices.
Where this comes from: Our own arithmetic, shown in full on the page and checked by hand; VAT at the standard rate of 20% (GOV.UK VAT rates, read 2026-10-01). The test record is in tests/packhand/tools-check.txt.
AEO Lookup editorial team
We write practical guides for people who run small UK firms, and we check every fact against its source on the date shown. Read how we review, or tell us if something has changed.
