Discount and Pricing Calculator
The sale price after a discount and, if you enter your cost, what the discount does to your margin and how many extra sales you need to break even.
- Free, no sign-up
- Runs in your browser, nothing is stored
- Formula and worked example included
Discount and Pricing Calculator
Enter your figures to see results.
What will a discount really cost me?
A 20% discount does not cost you 20% of your profit; usually it costs far more. On an £80 item that cost £44, 20% off cuts the price by £16 but the profit by £16 out of £36: a 44% drop. You would need to sell 80% more units just to stand still. Enter your cost to see the real effect before you run the promotion.
How to use this calculator
- Enter the normal price and the discount you are considering.
- Enter your cost per item to see margin before and after, and the extra volume the promotion must deliver to break even.
- Add a quantity for an order total, or leave it at 1 for a per-item view.
What your result means
How to read the figure, what counts as normal, and what to do about it.
Discounts cost more than they look
A 20% discount does not cost you 20% of your profit; it usually costs far more. If you sell something for £80 that cost £44, you make £36. Knock 20% off and the price is £64, the profit is £20: a 44% cut in profit for a 20% cut in price. To end the promotion with the same profit you would need to sell 80% more units, not 20% more.
This is why the calculator asks for your cost. Without it, a discount is just arithmetic. With it, you can see whether the promotion has any realistic chance of paying for itself.
Better alternatives to a straight price cut
- Bundle a high-margin add-on instead of cutting the headline price.
- Add value (free delivery over a threshold, an extended warranty, priority booking) which costs you less than the customer values it.
- Condition the discount on a larger order, a longer contract, prepayment or a referral.
- Time-limit it honestly. A genuine two-week promotion draws forward demand without training customers to wait for the next one.
UK consumer law also matters: the Digital Markets, Competition and Consumers Act 2024 tightened the rules on "was/now" pricing. The reference price must be one the product actually sold at recently, and fake urgency or hidden fees are unfair commercial practices.
Worked example: a 20% off weekend
A homeware shop sells a lamp for £80 that costs £44 to buy in. It plans a 20% weekend promotion.
Sale price = 80 × 0.8 = £64. Margin drops from 45% (36 ÷ 80) to 31% (20 ÷ 64). Profit per lamp falls from £36 to £20.
To make the same total profit the shop must sell 36 ÷ 20 = 1.8 times as many lamps: an 80% volume uplift. If it normally sells 10 a weekend, it needs to sell 18. That is the number to judge the promotion against afterwards.
Frequently asked questions
How do I work out a price from a discount I want to offer?
Decide the margin you need after the discount and work backwards: Price = Cost ÷ (1 − margin). Then gross the price up so that the discounted figure still lands on your target.
Is a percentage or a pounds-off discount better?
Customers perceive "£20 off" as bigger than "20% off" on items over £100, and the reverse below it. The cost to you is identical if the amounts match; choose the framing that sounds bigger.
What about VAT on discounts?
VAT is charged on the price actually paid. A 20% discount on a £120 VAT-inclusive item makes it £96, of which £16 is VAT, so the discount reduces the VAT you pay over as well as your revenue.
How much can I discount without losing money?
Never below cost, and rarely below the point where margin after discount is less than half your normal margin. The calculator shows the volume uplift needed; if it looks implausible, the discount is too deep.
The maths behind this calculator
For anyone who wants to check the working or rebuild it in a spreadsheet.
The formulas
Sale price = Original price × (1 − Discount %) Margin after = (Sale price − Cost) ÷ Sale price × 100 Extra volume needed = (Profit before ÷ Profit after − 1) × 100 Price for a target margin = Cost ÷ (1 − Target margin %)
Assumptions and limits
- Prices are treated as they are entered; if you enter VAT-inclusive prices, enter a VAT-inclusive cost or the margin will be understated by the VAT.
- Cost is the variable cost per item (purchase or production plus any per-item fees). Fixed overheads are ignored, which is correct for a short promotion decision.
- The volume uplift is the break-even for gross profit; it does not include extra handling, delivery or returns that higher volume brings.
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