To calculate gross profit on food in the UK, work from the VAT-exclusive selling price, subtract your ingredient cost, then divide that figure by the net selling price. The formula is:
Gross Profit % = (Net Selling Price − Food Cost) ÷ Net Selling Price × 100
The single biggest mistake UK operators make is leaving VAT in the selling price. VAT isn't yours — you collect it for HMRC — so it must come out before you calculate GP. Get that wrong and every margin on your menu is overstated.
Let's break it down properly.
Most restaurant food sold for consumption on the premises, plus all hot takeaway food, is standard-rated at 20% VAT. To find the net (VAT-exclusive) price from a gross menu price, divide by 1.2.
Net price = Gross price ÷ 1.2
Example: a burger sells for £12.00 on the menu.
The £2.00 is HMRC's, not yours. Your gross profit is calculated on the £10.00.
Add up the cost of every ingredient that goes into the dish, at the portion size you actually serve. This is where most calculations quietly fall apart, because the price you pay for a sack of onions isn't the cost of the onions on the plate.
You need to account for:
For our burger, suppose the costed ingredients total £3.20 per portion.
Now plug the net price and food cost into the formula:
That 68% GP is the figure you actually run your business on. Notice what happens if you'd lazily used the £12.00 gross price instead: £12.00 − £3.20 = £8.80, divided by £12.00 = 73%. That five-point gap is pure illusion — it's the VAT flattering your numbers.
Using a £3.20 food cost across different menu prices:
| Gross menu price | Net price (÷1.2) | Food cost | GP £ | GP % |
|---|---|---|---|---|
| £9.00 | £7.50 | £3.20 | £4.30 | 57.3% |
| £10.00 | £8.33 | £3.20 | £5.13 | 61.6% |
| £12.00 | £10.00 | £3.20 | £6.80 | 68.0% |
| £14.00 | £11.67 | £3.20 | £8.50 | 72.8% |
Most kitchens target 65–70% gross profit on food. To price a dish to hit a target GP, use:
Net selling price = Food cost ÷ (1 − target GP%)
Then add VAT back on for the menu price.
Example: your food cost is £3.20 and you want 70% GP.
Round to £12.95 and you've protected your margin with a little headroom.
VAT on food in the UK isn't always 20%, and this directly changes your GP maths. Broadly:
This means an identical sandwich can have a different gross profit depending on whether it's eaten in or taken away, because eat-in carries 20% VAT and takeaway doesn't. If you run both channels, calculate GP separately for each.
The rules around hot versus cold and eat-in versus takeaway are genuinely fiddly (HMRC's VAT Notice 709/1 covers the detail), so check your specific products if you're unsure.
Gross profit only accounts for food cost. It tells you nothing about whether you're actually making money. After GP, you still pay for:
A 70% GP dish can still lose money if it's labour-intensive or sells in tiny volumes. GP is a control metric for your kitchen, not your bottom line — but it's the foundation everything else sits on.
Doing this properly for one dish takes ten minutes. Doing it for a full menu, then re-doing it every time a supplier price moves, is where good intentions collapse — and that's exactly when guessed margins and silent waste start eating your profit.
If you'd rather not rebuild spreadsheets every time the cost of butter changes, PrepSheet turns any recipe into a costed, scalable prep sheet — handling ingredient costs, yields, portion maths and batch scaling automatically, so your GP figures stay accurate without the manual grind. If that sounds useful, you're welcome to [join the waitlist](#) and we'll let you know when it's ready.