Business Break-Even Calculator — the United Kingdom 2026-27
Find out how many sales you need to cover your costs.
Model UK business break-even with GBP revenue, VAT-aware pricing, payroll, rent, stock, overheads, contribution margin, and target profit.
UK Business Break-Even Notes
UK business break-even work often separates VAT from usable revenue and includes payroll, National Insurance, rent, stock, delivery, software, and card fees.
Use this version to test whether a limited company, shop, agency, or online business can cover overheads before director drawings or profit targets.
UK-specific treatment for business break even: figures are framed in pounds, with British household or business wording and the assumptions commonly seen in PAYE, HMRC, mortgage, pension, and consumer-credit contexts.
Watch for UK markers in the page copy and inputs: HMRC, PAYE, National Insurance, pension contributions, stamp duty land tax, miles, APR, part-exchange, council tax, VAT, and GBP-based totals.
The result should be read as a United Kingdom estimate, so compare it with UK provider quotes, HMRC or GOV.UK guidance, lender affordability rules, devolved-nation differences, or regulated advice where needed.
Uses VAT-exclusive figures. Break-even = Fixed costs ÷ (Price − Variable cost). Not accounting advice.
Select the question that matches where you are right now.
Your break-even point is the minimum sales level where your business covers all its costs. Below this, you make a loss. Above this, every additional unit sold generates pure contribution margin as profit.
Every unit sold contributes its CM toward covering fixed costs. Once fixed costs are covered (at break-even), each additional unit sold generates pure profit. High CM ratio = fast profit growth above break-even.
High fixed costs relative to variable costs create "operating leverage." Above break-even, profits grow rapidly with each additional unit. Below break-even, losses accumulate quickly. This is why break-even analysis matters most for businesses with significant fixed overheads.
Break-even revenue = BE units × selling price = Fixed costs ÷ CM ratio. This is often more useful than units — it tells you the minimum monthly revenue your business must generate, regardless of how many products or services you sell.
Margin of safety (MOS) = Current units − Break-even units. It tells you how far sales can fall before you make a loss.
A 20%+ MOS means sales would need to fall by more than 20% before you make a loss. A 5% MOS means a small downturn pushes you into losses. Seasonal businesses should plan for their lowest-volume period to still be above break-even.
Stable recurring revenue businesses: 15–25% MOS is comfortable. Seasonal or project-based businesses: aim for 30%+ in peak months. High fixed cost businesses (restaurants, manufacturing): MOS below 10% is high risk — fixed costs cannot be easily reduced in a downturn.
You can improve MOS by: selling more units (increase MOS numerator), reducing break-even point (by raising prices, cutting variable or fixed costs), or both. The profit volume chart in Standard mode shows profit at 50%, 75%, 100%, 125%, and 150% of break-even — a quick visual of how much buffer you have.
Three levers reduce break-even — and pricing is the most powerful.
A 10% price increase on a 50% CM ratio product reduces break-even by ~17%. Every £1 price increase adds £1 to CM (fixed costs unchanged). Test price sensitivity carefully — some markets accept price rises readily; others are highly elastic.
Renegotiate supplier prices, reduce waste, improve production efficiency, or find cheaper inputs. Each £1 reduction in variable cost adds £1 to CM. This approach preserves volume while improving profitability.
Every £1 reduction in monthly fixed costs reduces break-even by 1 ÷ CM units. At £50 CM, cutting £1,000/month in fixed costs reduces break-even by 20 units. Review all fixed expenses annually — software subscriptions, insurance, and staffing are common areas.
Once you know your break-even, here are the practical applications.
Your break-even revenue is your minimum monthly revenue target. Set your sales goal above this — add your target profit to the calculation in Standard mode to see the units needed for any profit goal.
Before accepting a bulk discount or running a promotion, recalculate break-even at the lower price. A 15% discount on a 40% CM ratio product requires ~60% more volume just to maintain the same total profit. Use the calculator to sense-check every pricing decision.
Include break-even analysis in your business plan and budget. Lenders and investors want to know when a business becomes profitable. If you are starting a new business, estimate realistic sales volume relative to break-even to assess viability before committing capital.
The break-even formula, contribution margin, and how to use them
The break-even formula
Break-even units = Fixed Costs ÷ Contribution Margin per unit
Contribution margin (CM) = Selling price − Variable cost per unit
Break-even revenue = Break-even units × Selling price (or equivalently: Fixed costs ÷ CM ratio)
Example
Fixed costs: £10,000/month. Variable cost: £25/unit. Selling price: £75/unit. CM = £75 − £25 = £50/unit. CM ratio = £50/£75 = 66.7%. Break-even units = £10,000 ÷ £50 = 200 units/month. Break-even revenue = 200 × £75 = £15,000/month.
| Units sold | Revenue | Variable costs | Fixed costs | Profit/(Loss) |
|---|---|---|---|---|
| 100 | £7,500 | £2,500 | £10,000 | (£5,000) |
| 150 | £11,250 | £3,750 | £10,000 | (£2,500) |
| 200 BE | £15,000 | £5,000 | £10,000 | £0 |
| 250 | £18,750 | £6,250 | £10,000 | £2,500 |
| 300 | £22,500 | £7,500 | £10,000 | £5,000 |
Margin of safety
Margin of safety = Current units sold − Break-even units. This tells you how much sales can fall before you make a loss. Expressed as a percentage: (Current units − BE units) ÷ Current units × 100. A margin of safety of 20%+ is generally comfortable.
How to classify your business costs correctly for break-even analysis
Fixed costs
Fixed costs do not change with sales volume. They must be paid whether you sell zero or 10,000 units. Examples: rent, insurance, salaries of permanent staff, loan repayments, software subscriptions, accounting fees, and depreciation. These costs are the "overhead" that must be covered before any profit is made.
Variable costs
Variable costs change in direct proportion to sales volume. Every additional unit you sell incurs this cost. Examples: raw materials, cost of goods purchased for resale, per-transaction payment processing fees, freight and packaging per item sold, and sales commissions. In break-even analysis, variable costs are expressed per unit sold.
Semi-variable costs
Some costs are partly fixed and partly variable — for example, a base salary plus commission, or a fixed internet plan with overage charges. For break-even purposes, split these: put the fixed portion in fixed costs and the per-unit portion in variable costs.
| Cost type | Examples | In break-even formula |
|---|---|---|
| Fixed | Rent, salaries, insurance | Fixed costs ÷ CM = BE units |
| Variable | Materials, COGS, commissions | Subtracted from price = CM |
| Semi-variable | Base + bonus, tiered fees | Split into fixed and variable portions |
Three levers for reducing your break-even threshold
Lever 1: Raise prices
A price increase directly increases contribution margin. A 10% price rise on a 50% CM ratio product reduces break-even by approximately 17%. Warning: test price elasticity — some products lose volume when prices rise. The net effect on profit depends on how much volume you retain.
Lever 2: Reduce variable costs
Negotiate better supplier pricing, find cheaper raw materials, reduce packaging costs, or improve production efficiency. Every £1 reduction in variable cost adds £1 to CM per unit. Reducing variable costs from £25 to £20 on a £75 product (CM ratio: 73% vs 67%) reduces break-even from 200 to 167 units — saving 33 units/month.
Lever 3: Reduce fixed costs
Cut or eliminate fixed costs where possible: sublease unused space, renegotiate insurance, switch to pay-per-use software, reduce salaried headcount. Every £1,000/month reduction in fixed costs reduces break-even by £1,000 ÷ CM per unit. At £50 CM, that is 20 fewer units needed per month.
Combined impact example
Base case: £10,000 fixed, £25 variable, £75 price → BE = 200 units. Raise price to £80 (+£5) → BE = 182. Also cut fixed costs by £1,000 → BE = 164. Also reduce variable to £22 → BE = 156. Combined levers reduce BE by 22%.
Whether to include or exclude VAT in your break-even figures
Use VAT-exclusive figures
For break-even analysis, always use VAT-exclusive figures — the price and costs before adding 20% standard-rate VAT. VAT is collected on behalf of HMRC and flows straight through your business: you charge output VAT on sales, reclaim input VAT on purchases, and remit the difference on your VAT return. It does not affect your profitability.
Example: £90 VAT-inclusive price
Excluding VAT: £90 ÷ 1.20 = £75 selling price. Use £75 in your break-even calculation. Similarly, if your variable cost including VAT is £30, the ex-VAT cost is £25 (and you reclaim the £5 input VAT).
If not registered for VAT
If your turnover is under £90,000 and you are not registered for VAT, you do not charge or collect VAT. Use your actual prices as they are — no adjustment needed. Once turnover exceeds £90,000, VAT registration is mandatory and you must switch to VAT-exclusive figures in your analysis.
VAT registration threshold
UK businesses with VAT-taxable turnover above £90,000 (2024-25 threshold, increased from £85,000 in April 2024) over a rolling 12-month period must register for VAT with HMRC. Once registered, you charge 20% standard-rate VAT on most taxable supplies (5% on some, 0% on essentials like most food) and reclaim input VAT on business purchases. VAT returns are typically submitted quarterly through Making Tax Digital (MTD) compatible software.
UK business break-even worked examples
London coffee shop
Fixed costs (rent, business rates, staff PAYE, NI, utilities, insurance): £18,000/month. Average sale value: £4.50 (VAT-inclusive £5.40, but use £4.50 ex-VAT). Variable cost per cup (coffee, milk, cup, card fees): £1.20. Contribution per cup: £3.30. Break-even = 18,000 ÷ 3.30 = 5,455 cups/month, or 182 cups/day. At 12 trading hours, that's 15 cups per hour — typically achievable for a busy spot, marginal for a quieter one.
UK e-commerce — single product
Fixed costs (Shopify, marketing salary, accountant, software): £4,500/month. Average sale price: £45. Variable cost (product, packaging, shipping, card fees, ad spend per sale): £30. Contribution: £15 per sale. Break-even = 4,500 ÷ 15 = 300 sales/month, or 10 per day. Add 25% margin of safety: target 375 sales/month.
UK consultancy — director-only Ltd
Fixed costs (office, accountant, insurance, software, phone, IT): £1,800/month. Plus director salary £36,000/year ÷ 12 = £3,000/month plus employer NI ~£250. Total fixed ~£5,050. Day rate £600 (typical UK consultancy). Daily contribution after small variable costs ~£580. Break-even = 5,050 ÷ 580 = ~9 billable days/month. Above this, profit accrues to retained earnings or dividend.
Manchester bar & restaurant
Fixed costs (rent, business rates, staff, NI, utilities, music licences, insurance): £42,000/month. Average customer spend (food + drinks): £35 ex-VAT. Variable cost per cover (food cost, drink cost): £14. Contribution per cover: £21. Break-even = 42,000 ÷ 21 = 2,000 covers/month, or about 67 per night across 30 trading days.
UK business fixed costs — what to include in break-even analysis
Premises & business rates
Commercial rent (typically with quarterly upward-only review), business rates (the UK property tax on commercial premises — varies by local council and rateable value), service charge, utilities (gas, electric, water), buildings insurance.
Staff costs
Gross salaries, employer National Insurance (15% on earnings above £5,000 from April 2025, up from 13.8%), workplace pension auto-enrolment minimum 3% employer contribution on qualifying earnings, statutory holiday pay accrual (5.6 weeks/year), apprenticeship levy if your annual pay bill exceeds £3m.
Professional services
Accountancy fees (typical limited company: £800-£2,500/year), legal retainer or one-off legal fees, business banking, payroll software (Xero, Sage, QuickBooks), data protection registration (ICO fee £40-£60).
Insurance
Public liability, employers liability (legally required if you have employees, ~£100-£300/year), professional indemnity, cyber, business interruption. Total typically £600-£2,500/year for a small UK business.
Marketing & technology
Google Ads / Meta Ads minimum spend, website hosting, domain renewal, email marketing tools, CRM software. Sometimes split between fixed (base subscriptions) and variable (CAC per acquired customer).
Owner/director drawings
For a sole director limited company, the director's salary (typically £12,570 taken as PAYE-efficient base) is part of fixed costs. Dividends are paid from retained profit, not from break-even calculations.
UK business variable costs — what changes per sale
Cost of goods sold (COGS)
Direct material costs for each product or service unit. For retailers: wholesale price. For manufacturers: raw materials and direct labour. For service businesses: any per-engagement contractor or subcontractor costs.
Card processing fees
UK payment processors charge: Stripe ~1.5% + 20p (UK cards), 2.5% + 20p (EU/international), Square 1.75% (in-person), PayPal 2.9% + 30p, GoCardless 1% capped at £4. Card fees on a £50 sale are typically 95p-£1.45. For high-volume retailers this compounds materially.
Delivery and fulfilment
Royal Mail standard parcel 2nd Class ~£3.40, Tracked 24 ~£4.75, Hermes Tracked 48 ~£3.50, Amazon SFP/FBA fees 15-30% of sale price. For e-commerce businesses, fulfilment is the second-largest variable cost after COGS.
Commissions
Sales commissions, affiliate payouts, platform fees (Etsy 6.5%, Not on the High Street 25%, eBay 12-15%, Amazon 12-15%). Marketplace platforms eat materially into margin and must be modelled explicitly.
VAT
VAT does NOT count as a variable cost for break-even purposes because it flows through — you collect it and remit it net of input VAT. Always use VAT-exclusive figures for both prices and costs in break-even analysis.
How to calculate break-even for a UK business with multiple products
Weighted average contribution
When you sell multiple products with different margins, calculate the weighted average contribution based on expected sales mix. Example: 60% of sales are Product A (contribution £20), 40% are Product B (contribution £45). Weighted average = (0.6 × 20) + (0.4 × 45) = £30 per sale. Apply this to total fixed costs.
Per-product break-even (if products are independent)
If each product has its own dedicated fixed costs and doesn't share resources, calculate break-even product-by-product. Useful for separate divisions or franchise lines.
Sales-mix sensitivity
If 80% of your contribution comes from one product line, model the impact of that line's sales falling 20-30%. Break-even shifts dramatically when product mix changes — a critical risk to flag.
Loss-leader products
Some products may operate near zero or negative contribution if they drive higher-margin upsells (e.g. a £5 starter pack that brings customers to the £50 subscription). Track contribution at customer level, not just product level, in these cases.
Sensitivity testing your UK break-even calculations
Cost rise scenarios
Model break-even at: +5% wages (typical annual pay review, tracking National Living Wage rises), +10% rent (typical 5-year review), +15% utilities (recent UK energy volatility), +25% materials (inflation shock). Each shifts break-even upward — your business needs to know when the model breaks.
Price reduction scenarios
If you have to drop prices to stay competitive: at −5% selling price, how many extra units are needed to maintain profit? At −10%? Compute the new break-even and assess whether achievable demand exists.
Macro factor impacts
Model: UK recession (revenue down 15-20%), Bank of England rate rise +1% (if you have business debt), London Underground/rail strikes (footfall down for retail/hospitality), business rates revaluation (typically 5-7 year cycle, with major shifts).
Best-case scenarios
Equally important: what if your marketing works and you get 50% more sales? Can your fixed cost base handle the volume? Many UK small businesses fail not from low sales but from being unable to scale fixed costs (kitchen capacity, staff hours, premises space) when demand exceeds expectation.
How recent UK regulation affects business break-even
April 2025 NI rise to 15%
Employer National Insurance rose to 15% on earnings above £5,000 (was 13.8% on earnings above £9,100). For a typical small business with 10 employees on average £30,000, the annual NI cost rose from approximately £29,000 to approximately £37,500 — a £8,500 fixed cost increase.
April 2025 minimum wage
National Living Wage (21+) rose to £12.21/hour. For UK retail/hospitality businesses, this is the single biggest fixed cost driver in recent years. Margin of safety calculations should bake in 5-7% annual NLW rises.
Business rates relief reductions
Retail/hospitality/leisure rates relief reduced from 75% to 40% in April 2025. For a typical high street unit with a £20,000 rateable value, this added approximately £3,500/year in fixed costs.
Making Tax Digital (MTD)
MTD for VAT has been mandatory since 2019; MTD for Income Tax Self-Assessment phases in from April 2026 for sole traders earning over £50,000. Compliance software adds £100-£300/year to fixed costs.
Corporation Tax
Small profits rate (under £50,000) 19%, main rate (over £250,000) 25%, taper between. Corporation Tax doesn't affect break-even directly (break-even is pre-tax) but does change your post-tax retention strategy.
Frequently asked Frequently asked questions about UK business break-even
How do I calculate break-even for my UK business?
Break-even units = Fixed monthly costs ÷ (Selling price − Variable cost per unit). At £10,000 fixed costs, £25 variable cost, and £75 selling price: break-even = £10,000 ÷ £50 = 200 units/month. Break-even revenue = 200 × £75 = £15,000/month. Use VAT-exclusive figures in all calculations.
What is contribution margin?
Contribution margin = Selling price − Variable cost per unit. It is the amount each unit sold "contributes" toward covering fixed costs and generating profit. Once fixed costs are covered (at break-even), contribution margin becomes pure profit per unit. Expressed as a ratio: CM ÷ Price × 100 = CM%. A higher CM% means fewer sales are needed to cover fixed costs.
What is a good margin of safety for a UK business?
A margin of safety of 20–30% above break-even is generally considered healthy for a stable business. This means sales would need to fall by 20–30% before you make a loss. Seasonal businesses (UK retail at Christmas, summer tourism) or those in volatile industries should aim for 30%+ to buffer slow periods. If your margin of safety is under 10%, a relatively small revenue drop could push you into loss.
How does VAT affect break-even calculations?
Use VAT-exclusive figures (prices and costs before the 20% standard VAT) for break-even analysis. VAT flows through your business — you collect 20% from customers and remit it to HMRC quarterly (after claiming input VAT on purchases via your VAT return). VAT does not affect your profitability and should not be included in your selling price or cost figures for break-even purposes.
Should I include my own salary in fixed costs?
For a UK sole trader: no — your drawings come from profit after break-even. Track separately. For a limited company director: yes — your director's salary (and associated employer NI) is a business expense and forms part of fixed costs. Dividends are paid from retained profit, not from break-even.
How often should I review my break-even?
At minimum annually, but quarterly is better. Major triggers for immediate review: rent review/renewal, NLW or NI rate changes (typically April), interest rate changes (if you have debt), losing or gaining a major customer, supplier price changes > 10%. Most accountants run break-even at financial year-end as part of the annual review.
Does UK business rates relief affect break-even?
Yes — business rates are a fixed cost. The April 2025 reduction in retail/hospitality/leisure relief from 75% to 40% increased fixed costs for affected sectors. A typical £20,000 rateable value high-street unit saw fixed costs rise £3,500/year as a result. Recalculate break-even immediately after any rates revaluation.
What's the difference between break-even and cash break-even?
Accounting break-even uses depreciation (non-cash). Cash break-even adds back depreciation, so it's lower. For a UK small business with limited cash reserves, cash break-even matters most month-to-month — you can technically be at accounting break-even but running out of cash if customers pay slowly. Track both.
Should I model multiple-product break-even separately?
If products share fixed costs (same premises, staff, marketing), use a weighted-average contribution based on expected sales mix. If product lines have dedicated costs and don't compete for resources, calculate per-product break-even. Sensitivity-test mix assumptions — break-even shifts dramatically if your mix moves.
How do start-up costs fit into break-even?
Initial start-up costs (fit-out, equipment, marketing launch) are typically amortised — spread over the expected period of use (3-5 years for equipment, 5-10 for fit-out). Monthly amortisation becomes part of fixed costs in the break-even calculation. Many failing businesses ignore amortisation and over-state profitability.
Can I use break-even to price a new product?
Yes — work backwards. Decide what fixed costs you can support per month, estimate variable cost per unit and likely sales volume, then calculate the minimum selling price needed to hit break-even at that volume. If the resulting price is uncompetitive, the unit economics don't work — try again with different volume or cost assumptions.
Does Brexit affect break-even calculations?
For UK businesses importing from the EU: yes — customs duties, EORI number costs, customs broker fees, and longer lead times all increase variable cost. For UK exporters: VAT zero-rating still applies for genuine exports, but customs and rules-of-origin certification add admin cost. Both should be included in current break-even modelling for international UK businesses.
Where these figures come from
Business figures on this page are drawn from HM Revenue & Customs (corporation tax, VAT, PAYE), Companies House (company registrations), and GOV.UK (statutory employer and business obligations).
- Corporation Tax rates — GOV.UK — Corporation Tax rates and reliefs.
- VAT rates (standard 20%) — GOV.UK — VAT rates.
- PAYE & employer obligations — GOV.UK — PAYE and payroll for employers.
- Company registration & filing — Companies House — GOV.UK.
- Business rates — GOV.UK — Business rates.
Last checked: April 2026. Rates and thresholds are reviewed against the source of record each November, when annual adjustments for the following tax year are published.