VAT is the most common place UK operators lose pricing clarity.
Guests see a VAT-inclusive price, but your food cost math should use the net price. This guide shows the exact formula and a simple example so you can protect margin without confusion.
VAT Basics (UK)
Most restaurant meals are charged at the standard VAT rate. That means your menu price already includes VAT.
For pricing decisions, convert the guest price to net (ex VAT), then calculate food cost % and margin.
The Net Price Formula
Net price = Gross price ÷ 1.20Example:
- Menu price shown to guests: £14.40
- Net price used for cost %: £12.00
Pricing Example (30% Food Cost)
- Ingredient cost per serving: £3.60
- Target food cost: 30%
Net target price:
£3.60 ÷ 0.30 = £12.00VAT-inclusive menu price:
£12.00 x 1.20 = £14.40Quick Checklist
- Always calculate food cost % on net price
- Keep VAT out of your cost and margin math
- Review VAT treatment for any takeaway or cold items
- Reprice monthly if ingredient costs are moving
Related Guides
- UK Restaurant Menu Pricing Guide
- UK Food Cost Calculator
- UK Restaurant Labour Cost Calculator
- UK Restaurant Prime Cost Calculator
- UK Service Charge & Tips Guide
Want This Done Automatically?
KitchenCost recalculates recipe costs, food cost %, and price targets as your ingredient prices change.
If you want a faster way to protect margin, try KitchenCost.