- Turnover is your total sales income from normal trading before any costs are taken off, and it’s not the same as profit.
- Turnover excludes VAT you collect for HMRC, one-off asset sales, grants, and interest, so quoting the wrong figure is a common and costly mistake.
- Your turnover figure decides when you must register for VAT (£90,000) and which company size rules and audit exemptions apply.
Turnover is the total money your business makes from selling its goods or services over a set period, before you take off any costs. It’s measured over a financial year, a quarter, or any period you choose, and in UK practice it means the same thing as revenue. It’s the first number a bank, an accountant, HMRC or an insurer will ask you for.
Get it wrong and the knock-on effects are real. Quote turnover when you meant profit and you’ll look like you’re earning far more than you are. Include VAT you’re only holding for HMRC and you’ll overstate it, which is where accounting priced to your business earns its keep.
What is turnover?
Turnover is your total sales income from normal trading activities in a given period, before any costs are deducted. If you invoiced £120,000 for your work over a year, that’s your turnover, full stop, regardless of what you spent to earn it.
It’s sometimes called your “top line”, because it sits at the very top of your profit and loss account. Everything else, your costs, your tax, your take-home, comes off it further down.
One quick clarification that trips people up. Turnover only counts money from your actual trade. A bank loan landing in your account isn’t turnover. Nor is money you’ve invested yourself. We’ll come back to those exclusions, because they’re where most mistakes happen.
Turnover, revenue and profit: what’s the difference?
Turnover and revenue mean the same thing in UK usage, while profit is what’s left after you subtract your costs. People use “turnover” and “revenue” interchangeably here, so don’t waste energy hunting for a distinction that isn’t really there.
Profit is the one that’s genuinely different, and it comes in two forms worth knowing.
Here’s a simple worked example for a sole trader with £120,000 of sales in a year:
Figure | Amount | What it means |
Turnover (revenue) | £120,000 | Total sales income before costs |
Less: direct costs | £45,000 | Stock, materials, subcontractors |
Gross profit | £75,000 | Turnover minus direct costs |
Less: running costs | £30,000 | Rent, software, insurance, fees |
Net profit | £45,000 | What’s actually left |
So this business has a turnover of £120,000 but a net profit of £45,000. Tell your bank your turnover is £45,000 and you’ve undersold yourself badly. Tell HMRC your profit is £120,000 and you’ll pay tax on money you never kept.
If you want the fuller picture of how the balance sheet side fits together, our guide to what an opening balance is is a useful companion read.
How to calculate your turnover
To calculate turnover, add up the total value of everything you sold during the period, using the invoice or sale date rather than the date you got paid. Most businesses report on this accruals basis, meaning a sale counts when you raise the invoice, not when the cash lands.
Follow these steps:
- Pick your period, usually your financial year.
- Add up every sales invoice you raised in that period.
- Add any cash sales that weren’t invoiced.
- Strip out the VAT element if you’re VAT registered (more on that next).
- The total is your turnover.
If you're VAT registered, your accounting software almost certainly shows a net-of-VAT sales figure already. That net figure is your turnover. The gross figure includes VAT that was never yours to keep.
Money you’re still owed counts too. If you’ve invoiced a customer who hasn’t paid yet, that sale is part of your turnover, and it sits in your accounts as a debt owed to you. That’s the idea behind trade debtors explained in our separate guide.
What to include and what to leave out
Include all income from your normal trade; leave out anything that isn’t a sale you made. This is the part of the definition that decides whether your figure is right, so it’s worth being precise.
Include in turnover:
- Sales of your goods or services, whether invoiced or paid in cash
- Sales made on credit that you haven’t been paid for yet
- Commission or fees earned from your core trade
Leave out of turnover:
- VAT you’ve charged and are holding to pass to HMRC
- One-off sales of business assets, like selling an old van
- Grants, including most government support payments
- Bank loans, overdrafts or other borrowing
- Money you or investors put into the business
- Interest received on your business savings
The VAT point is the big one. When you charge a customer £120 including £20 of VAT, only the £100 is yours. The £20 belongs to HMRC and never counts as turnover. If you’re weighing up whether to register at all, our guide to registering for VAT walks through the process.
Where your turnover figure gets used
Your turnover appears in more places than most business owners expect, which is exactly why getting it right matters. It’s a headline number that follows you around.
You’ll be asked for it, or have to report it, in your:
- Annual accounts filed at Companies House
- Corporation tax return, if you run a limited company
- VAT returns, if you’re registered
- Business insurance applications, where premiums often scale with turnover
- Finance and loan applications
- Accounting plan pricing, since many providers set fees by turnover band
That last point is close to home. Sleek’s UK plans are set by turnover band, so the figure you give us is the figure your price is based on. No nasty surprises once you’re on board.
If you’re forecasting ahead rather than reporting the past, turnover is the starting line for that too. Our guide to financial forecasting picks up where this one leaves off.
The thresholds turnover triggers
Your turnover level decides which tax and reporting rules apply to you, and several of the big ones kick in at specific figures. This is where the definition stops being academic and starts costing or saving you money.
When you must register for VAT
You must register for VAT once your taxable turnover goes over £90,000 in any rolling 12-month period. It’s not tied to your tax year; it’s any 12 months in a row. You’ll also need to register if you expect to cross £90,000 in the next 30 days alone.
The deregistration threshold sits at £88,000, so if your turnover drops below that you can apply to come off the register. Both figures have held since April 2024. For the full detail, see the VAT registration threshold guide, and HMRC’s own register for VAT guidance.
Company size and accounts thresholds
If you run a limited company, turnover is one of the tests that decides how much detail you file. For accounting periods beginning on or after 6 April 2025, the limits are:
Company size | Turnover | Balance sheet total | Employees |
Micro-entity | £1 million or less | £500,000 or less | 10 or fewer |
Small | £15 million or less | £7.5 million or less | 50 or fewer |
Medium | £54 million or less | £27 million or less | 250 or fewer |
You qualify for a size band by meeting at least two of the three conditions. These figures rose by roughly 50% from 6 April 2025, so if you’d checked a year ago you’d have seen smaller numbers.
Audit exemption
Most small companies don’t need a statutory audit. You can claim audit exemption if you meet at least two of these three: turnover of £15 million or less, a balance sheet total of £7.5 million or less, and 50 or fewer employees. The full rules, including who can’t use the exemption, are on GOV.UK’s Companies House accounts guidance.
Turnover also feeds decisions further up the tax chain, including your corporation tax rates once profits are worked out.
Turnover for a sole trader vs a limited company
Turnover means exactly the same thing whether you’re a sole trader or a limited company; it’s total sales income before costs. What changes is where you report it and what happens next.
As a sole trader, your turnover goes on your Self Assessment tax return, and you’re taxed on your profit, not your turnover. As a limited company, turnover appears in your statutory accounts and your corporation tax return, and the company pays tax on its profits separately from you.
The practical upshot: a sole trader and a company with identical £120,000 turnovers can end up with very different tax bills and filing duties. If you’re a sole trader working out what you’ll owe, our sole trader tax guide breaks it down.
Mistakes people make with turnover
The most common turnover mistakes come from including money that isn’t a sale or muddling the period it belongs to. They’re easy to make and easy to avoid once you know them.
Watch out for these:
- Quoting turnover including VAT. The VAT you charge isn’t yours, so it never counts. This one inflates your figure by up to 20%.
- Treating a loan or investment as turnover. Borrowed money and injected capital aren’t sales. They don’t touch your turnover.
- Counting an asset sale. Selling an old piece of kit is a one-off, not trading income.
- Mixing accounting periods. Sales belong to the period you made them, based on the invoice date, not when you were paid.
Get any of these wrong and everything downstream, your tax, your VAT position, your accounts, inherits the error.
Why your accountant asks for this figure
Your accountant asks for your turnover because it drives three things at once: your pricing, the thresholds that apply to you, and the accounts they’ll prepare. It’s not idle curiosity; it’s the number that shapes the whole engagement.
On pricing, Sleek sets UK plans by turnover band, so an accurate figure means an accurate quote. On thresholds, your turnover tells us whether VAT registration is on the horizon and which company size rules you fall under. On the accounts themselves, it’s a headline figure that has to be right before anything else is built on top of it.
There’s an honest point worth making here. Plenty of the tasks around turnover, filing a VAT return, submitting accounts, you can do yourself, free, directly with HMRC and Companies House. Where it’s genuinely straightforward, do it yourself. Where the risk of an expensive mistake is real, that’s where a qualified accountant earns their fee.
How Sleek helps with turnover
Turnover is a simple idea with expensive consequences when it’s wrong. Sleek’s in-house, qualified accountants make sure the figure in your accounts, your VAT returns and your tax return is the right one, and that you’re on the correct side of every threshold it triggers.
We’re not a chat widget or an outsourced back office. You get a real person who’s accountable for your numbers, backed by technology that does the heavy lifting.
Disclaimer: The preceding information is not legal advice. This content is aimed to provide general guidance. For more formal or legal advice, contact Sleek directly.
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FAQs on turnover
Is turnover the same as revenue?
Yes. In UK business practice, turnover and revenue mean the same thing: your total sales income before costs. You’ll see both terms used interchangeably in accounts, guidance and everyday conversation. There’s no meaningful difference to worry about, so if a form asks for one and you know the other, they’re the same figure.
Does turnover include VAT?
No. Turnover excludes any VAT you charge, because that money belongs to HMRC and you’re only collecting it on their behalf. If you invoice £120 including £20 VAT, your turnover from that sale is £100. Quoting the VAT-inclusive figure is one of the most common ways business owners accidentally overstate their turnover.
Do grants count towards turnover?
No, in most cases. Grants aren’t income from your normal trade, so they usually sit outside turnover and are recorded separately in your accounts. The treatment can vary depending on the grant’s terms and purpose, so if you’ve received a significant grant it’s worth confirming with an accountant how to record it correctly.
Is turnover before or after expenses?
Before. Turnover is your total sales income with nothing taken off, which is why it’s called the top line. Once you subtract your costs you get profit, not turnover. This is the single distinction most worth remembering, because confusing the two changes both what you appear to earn and what you’re taxed on.
Does selling equipment count as turnover?
No. Selling a business asset, like an old van or a piece of machinery, is a one-off event rather than part of your normal trade, so it doesn’t count as turnover. It’s recorded elsewhere in your accounts, and any gain may have separate tax consequences. Only income from your core trading activity belongs in your turnover figure.
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How do I work out my annual turnover?
Add up the total value of all sales you made across your financial year, using the invoice or sale date rather than the payment date. Include sales you’ve invoiced but not yet been paid for, and strip out any VAT if you’re registered. The resulting total is your annual turnover, before any costs are deducted.
What turnover do I need before registering for VAT?
You must register for VAT once your taxable turnover exceeds £90,000 in any rolling 12-month period, or if you expect to cross it in the next 30 days alone. It’s based on any 12 consecutive months, not your tax year. You can also register voluntarily below that figure if it suits your business.
