Turnover vs revenue vs profit: what UK businesses mean

Turnover and revenue both mean the money a business brings in from sales before it pays any costs. Profit is what is left after those costs. In UK accounts the words turnover and revenue are usually interchangeable, but profit is a different number, and HMRC and Companies House use each one for different tests.

What is turnover?

Turnover is the total value of a business’s sales of goods and services in a period, before costs. The Companies Act 2006, section 474 defines it for companies as the amounts derived from providing goods and services, after deducting:

• trade discounts
• VAT
• any other taxes based on those amounts

So turnover in company accounts excludes VAT. If you charge £1,200 including 20% VAT, £1,000 counts towards turnover.

Is revenue the same as turnover?

Yes, in most UK usage. “Turnover” is the traditional British term and the one used in the Companies Act and on Companies House size tests. “Revenue” is the term used in international accounting standards and in most US material, so larger groups and listed companies tend to say revenue.

Some people use “revenue” more widely to include all income, such as bank interest or rent received, and keep “turnover” for sales from the main trade. If a lender, buyer or form asks for revenue, check which they mean.

What is profit?

Profit is income minus costs. There are several levels, and each one appears on a profit and loss account:

Our guide to gross profit vs net profit goes into each line.

A worked example

Here is how the three terms fit together for a small limited company in one year:

1. Turnover: the company sells £100,000 of goods, excluding VAT.
2. Total income (wider revenue): it also earns £2,000 of bank interest, so total income is £102,000.
3. Gross profit: cost of sales is £40,000, leaving £60,000.
4. Operating profit: overheads such as rent, wages and software are £35,000, leaving £25,000.
5. Profit before tax: adding the £2,000 interest gives £27,000.
6. Corporation Tax: at the 19% small profits rate, tax is £5,130.
7. Net profit after tax: £21,870.

The business has a turnover of £100,000 but a net profit of under £22,000. Quoting turnover where a lender or buyer expects profit makes a business look far more profitable than it is. To test your own margins, try the profit margin calculator.

Which figure do HMRC and Companies House use?

Each test uses a specific figure, so using the wrong one can lead to missed registrations or wrong filings.

Note that VAT uses “taxable turnover”, which HMRC defines as everything you sell that is not VAT exempt or outside the scope of VAT. See our page on the VAT registration threshold for what counts.

For Making Tax Digital, HMRC says qualifying income is total income from self-employment and property, “before expenses (also known as turnover)”. A landlord with £35,000 of rent and £20,000 of costs has qualifying income of £35,000, not £15,000. See MTD qualifying income.

Which applies to you?

Use this quick check:

• If you are filling in a VAT registration test, use taxable turnover over the last 12 months.
• If you are deciding whether you need MTD for Income Tax, use income before expenses from your last tax return.
• If you are working out which accounts to file at Companies House, use turnover, balance sheet total and employee numbers.
• If you are working out your tax bill, use profit, after allowable expenses.
• If you are applying for a loan, give both turnover and profit, and say which year they relate to.

What to do now

1. Check your bookkeeping software reports turnover excluding VAT.
2. Track rolling 12-month taxable turnover each month if you are near £90,000.
3. Check last year’s gross income if you are self-employed or a landlord, to see when MTD applies.
4. Read your profit and loss statement line by line, so you know where turnover ends and profit begins.

Frequently asked questions

Is turnover the same as revenue?

In most UK contexts, yes. Both mean income from sales before costs; turnover is the term used in the Companies Act 2006.

Is turnover before or after VAT?

For company accounts, turnover is after deducting VAT, so it excludes VAT. The Companies Act 2006, section 474, says so.

Is turnover the same as profit?

No. Turnover is sales before costs; profit is what remains after costs are deducted.

Does the VAT threshold use turnover or profit?

Turnover. You must register if your taxable turnover goes over £90,000 in any rolling 12-month period, whatever your profit.

Is MTD for Income Tax based on turnover or profit?

Turnover. HMRC uses qualifying income before expenses, taken from your previous Self Assessment return.

What is a good turnover for a small business?

There is no single figure. What matters is the profit margin and cash flow that turnover produces, which varies widely by sector.