In a business context, turnover means the total revenue a business generates from its trading activities over a given period, typically a financial year. It’s the ‘top line’ figure: the amount coming in before any costs are deducted.
Turnover is sometimes called revenue, sales, or gross income. These terms are often used interchangeably, though there are technical accounting distinctions between them in some contexts.
| Important: Turnover is not profit. Turnover is your total sales income. Profit is what remains after all your costs have been deducted. A business can have high turnover and low profit, or even a loss, if costs are high. |
What Counts as Turnover?
Turnover includes all income earned from your core business activities: selling goods, providing services, or licensing products. It does not typically include:
- VAT (you collect VAT on behalf of HMRC, it’s not your income)
- Investment income or interest received
- Money you’ve borrowed
- One-off asset sales (e.g. selling a company van)
For example, if you’re a VAT-registered plumber who invoices £60,000 including VAT during the year, your turnover for accounting purposes would be £50,000 (the net figure, before VAT).
| 📊 Example A freelance graphic designer charges clients £4,500 per month. Annual turnover = 12 × £4,500 = £54,000 After deducting costs, software, studio space, professional development, of £12,000, the designer’s profit is £42,000. |
Why is Turnover Important?
Turnover matters for several practical reasons:
- VAT registration, businesses with taxable turnover above £90,000 (the threshold from April 2024) must register for VAT
- Corporation tax, limited companies pay corporation tax on their profits, but turnover provides context for how those profits were generated
- Business size classification, the government uses turnover as one criterion to define micro, small, medium, and large businesses
- Loan applications, lenders often use turnover to assess how much a business can reasonably borrow
- Benchmarking, comparing your turnover year-on-year, or against industry averages, is a key performance indicator
Turnover vs Revenue vs Profit: What’s the Difference?
In everyday UK business usage, turnover and revenue are usually the same thing, total sales income. However:
- Revenue is the broader accounting term used internationally
- Turnover is the term most commonly used in UK accounting, on Companies House filings, and in HMRC guidance
- Gross profit = turnover minus cost of sales
- Net profit = turnover minus all costs, including overheads and tax
What is a Good Turnover for a UK Small Business?
There’s no single ‘good’ turnover figure, it depends entirely on your sector, costs, and business model. According to the DBT Small Business Survey, the median annual revenue for a UK small business is around £295,000. However, the range is enormous: many sole traders turn over under £50,000, while small businesses with 10–49 employees may turn over several million pounds.
What matters more than the absolute turnover figure is the trend (is it growing?), the margin it generates (what proportion becomes profit?), and how it compares to your direct costs.
Frequently Asked Questions
Not quite. For Self Assessment, sole traders report their trading income (turnover) and then deduct allowable business expenses to arrive at taxable profit. You pay tax on profit, not on turnover.
As of April 2024, the VAT registration threshold is £90,000 of taxable turnover in a 12-month rolling period. Once you exceed this, you must register for VAT within 30 days.
No. Money you invest in your own business (e.g. from personal savings) is capital, not turnover. Turnover only includes income earned from trading activities.
