What is turnover?

What turnover means

In UK accounts, turnover is the figure at the top of the profit and loss account: everything you invoiced or sold in the period, net of VAT, discounts and returns. It is the same thing as revenue or sales for almost every small business. (In HR, "staff turnover" means something else entirely: how many people leave.)

Example

A bakery sells £186,000 of bread and cakes in a year, and wholesales £42,000 to cafés. Customers returned or were refunded £1,500.

Item	Amount
Shop sales	£186,000
Wholesale	£42,000
Refunds	(£1,500)
Turnover	£226,500

If ingredients and packaging cost £81,000 and overheads £110,000, profit before tax would be £35,500, about 16% of turnover.

Why it matters for your business

Several rules are triggered by turnover, so it is worth watching:

• VAT registration: you must register if VAT-taxable turnover over the last 12 months goes above £90,000, or you expect it to in the next 30 days alone. See VAT threshold.
• Company size: micro and small company definitions, which control how much detail your accounts need, depend partly on turnover.
• Making Tax Digital: for sole traders and landlords, qualifying income decides when quarterly reporting starts.
• The trading allowance: sole traders with gross income of £1,000 or less need not declare it.

Lenders and buyers look at turnover trends, but they care more about profit. High turnover with thin margins can be riskier than lower turnover at good margins.

Turnover vs profit

Turnover is income before costs. Gross profit takes off direct costs; net profit takes off everything. Tax is charged on profit, not turnover, except for VAT, which is calculated on taxable sales.

Watching turnover month by month

Annual turnover hides seasonality. A rolling 12-month total, updated each month, smooths out the peaks and shows the real trend, and it is the same measure HMRC uses for the VAT threshold. Comparing each month with the same month last year is the simplest way for a small business to tell whether it is growing.

For limited companies, turnover is one of the tests for company size. Small companies can file simpler accounts, and micro-entities can file the most basic version, which affects how much information is public.