What is Turnover?
Turnover is your total business income before deducting any costs or expenses. It's also called revenue or gross income.
Example
You invoice clients £150,000 in a year. Your turnover is £150,000 (regardless of how much profit you make).
Key Dates
Monitor for VAT threshold (£90,000)
How Turnover Works in Practice
Turnover is the total income your business generates from its normal trading activities during an accounting period, before deducting any expenses whatsoever. It includes all sales of goods and services, whether or not payment has been received. If you invoice a customer in March but they pay in May, the income still counts towards your March period turnover.
Turnover is not profit. This is one of the most fundamental distinctions in accounting. A company with £500,000 turnover might only make £30,000 profit after expenses, or it might make a loss. Turnover tells you the scale of business activity; profit tells you whether the business is actually making money. Corporation Tax is calculated on profit, not turnover.
Turnover matters for several regulatory thresholds in the UK. The most important is the VAT registration threshold, currently £90,000. If your taxable turnover exceeds £90,000 in any rolling 12-month period, you must register for VAT. Turnover also determines whether your company qualifies as "small" for Companies House filing purposes (under £10.2 million), which affects what level of detail you must include in your accounts. For the audit exemption, the turnover threshold is also £10.2 million.
For limited companies, turnover is reported on the top line of your Profit and Loss statement and in your CT600 Corporation Tax return. HMRC uses turnover figures to benchmark your business against industry norms, so significant discrepancies between reported turnover and lifestyle indicators can trigger enquiries.
Step by Step
Turnover is calculated by adding up all sales invoices raised during your accounting period, regardless of whether payment has been received. If you operate on an accruals basis (which limited companies must), you recognise revenue when the work is done or goods are delivered, not when cash arrives.
For VAT purposes, you need to monitor turnover on a rolling 12-month basis, not just your accounting year. This means checking at the end of every month whether your total taxable turnover in the previous 12 months has exceeded £90,000. You must also register if you expect turnover to exceed £90,000 in the next 30 days alone.
Turnover excludes VAT you charge customers (that belongs to HMRC), investment income, interest income, and one-off capital gains from selling assets. These may appear in your accounts but are not classified as turnover from trading activities.
Practical Tips
- Set up a monthly turnover tracker so you can monitor your rolling 12-month total against the £90,000 VAT threshold
- Keep turnover figures net of VAT in your management reports for consistency with statutory accounts
- If you are approaching the VAT threshold, consider whether voluntary early registration might benefit you by allowing input VAT recovery
- Compare your turnover year-on-year as a basic health check -- declining turnover is an early warning sign that needs attention
Common Mistakes to Avoid
- Including VAT in your turnover figure -- turnover should always be reported net of VAT
- Only monitoring turnover against the VAT threshold at year end instead of on a rolling 12-month basis
- Confusing turnover with cash received -- turnover includes unpaid invoices on an accruals basis
- Treating investment income or asset sales as turnover when they should be reported separately
Frequently Asked Questions
Does turnover include VAT?
No. Turnover is always stated net of VAT (excluding VAT). The VAT you charge customers is collected on behalf of HMRC and is not your income. If you invoice £1,200 including £200 VAT, your turnover is £1,000.
What is the difference between turnover and revenue?
They mean essentially the same thing in UK accounting. Turnover is the traditional UK term, while revenue is more commonly used in international (IFRS) accounting standards. Both refer to total sales income before deducting expenses.
Does turnover include money I haven't been paid yet?
Yes, if you use accruals accounting (which limited companies must). Revenue is recognised when earned, not when cash is received. An invoice raised in March counts as March turnover even if the customer pays in June.
How does turnover affect my VAT obligations?
If your taxable turnover exceeds £90,000 in any rolling 12-month period, you must register for VAT within 30 days. You must also register if you expect to exceed £90,000 in the next 30 days. Once registered, you charge VAT on sales and submit quarterly VAT returns.
Is turnover the same as income?
Turnover specifically refers to income from your normal trading activities. Total income is broader and may include bank interest, rental income, or gains on asset disposals. On your CT600, these different types of income are reported separately.
Source: HMRC Business Income Manual: https://www.gov.uk/hmrc-internal-manuals/business-income-manual
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