What is business turnover in the UK?

Revenue Recognition
Revenue Recognition

Stripe Revenue Recognition streamlines accrual accounting so you can close your books quickly and accurately. Automate and configure revenue reports to simplify compliance with IFRS 15 and ASC 606 revenue recognition standards.

Learn more 
  1. Introduction
  2. How is turnover different from profit?
    1. Turnover
    2. Profit
  3. What should be included in turnover calculations?
    1. Revenue from sales of goods or services
    2. Commissions or fees
    3. Rental income (if part of the core business)
    4. Other operating income
    5. Exclusions from turnover
  4. Why is turnover important for UK businesses?
  5. How can you accurately track business turnover?
  6. What are common mistakes in calculating turnover?

In the United Kingdom, business turnover refers to a business’s total revenue during a specific period – typically a year – and is the gross income earned before deducting expenses (e.g. salaries, operating costs, taxes). Turnover includes sales of goods or services and any other business activities that bring in money.

Businesses in the UK report turnover in financial statements and use it to calculate taxes such as value-added tax (VAT). Turnover is also a useful metric for comparing growth and tracking performance over time. Below, we’ll discuss what should be included in turnover calculations, how to accurately track business turnover, and common mistakes.

What’s in this article?

  • How is turnover different from profit?
  • What should be included in turnover calculations?
  • Why is turnover important for UK businesses?
  • How can you accurately track business turnover?
  • What are common mistakes in calculating turnover?

How is turnover different from profit?

Turnover and profit are important financial metrics for understanding a business’s performance, but they measure different things. Turnover is about total revenue (all the money coming in), while profit is about what’s left after paying all costs (the money the business keeps).

Turnover

Turnover, also known as gross revenue, is the total income a business earns from its core activities, such as selling products or services, during a specific period. It reflects the total amount of money coming in before costs or expenses are subtracted.

  • Example: If a shop sells 1,000 items at £10 each, its turnover is £10,000, regardless of the cost to produce or sell those items.

Profit

Profit is what remains after all the business’s expenses are deducted from the turnover. It shows how much the business earns for its owners or shareholders. Profit can be divided into:

  • Gross profit: Turnover minus the direct costs of producing goods or services (e.g. materials and labour)

  • Operating profit: Gross profit minus operating expenses (e.g. rent, utilities, marketing)

  • Net profit: The final figure after subtracting all expenses, including taxes and interest

If its costs are too high, a business can have a high turnover but low profit. Conversely, a smaller turnover and well-managed costs can still result in healthy profits.

What should be included in turnover calculations?

Turnover calculations should include all income generated from a business’s products or services over a given period, excluding extras such as interest earned and money received from selling assets. Here’s what to include:

Revenue from sales of goods or services

  • Product sales (the income from selling physical goods)

  • Service revenue (fees earned from providing services)

  • Subscription income (recurring revenue from subscription-based services)

Commissions or fees

  • Income from commissions (e.g. agency fees, brokerage fees)

  • Income from transaction fees or processing charges

Rental income (if part of the core business)

  • Rent, if the business operates as a landlord

  • Income from leasing assets

Other operating income

  • Royalties

  • Licensing fees

  • Franchise income

Exclusions from turnover

Turnover doesn’t include these figures:

  • VAT charged on sales

  • Interest or investment income

  • Proceeds from selling assets

  • One-off exceptional items such as insurance payouts and legal settlements

Why is turnover important for UK businesses?

Turnover is important for UK businesses because it shows how much money they’re making from their main activities. It’s a helpful way to measure how well your business is doing, plan next steps, and ensure you’re following the rules. This is what turnover can tell you:

  • If your business is growing or slowing down: If turnover increases, you’re selling more, keeping customers happy, or breaking into new markets. If it’s decreasing, that could mean less demand, rising competition, or something else that needs attention. Watching this number helps you spot trends and make adjustments before problems become substantial.

  • How much money is coming into your business: Although it doesn’t show profit, turnover is a good indicator of whether customers are buying and whether you have enough income to cover your expenses and continue operating. If turnover starts to decrease, that’s often a sign you should resolve an issue, such as by improving sales or cutting costs.

  • How the government views your business size: Turnover tells you whether you need to register for VAT and whether you’re eligible for certain government grants or relief programmes. If your annual taxable turnover is more than £90,000, you’ll need to register for VAT and start charging it on your sales; certain grants and relief programmes, meanwhile, are available only to businesses below a certain size. Reporting turnover accurately can help you avoid fines and stay on good terms with the tax office.

  • What decisions you should make next: If your revenue is rising, it might be time to expand, hire more staff, or launch a new product. If it’s flat or dropping, you might need to reduce spending or rethink your sales strategy. Turnover is also important for budgeting: you can’t plan your expenses or expansion without knowing how much money is coming in.

  • How you appear to investors: If you want to secure a loan or attract investment, turnover is one of the first metrics investors will look at. A steady or increasing turnover shows your business is bringing in money and has the potential to grow. On the other hand, if turnover is unpredictable or decreasing, it can be a warning sign and make it harder to get funding.

  • How you compare with competitors: Turnover is a useful way to compare your business with others in your industry. For instance, if you run a cafe, you could check how your revenue compares against that of similar businesses. This helps you see where your business is doing well and where you might need to improve to stay competitive.

How can you accurately track business turnover?

Accurately tracking your business turnover means tracking all the money coming into your business from its core activities. Here’s how you can do so effectively:

  • Automate your sales tracking: Manually calculating turnover can lead to missed details and wasted time. Instead, use tools that record every sale in real time. If you’re using Stripe, the Dashboard gives you an instant view of your gross volume and breaks it down by product, customer, or region. This eliminates guesswork and makes sure your numbers are up to date.

  • Focus on revenue that reflects your business: Turnover should include only income from your main operations. Leave out one-off settlements and refunds. With Stripe, you can separate recurring revenue from one-off payments and filter by subscription plans so you’re counting only the income that reflects your core activities.

  • Don’t let taxes confuse your calculations: Remember that VAT isn’t part of your turnover; it’s money you’re collecting for HMRC. Stripe’s automatic tax features can calculate and separate VAT so you know exactly what’s revenue and what’s tax.

  • Look at turnover trends, not just totals: Look for patterns, not just the final number. Are you seeing peaks during certain months? Is one product responsible for most of your revenue? Stripe can help you analyse these trends to understand what’s fuelling your growth or holding it back.

  • Automate reconciliation to catch errors: You can’t afford to skip regular reconciliation, but you can automate it. Stripe integrates with accounting platforms such as Xero or QuickBooks to automatically match payments with invoices and ensure nothing gets lost between your sales and your bank.

  • Monitor real-time data: Checking turnover regularly can help you respond to unexpected changes such as a campaign’s success or a drop in sales. Stripe’s reporting lets you monitor revenue as it comes in.

  • Separate by revenue stream: If you sell multiple products or operate in different markets, it’s worth breaking down your turnover by category. Stripe’s customisable reports let you do this easily, so you can see which areas of your business are thriving and which might need more attention.

  • Plan for growth: As your business scales, turnover tracking can get more complicated, especially with multiple currencies, payment types, or revenue streams. Stripe is built to grow with you, with features such as multicurrency support and consolidated reporting.

  • Analyse turnover trends: Accurate turnover tracking involves analysing what your turnover means, too. Are you ready to expand? Are your costs too high? Are customers returning? By combining turnover data with technology such as Stripe’s analytics, you can better determine what’s driving your performance.

What are common mistakes in calculating turnover?

When you calculate turnover, it’s easy to make mistakes that can cause confusion or compliance issues. Here are some of the most common mistakes and how to avoid them:

  • Including non-turnover income: Turnover should include only revenue from your core business activities, such as selling products or services. Don’t count interest or one-off funds such as asset sales. Keep your accounts structured so income types are clearly labelled. For example, Stripe’s reporting tools let you filter revenue sources to ensure only operational income is counted.

  • Forgetting to exclude VAT: VAT is money collected on behalf of the government and not part of your revenue. Don’t add VAT or other sales taxes to your turnover figure. Use systems such as Stripe Tax, which automatically calculates and separates VAT from your revenue so you don’t accidentally inflate your turnover.

  • Missing small transactions: Even minor omissions can lead to an inaccurate turnover figure. Don’t overlook smaller payments, refunds, or occasional sales. Use tools that track every transaction, no matter how minor. A payment platform such as Stripe logs all activities and helps ensure no sale is missed.

  • Mixing up turnover and profit: Turnover doesn’t reflect what you’ve earned after expenses. Don’t confuse turnover (revenue) with profit (what’s left after costs). Make sure your financial reports clearly distinguish turnover from other metrics such as gross or net profit.

  • Ignoring refunds or discounts: Refunds reduce your total revenue, and discounts lower what you earn. Don’t count refunded or discounted sales at their full value. Ensure that your accounting system subtracts refunds and applies discounts when it calculates turnover.

  • Double-counting sales: Recording the same revenue twice (due to manual input errors or duplicate invoices) inflates turnover and misrepresents your business performance. Use automated systems such as Stripe, which syncs with your accounting software to eliminate manual entry errors.

  • Using the wrong time period: Comparing inconsistent time frames skews your turnover trends and misleads stakeholders. Don’t mix up reporting periods or accidentally combine figures from different months or years. Use consistent periods when pulling turnover data. Stripe’s reporting dashboard lets you set custom date ranges to match your reporting needs.

  • Not accounting for multicurrency revenue: If you operate globally, currency fluctuations can affect your turnover figures. Don’t ignore exchange rates or miscalculate income from international sales. Use a system such as Stripe, which handles multicurrency payments and provides consolidated reports in your chosen currency.

  • Overlooking recurring revenue: Subscription businesses often rely heavily on recurring revenue. Don’t exclude subscription payments or recurring income streams; this will make your turnover inaccurate. Track subscription income separately, and ensure it’s included in your turnover. Stripe’s recurring billing features automatically handle this.

  • Relying on manual calculations: Errors in manual calculations can add up and lead to inaccurate turnover reports. Automate your processes with tools such as Stripe, which records and calculates turnover in real time.

The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accuracy, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent lawyer or accountant licensed to practise in your jurisdiction for advice on your particular situation.

Ready to get started?

Create an account and start accepting payments – no contracts or banking details required. Or, contact us to design a custom package for your business.
Revenue Recognition

Revenue Recognition

Automate and configure revenue reports to simplify compliance with IFRS 15 and ASC 606 revenue recognition standards.

Revenue Recognition docs

Automate your accrual accounting process with Stripe Revenue Recognition.