I’ve updated this post on 16 May 2020
How to Calculate Your Business Turnover for Self-Assessment. Your business turnover on your self-assessment tax return consists of your total sales, takings, fees and any other money you earned during your accounting period. Here’s how to calculate it.
Calculating your business turnover for your self-assessment tax return is crucial.
Show too much and you’ll pay too much tax. Show too little and you could face penalties.
Here’s how to get it right.
What is Business Turnover
Your business turnover refers to all the sales you have generated in your business for work you have carried out or product you have sold.
Business turnover does not include money earned as interest or business loans. These are dealt with in a different way.
You’ll need to calculate your business turnover when completing out your self-assessment tax return, totalling up everything you have earned in your accounting period.
The figures you use must be GROSS. That means before any deductions. So if you are a self-employed uber driver, for example, you’ll need to pick up your income before any Uber deductions.
Don’t worry, you’ll be able to get tax relief on any fees deducted from your earnings when you enter your expenses into your tax return.
You’ll find the figures you need by referring back to all the places you collected money.
You’ll find those figures in places like:
- Cash takings records;
- Bank statements;
- Online accounts like eBay, Amazon, Shopify or payment processing solution for your own Website.
The actual figures you need to add up depends on whether you use the cash basis or traditional accounting.
How is Business Turnover Calculated Using the Cash Basis
The easiest way to work out your business turnover is to use the cash basis.
That means that you need to add up everything you were paid during your accounting period.
So if you have invoiced a customer but they have not paid you, then you don’t need to include it in your business turnover calculation.
It’s great for self-employed business owners because it means they only pay tax on the money they have actually been paid.
If you are using my bookkeeping spreadsheet your business turnover will be automatically calculated on a month by month basis from the information you enter. You’ll find your yearly total on the summary sheet and can input that figure straight into your tax return.
How is Business Turnover Calculated Using Traditional Accounting
If you don’t use the cash basis you’ll need to include all the money you have earned during your accounting period, whether it has been paid to you or not.
That’s things like:
- Unpaid invoices;
- Online payments that arrive after the end of your accounting period but cover earnings during that time.
Does Business Turnover Include VAT?
If you are VAT registered then you must not include any VAT you have charged in your business turnover.
That’s because when you are VAT registered, you are simply collecting VAT on behalf of HMRC. So VAT is not part of your earnings.
Tips on Calculating Your Business Turnover for Your Self-Assessment Tax Return
If you are struggling to get started adding up your business turnover, here are some tips to get you going:
- Write down your accounting period;
- List out all your sources of income during your accounting period;
- Run through your paperwork and list out all income received during your accounting period;
- Find amounts you were paid that are net of charges, fees or other deductions;
- Find statements and documentation that relate to the amounts in #4;
- Note down all charges, fees or other deductions from the statements in #5;
- Add back all deductions and charges to the figures in #4 to show your gross business turnover (that means before any deductions);
- If you are using traditional accounting, adjust for any unpaid invoices or money you are owed on the last day of your accounting period.
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