Profit & loss in plain English

Income (turnover) is what customers pay you for your work, excluding VAT. Expenses are costs of running the business: freelancers, software, rent, travel, fees and so on. Profit before tax = income − expenses.

Books records each item by the date on the invoice (not when money moved). The Profit & loss report groups everything by category, so you see where money comes from and where it goes.

Use the category on each entry – it also helps your accountant prepare your accounts. Personal spending must not be booked as a company expense.

General information, not tax or legal advice. Rates and dates change – always check GOV.UK.