Free Profit and Loss | Business P&L UK 2025 calculator for the UK. Get instant, accurate results with our easy-to-use online tool. Updated for 2025/26 with...
Calculate gross profit, net profit, and margins for your UK business with HMRC-aligned categories
Small Profits Rate (19%): Profits up to £50,000
Main Rate (25%): Profits over £250,000
Marginal Relief: Profits between £50,000-£250,000 (effective rate 26.5% on marginal profits)
A Profit and Loss statement (P&L), also called an Income Statement, summarises your business revenue, costs, and expenses during a specific period. It's essential for HMRC reporting, business loans, and understanding your company's financial health.
The Basic P&L Formula:
Revenue - COGS = Gross Profit
Gross Profit - Operating Expenses = Operating Profit
Operating Profit - Interest - Tax = Net Profit
| Profit Type | What It Measures | Formula |
|---|---|---|
| Gross Profit | Revenue after direct costs of goods/services | Revenue - COGS |
| Operating Profit (EBIT) | Profit from core business operations | Gross Profit - Operating Expenses |
| EBITDA | Operating profit before non-cash charges | Operating Profit + Depreciation + Amortisation |
| Net Profit (Bottom Line) | Final profit after all costs including tax | Operating Profit - Interest - Tax |
Understanding industry benchmarks helps you assess whether your business is performing well compared to competitors. These figures are based on UK SME data from 2023-2024.
| Industry | Gross Margin | Net Margin | EBITDA Margin |
|---|---|---|---|
| Retail (General) | 25-40% | 2-5% | 4-8% |
| Grocery Retail | 20-30% | 1-3% | 3-6% |
| Restaurant / Hospitality | 60-70% | 3-9% | 10-18% |
| Construction | 15-25% | 3-8% | 5-12% |
| Manufacturing | 25-35% | 5-10% | 10-15% |
| Professional Services | 70-85% | 15-30% | 20-35% |
| Technology / SaaS | 70-90% | 20-40% | 25-45% |
| Healthcare Services | 40-60% | 10-20% | 15-25% |
| Trades (Plumber, Electrician) | 40-60% | 10-20% | 12-25% |
For most UK SMEs, aim for at least 10% net profit margin for sustainable growth. Below 5% leaves little buffer for unexpected costs. Above 20% is excellent and indicates strong pricing power or operational efficiency.
To reduce your tax liability, you can deduct expenses that are "wholly and exclusively" for business purposes. Here are the main categories HMRC accepts:
You cannot deduct: personal expenses, entertainment costs (except staff), fines/penalties, donations to non-approved charities, clothing (unless uniform), or the personal portion of mixed-use items. Keep receipts for at least 6 years.
Understanding how corporation tax applies to your profits helps with tax planning and cash flow management.
| Profit Band | Tax Rate | Tax on £100k Profit |
|---|---|---|
| £0 - £50,000 | 19% (Small Profits Rate) | N/A at this level |
| £50,001 - £250,000 | Marginal Relief applies | £21,750 (effective 21.75%) |
| Over £250,000 | 25% (Main Rate) | N/A at this level |
Marginal Relief Formula (2025/26):
Tax = Profits × 25% - (Upper Limit - Profits) × 3/200
Where Upper Limit = £250,000
Gross profit is revenue minus cost of goods sold (COGS) - the direct costs of producing your products or services. It shows how efficiently you produce goods. Net profit is gross profit minus all operating expenses (rent, salaries, utilities, marketing, depreciation, interest, and tax). Net profit is your actual "bottom line" - the money left after all costs.
Profit margins vary significantly by industry. Retail typically sees 2-5% net margin due to high competition and low prices. Professional services enjoy 15-30% due to low overheads. Software/SaaS can achieve 20-40% due to scalability. Manufacturing averages 5-10%. For most UK SMEs, aim for at least 10% net profit margin for sustainable growth and reinvestment capacity.
Sole traders report their profit/loss through Self Assessment (form SA103 for self-employment). You need to keep records but don't submit a formal P&L. Limited companies must file full accounts with Companies House (including a P&L/Income Statement) and a Corporation Tax return (CT600) with HMRC. Micro-entities can file simplified accounts, but still need a profit/loss account.
You can deduct expenses that are "wholly and exclusively" for business purposes. This includes: office costs and supplies, business travel (not commuting), staff costs (salaries, NI, pensions), stock and materials, professional fees (accountant, solicitor), advertising and marketing, premises costs (rent, rates, utilities), insurance, and capital allowances for equipment. You cannot deduct personal expenses, entertainment, fines, or the personal portion of mixed-use items.
For the 2025/26 tax year: 19% for profits up to £50,000 (Small Profits Rate), 25% for profits over £250,000 (Main Rate), and a marginal rate between £50,000-£250,000 where effective tax ranges from 19% to 25%. The marginal relief formula means profits between these thresholds are taxed at an effective rate of about 26.5% on the marginal amount.
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation. It shows your operating profitability without the effects of financing decisions (interest), tax regimes, and non-cash accounting charges. Investors and lenders often use EBITDA multiples to value businesses - typical UK SME valuations are 3-6x EBITDA depending on industry, growth rate, and reliability of earnings.
Best practice for UK businesses: Monthly for active management and early problem detection, quarterly for trend analysis and board reporting, and annually for statutory reporting and tax filing. Many UK businesses use cloud accounting software like Xero, QuickBooks, or FreeAgent for real-time P&L visibility. Regular review helps identify cost creep and revenue trends early.
Profit is calculated on an accrual basis - revenue is recognised when earned (invoiced), not when cash is received. Expenses are recognised when incurred, not when paid. Cash flow tracks actual money moving in and out of your bank account. A profitable business can still fail due to poor cash flow if customers pay late or you have large upfront costs. According to UK statistics, 82% of business failures are attributed to cash flow problems rather than lack of profitability.
Last Updated: January 2025 | Next Review: April 2025 (post-Budget)
This calculator provides estimates for planning purposes. For specific tax advice, consult a qualified accountant or tax advisor.
Expert Reviewed — This calculator is reviewed by our team of financial experts and updated regularly with the latest UK tax rates and regulations. Last verified: January 2026.
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