Free profit and loss template for UK businesses

What is a profit and loss account?

In accounting, a profit and loss account shows what a business earned and spent over a period, usually its financial year, and the profit or loss that leaves. It is the same report whatever it is called: a profit and loss statement, a P&L, a statement of profit or loss, or in American usage an income statement. UK company law calls it the profit and loss account. It is prepared on the accruals basis, so sales count when they are earned and costs when they are incurred, not when the money arrives or leaves, which is why the profit is rarely the same as the change in the bank balance.

The profit and loss account format

The profit and loss account statement format everyone recognises, and the one in the template, runs from the top line to the bottom line:

Turnover
− cost of sales
= gross profit
+ other operating income
− administrative expenses (and distribution costs)
= operating profit
+ interest receivable − interest payable
= profit before tax
− tax on profit
= profit for the financial year

For a limited company that order comes from the law. The Small Companies Regulations 2008 (SI 2008/409, Schedule 1, Format 1) set the headings: turnover, cost of sales, gross profit or loss, distribution costs, administrative expenses, other operating income, the investment income and interest lines, tax on profit or loss, and the profit or loss for the financial year. A micro-entity can use a shorter format with eight headings: turnover, other income, cost of raw materials and consumables, staff costs, depreciation and other amounts written off assets, other charges, tax, and profit or loss. Inside those headings you can show as much detail as is useful; the template lists each expense line under administrative expenses.

Gov.uk says a small company can choose whether to send its profit and loss account to Companies House, and a micro-entity sends only a simpler balance sheet. Either way the full accounts, profit and loss account included, still go to the members and to HMRC.

A profit and loss account example

Here is a sample profit and loss account, a profit and loss statement example (an income statement example, in American terms) for a small limited company. Harbour Florists Ltd, an illustrative business, has this profit and loss account for its year to 31 March 2026, with the year before alongside. It is the worked example loaded in the template above, so you can change any figure and see the margins move.

Two things are worth noticing. Cost of sales includes the change in stock: the shop started the year with £3,200 of stock and ended it with £3,650, so the £450 increase comes off the purchases. And the £5,182 of tax is not 19% of the profit before tax: it comes from the corporation tax computation, which adds back the £3,210 of depreciation and deducts the capital allowances instead, then applies the 19% small profits rate. The corporation tax calculator does that last step.

How to do a profit and loss account, step by step

To calculate profit and loss for a period, work down from the top line:

1. Pick the period. Usually the financial year; a month or a quarter works the same way for management accounts.
2. Total the turnover. All sales, fees and takings for the period, excluding VAT if you are VAT registered.
3. Work out the cost of sales. Opening stock, plus purchases and direct costs, less closing stock. If you hold no stock, it is simply the direct costs.
4. List the running costs. Wages, directors’ pay, rent and rates, light and heat, insurance, motor, telephone, software, advertising, professional fees, bank charges, repairs and depreciation. Leave out drawings, dividends and loan repayments (only the interest is a cost).
5. Subtract down to the bottom line. Gross profit, then operating profit, then for a company interest and tax, to the profit for the year.
6. Compare and check. Set it against last year and look at the margins; a cost that has doubled, or a margin that has moved a long way, is usually a posting worth checking.

Most of the work is in steps 2 to 4, and it is the same work a bookkeeping system does as you go. If the figures come from a trial balance, every income and expense account goes on the profit and loss account and every asset, liability and capital account on the balance sheet.

A sole trader profit and loss account

A sole trader’s profit and loss account has the same shape, but the person and the business are one, so there is no corporation tax and no dividends: the net profit is the owner’s taxable income for the year, through Self Assessment. Choose Sole trader in the template and the expenses are grouped the way HMRC’s self-employment pages (SA103S) ask for them, so the totals drop straight into the return:

The sole trader example, Ashworth Joinery, turned over £64,800, spent £14,260 on timber and materials and £11,920 on running costs, a net profit of £38,620. HMRC’s short form lets a business with turnover below £90,000 give its total expenses in one box rather than line by line. Your drawings are not an expense, and for tax depreciation is not deductible: you claim capital allowances, or the cost of most equipment under the cash basis, instead. Our self-employed tax calculator turns the net profit into the Income Tax and National Insurance to pay.

How to read a profit and loss account

Three margins tell you most of what the profit and loss account has to say, and the template works them out as you type:

• Gross margin, gross profit as a share of turnover: whether your prices cover what you buy or make. A falling gross margin usually means costs rose faster than prices.
• Operating margin, operating profit as a share of turnover: whether the business covers its overheads.
• Net margin, the profit for the year as a share of turnover: what is left for the owners after everything.

Read them against last year rather than against a rule of thumb; what is healthy depends on the trade. To work out the margin or markup on a single product or price, use the profit margin calculator.

Profit and loss account and balance sheet

The profit and loss account and the balance sheet are the two halves of a set of accounts. The profit and loss account covers the year; the balance sheet is a snapshot of what the business owns and owes on the last day. They meet in one figure: the profit for the year is added to the profit and loss reserve on a company’s balance sheet (less any dividends), or to a sole trader’s capital account (less drawings). Fill this template first, then carry the profit into the balance sheet template.

A profit and loss template in Excel

The free profit and loss account template in Excel for a limited company, and the sole trader version, have this year and last year side by side and the formulas in place:

Cost of sales = opening stock + SUM(purchases and direct costs) − closing stock
Gross profit = turnover − cost of sales
Operating profit = gross profit + other income − SUM(expenses)
Profit for the year = operating profit + interest receivable − interest payable − tax
Margin = profit ÷ turnover

Fill in the shaded cells and every total works itself out: a one-page profit and loss sheet, laid out as a profit and loss statement template you can reuse as a monthly profit and loss report. It is a P&L, or profit and loss statement, template in Excel format, and the files open in Excel, Google Sheets, Numbers and LibreOffice with the formulas intact. If you fill the statement on this page instead, the Excel download carries the same live formulas, so it doubles as next year’s P&L template. For a monthly or year-to-date profit and loss, use one column per month, or run the same template with the period set to the year so far.

Sources: the Small Companies and Groups (Accounts and Directors’ Report) Regulations 2008, Schedule 1, on legislation.gov.uk; gov.uk, accounts for micro-entities and small companies; HMRC, Self-employment (short) SA103S for 2025 to 2026.