Your accountant might prepare a set of self-employment accounts, or they might enter the figures directly into your tax return. Whichever way you receive them, understanding your figures can help you make better business decisions and avoid financial surprises.

It's natural to just focus on the tax bill, but your business figures tell a much bigger story than simply how much tax you need to pay. They can reveal how profitable your business is, whether your expenses are under control, and whether your business is becoming stronger over time.

In this guide, we'll explain how to read self-employed accounts, how to interpret the self-employment pages of a Self Assessment tax return (SA100), and the key figures every sole trader should monitor.

Why Should Sole Traders Understand Their Figures?

Your business figures can help you:

• Monitor profitability
• Manage cash flow
• Understand your tax liabilities
• Identify opportunities to improve profits
• Spot problems before they become serious
• Support mortgage and finance applications
• Plan for future growth

Think of your figures as a financial health check for your business.

The better you understand them, the better equipped you'll be to make informed decisions.

Do Sole Traders Have Accounts?

Yes, although the format can vary because there are no rules for how they are presented.

Some accountants prepare a full set of accounts each year showing:

• Income
• Expenses
• Gross profit
• Net profit
• Comparative figures from previous years

Others may prepare the business records and include the figures directly on the tax return without producing separate accounts.

If this applies to you, the self-employment pages of your tax return effectively become your summary of business performance.

Either way, you should understand the key figures.

Understanding your Figures

The self-employment section of your Self Assessment return or your separate accounts contain a summary of your business income and expenses.

This information is usually transferred from your bookkeeping records.

Turnover

Turnover is your total business income before any expenses are deducted.

This is often the first figure people look at, but it doesn't show how much money you've actually earned.

Ask yourself:

• Is turnover increasing year on year?
• Is growth consistent?
• Are increases in turnover translating into higher profits?

A larger turnover doesn't automatically mean a more successful business.

Cost of Sales and Direct Costs

Depending on the nature of your business, you may have direct costs.

Examples include:

• Materials
• Subcontractors
• Stock purchases
• Direct production costs

These costs are deducted from turnover to calculate gross profit.

Gross Profit

What Is Gross Profit?

Gross profit is calculated as Turnover less Direct Costs.

This figure helps measure how efficiently your business delivers its products or services.

If your gross profit margin is reducing over time, it could indicate:

• Rising supplier costs
• Increased subcontractor costs
• Pricing issues
• Reduced efficiency

Monitoring gross profit can help identify problems before they affect overall profitability.

Business Expenses

Typical categories include:

• Motor expenses
• Travel costs
• Premises costs
• Insurance
• Advertising and marketing
• Professional fees
• Telephone and internet
• Office expenses

When reviewing expenses, ask:

• Which costs have increased significantly?
• Are expenses increasing faster than income?
• Are there opportunities to reduce unnecessary spending?

The aim isn't always to spend less, sometimes increased spending supports growth.

The key is understanding where your money is going.

Net Profit: The Figure That Matters Most

Net profit is what's left after all allowable business expenses have been deducted.

For many sole traders, this is the most important figure in the accounts because it often determines:

• Your Income Tax liability
• Your National Insurance liability
• Your business's overall financial performance

Ask yourself:

• Is profit increasing or decreasing?
• Is profit growing in line with turnover?
• How does this year's profit compare with previous years?

Looking at trends over several years is often more revealing than looking at a single year's figures.

Profit Doesn't Equal Cash

One of the most common misconceptions among self-employed people is:

"I've made a profit, so I must have that money in the bank."

Unfortunately, that's not always true.

Profit is an accounting figure.

Cash is what is actually available to spend.

You may have:

• Customers who haven't paid yet
• VAT/payroll tax bills due in the future
• Loan repayments
• Asset purchases

A profitable business can still experience cash flow problems.

That's why it's important to monitor both profit and bank balances.

Why Year-on-Year Comparisons Matter

Looking at a single year's figures only provides a snapshot.

Comparing this year's results with previous years can help you identify:

• Growth trends
• Rising costs
• Changes in profitability
• Seasonal fluctuations
• Areas where performance is improving or deteriorating

The most useful information in your accounts is often found in the trends rather than the individual figures.

Understanding Your Tax Calculation

Many sole traders skip straight to the tax calculation.

Your tax liability may be affected by:

• Business profits
• Employment income
• Rental profits
• Savings income
• Dividends
• Pension contributions
• Personal allowance
• Payments on account

If your tax bill seems higher than expected, ask your accountant to explain the calculation.

A good accountant should be able to explain it in plain English.

Key Questions Every Self-Employed Person Should Ask

"Is my turnover increasing?"

Growing revenue often indicates a healthy business.

"Is my profit increasing?"

Profitability is ultimately what matters.

"Are my expenses under control?"

Review significant changes year on year.

"Do I have enough cash set aside for tax?"

Unexpected tax bills can create cash flow pressure.

"Am I earning more for the time I put into the business?"

A growing business should ideally generate increasing returns.

"Is the business stronger than last year?"

Focus on trends rather than individual figures.

Common Mistakes When Reviewing Self-Employed Figures

• Looking Only at the Tax Bill - your accounts provide much more information than just your tax liability.
• Focusing on Turnover Instead of Profit - turnover is impressive, profit pays the bills.
• Ignoring Rising Expenses - small increases across multiple categories can significantly impact profitability.
• Not Comparing Against Previous Years - financial trends are often where the most valuable insights can be found.
• Assuming Profit Equals Cash - cash flow remains critical, even in profitable businesses.

How Often Should Sole Traders Review Their Figures?

Ideally, business owners should review their figures throughout the year, not just when the tax return is submitted.

Regular reviews can help you:

• Adjust pricing
• Control costs
• Plan for tax payments
• Monitor business performance
• Make informed decisions

The most successful business owners usually understand their numbers well.

Your Figures Are More Than a Tax Return

Too many self-employed people see their tax return as a compliance exercise.

In reality, the figures behind your return provide valuable insight into how your business is performing.

Understanding your turnover, expenses and profit can help you make better decisions, improve profitability and plan for the future.

You don't need to become an accountant, but you should understand the basics.

And if there's something you don't understand, ask your accountant. They'll be happy to explain it.

Frequently Asked Questions

"How do I read the self-employment section of my tax return?"

Start by reviewing turnover, expenses and net profit. These figures show how much income your business generated, what it cost to run and how much profit was made.

"What is the most important figure for a sole trader?"

For most self-employed people, net profit is the key figure because it determines profitability and often forms the basis of your tax liability.

"Can I understand my business performance without separate accounts?"

Yes. Even if your accountant doesn't prepare separate accounts, the self-employment pages of your tax return contain useful information about income, expenses and profit.

"Why doesn't my profit match my bank balance?"

Profit is an accounting figure, while your bank balance reflects actual cash available. Unpaid invoices, tax liabilities and other commitments can create differences.

"Should I keep previous years' figures?"

Absolutely. Comparing multiple years of results is one of the best ways to identify trends and monitor business performance.

Need Help Understanding Your Self-Assessment Figures?

At CJL Accountancy, we explain accounts and tax returns in plain English. Whether you're a sole trader, freelancer or self-employed professional, we'll help you understand your figures, your tax position and the financial story behind your business.

Get in touch today if you're looking for a proactive accountant that welcomes questions.