Compulsory profit and loss filing: what you need to know

Completing a profit and loss statement gives you a clear view of your business’s financial health. It helps you identify inefficiencies, track seasonal trends, and keep your business on the right path.

The government recently announced big changes to how smaller firms report this data. From April 2028, small companies and micro-entities must file their profit and loss accounts with Companies House. You’ll also need to use commercial software to do this.

We know that keeping on top of tax changes can feel overwhelming. We break down exactly what these new rules mean for your business, and how you can complete a profit and loss statement without the stress.

Small companies and micro-entities

To be considered a small company or micro-entity, you’ll need to meet two of the three requirements.

	Micro-entity	Small company
Turnover	£1m or less	£15m or less
Balance sheet	£500,000 or less	£7.5m or less
Number of employees	10 or fewer	50 or fewer

Read more: Companies House identity verification: what you need to do

What is a profit and loss statement?

Also known as a profit and loss account, or P&L, this statement calculates your business net profit or loss for a period of time. It shows the demand for your product or service, set against all the costs you incur to provide it.

Business owners often use a profit and loss account to identify the most profitable parts of their business. It also highlights what’s causing losses and how to reduce them. A company P&L is complemented by its balance sheet and cash flow statement to give an overall picture of how it’s performing.

If you own a limited company, you must create a profit and loss statement for HMRC each financial year. Sole traders are not required by law to create a P&L, but they give most of the same information when completing their annual Self Assessment tax return.

What is the difference between a profit and loss statement and a balance sheet?

A profit and loss sheet shows the financial position of your business over a period of time. This might be a month, a quarter, or a year. It gives you a clear picture of your company income and expenses, plus whether you’re making a profit or losing money.

On the other hand, a balance sheet shows how your business is performing at a particular moment. It outlines details such as your financial risks, assets, and liabilities. It also shows your shareholders equity and how easy it is for you to access money.

Which to choose:

1. Choose a profit and loss account if you need to review your income and expenses over time.
2. Choose a balance sheet if you want a snapshot of your overall business worth on a specific day.

Read more about how balance sheets work and download our free balance sheet template.

How do you calculate a profit and loss account?

When completing a profit and loss statement, you need to keep a record of your gross income. This includes all the money you make from sales. You also need to record your cost of sales, such as delivery or stock costs.

Next, factor in your overheads, which include wages, marketing, and rent. Finally, note down the corporation tax or income tax you need to pay. Once you have these details for the period you are measuring, you just subtract your costs, overheads, and tax from your gross income.

Here’s an example of a profit and loss account for a business over a three-month period:

• your business makes £15,000 worth of sales
• the cost of your sales is £3,000
• the cost of your overheads is £4,500
• this leaves you with a gross profit of £7,500
• your tax costs for the three months add up to £1,375
• this means your net profit for this period is £6,125

You can work out your P&L on a simple spreadsheet, but most basic accounting systems will do this for you. From April 2028, you must use software anyway, so it is a good idea to set this up early.

Getting your accounts right is crucial for business owners, so make sure you speak to a professional accountant or business finance expert if you’re not sure of anything.

FAQs about profit and loss filing

When do the new Companies House filing rules start?

The new rules take effect in April 2028. From this date, small companies and micro-entities must file their profit and loss accounts using commercial software.

Will my profit and loss data be made public?

You will have the option to opt out of publishing your profit and loss accounts on the public register. However, Companies House and HMRC will still have access to the data.

Can I still file paper accounts?

No. From April 2028, all web and paper routes for accounts filings will close. You must use commercial software to file your accounts in an iXBRL format.

Do these rules apply to sole traders?

These specific Companies House rules apply to limited companies, small companies, and micro-entities. Sole traders don’t file accounts with Companies House, but they still report their income and expenses to HMRC via Self Assessment.

More finance guides for limited companies

• How to value a business: a guide for small business owners
• What is turnover in business and how do you work it out?
• How to write an invoice: what to include in an invoice template
• Mandatory e-invoicing starts in 2029: what you need to do first