Turnover, profit and income: what is the difference?
Written by Ilias Aarrass5 min read · Published on · Last reviewed on 
In short
Turnover is what you invoice excluding VAT, profit is turnover less costs and depreciation, taxable profit is that profit less the entrepreneur deductions and the 12.70 per cent SME exemption, and your box 1 income is that taxable profit plus all your other income.
- The VAT you charge is never turnover and never income: that money is a liability to the tax authorities.
- Private withdrawals do not reduce your profit; only costs and depreciation do.
- A € 6,000 investment costs cash immediately but reduces your profit only by the annual depreciation.
- If institutions ask for your income, for example for allowances, they mean your aggregate income rather than your turnover.
You turned over € 80,000, so you earned € 80,000? No, and the difference is bigger than just your costs. Turnover, profit, taxable profit and income are four different figures, and they get mixed up in conversations with clients, in applications and in your own head. That is awkward, because wrong decisions hang on the wrong figure: an hourly rate that is too low, too little money set aside for tax, or a wrong figure in your allowances. This article walks through the four amounts with one continuous example.
Turnover: what you invoice, excluding VAT
Your turnover is the sum of your invoices excluding VAT. The VAT you charge is neither turnover nor income: that money belongs to the tax authorities and sits in your account temporarily. That is the first and most common misconception. If you invoice € 1,000 plus € 210 VAT, your turnover is € 1,000 and you have a € 210 liability.
Turnover belongs to the moment of supply or invoicing, not the moment of payment. An invoice from December paid in January is December's turnover. That is why your turnover rarely equals what came into your account that year. See reading your balance sheet and profit and loss account for how the two relate.
| Term | What it is |
|---|---|
| Turnover | what you invoice, excluding VAT |
| Profit | turnover less your business costs and depreciation |
| Taxable profit | profit less entrepreneur deductions and the SME exemption |
| Income in box 1 | your taxable profit plus other income, such as wages or a benefit |
| What you keep | profit less tax and the healthcare contribution |
Profit: after costs, not after withdrawals
Your profit is your turnover less your business costs, including depreciation on assets you bought earlier. What does not come off is the money you transfer to your private account. Such a private withdrawal is not a cost but a shift of your own money. If in a good year you withdraw little, your profit is not lower; the money simply stays in the business.
Also watch investments. If you buy a machine for € 6,000, that is not a € 6,000 cost in one year: you depreciate it, for example € 1,200 a year. So your bank account is € 6,000 lighter while your profit is only € 1,200 lower. That gap between cash flow and profit is exactly why entrepreneurs sometimes owe tax when there is no money. See capitalise or deduct at once.
From € 80,000 of turnover to what remains
- Turnover
- € 80,000 excluding VAT
- Costs and depreciation
- € 18,000, so a profit of € 62,000
- Self-employed deduction
- € 1,200, leaving € 60,800
- SME profit exemption
- 12.70 per cent, about € 7,722 off
- Taxable profit
- roughly € 53,078
- Tax and healthcare contribution
- together roughly € 19,000 to € 21,000, depending on your situation
Result: So of € 80,000 of turnover roughly € 41,000 to € 43,000 remains to live on, and that is before your buffer and old-age provision. So always calculate with your after-tax profit when you [set your hourly rate](kb:uurtarief-bepalen-zzp).
Taxable profit and your income in box 1
Between your profit and the tax sit the entrepreneur deductions. If you meet the hours criterion, the self-employed deduction comes off your profit, possibly with the starter's deduction. Then the SME profit exemption of 12.70 per cent applies to the remainder. What is left is your taxable profit. The income that remains is also the amount on your income statement (IB60).
Your income in box 1 is that amount plus all your other income: wages from a job, a benefit, a fee for incidental work. The brackets and tax credits apply to that total. That is why you can never look at your profit alone when calculating what you owe; see how much to set aside for tax.
Which figure do you use for what?
Use your turnover to track growth and your VAT return, and to check whether you stay below a threshold such as that of the small businesses scheme. Use your profit to assess your rate, your costs and your margin. Use your taxable profit and box 1 income only for tax, allowances and official statements.
And alongside that, track one practical figure that appears on no form: what you need per month to live on. That amount, divided by your billable hours and increased by your costs and tax, is the basis of a rate that works. The method is in setting your hourly rate.
- VAT is never turnover and never income; set that money aside.
- Private withdrawals do not reduce your profit, costs and depreciation do.
- Use your after-tax profit when setting your rate or your budget.
- If someone asks for your income, give the aggregate income from your tax return.
Frequently asked questions
Is my turnover my income?
No. First your costs and depreciation come off your turnover, then the entrepreneur deductions and the SME exemption. What remains is your taxable profit, which together with other income forms your box 1 income.
Is VAT part of my turnover?
No. The VAT you charge is a liability to the tax authorities. Your turnover is always the amount excluding VAT, including in your annual figures.
Why is my profit higher than what I withdrew?
Because withdrawals are not costs. If you leave money in the business, or it sits in unpaid invoices and stock, the profit is there while the cash is not.
Which amount do I give for allowances?
Your expected aggregate income, so your taxable profit plus any other income. Not your turnover, because that would be far too high.
Sources
- Business costsBelastingdienst · belastingdienst.nl
- Self-employed deduction 2026Belastingdienst · belastingdienst.nl
Sources checked on
This article provides general information based on the rules known for 2026 and does not replace personal tax advice. For your specific situation, we're happy to take a look with you.
