Profit is how much money you’re left with after you’ve subtracted costs from your earnings.

When can you talk about “making a profit”:

• Self-employed
• Landlord earning rental income
• You’ve just sold property or other assets (like shares in a company)

You don’t talk about making profit when you’re only a full-time employee with no other earnings. Knowing your profit is important because that is what HMRC will tax you on.

How to calculate your profit:

• If you’re self-employed, you pay tax on whatever you’re left with after you deduct your self-employed expenses or the £1,000 Trading Allowance
• The same is for landlords
• When you sell property, shares, or other assets, you only pay tax on the difference between the selling price and the original purchase price, minus the Capital Gains Tax Allowance (£12,570 in 2021/2022)

If your costs are higher than your earnings, you’ve made a loss. That’s not great, but sometimes you can use it to offset a profit next year and pay less tax then.