Overheads are the ongoing running costs of a business that aren't directly tied to making a sale, like rent, software and admin. This guide explains how they affect profit.
Published July 2026 · Updated July 2026
Overheads (also called operating expenses) are the costs of keeping the business running that don't change directly with each sale: rent, utilities, insurance, software subscriptions, admin wages, marketing and professional fees.
On the profit and loss, overheads are taken off gross profit to give net profit. Because they're relatively fixed, watching them matters: a creeping overhead quietly erodes the bottom line even when sales look healthy.
Cost of sales is the direct cost of what you sold; overheads are the general running costs that stay broadly the same whether you sell a little or a lot.
Most legitimate business overheads are allowable expenses that reduce taxable profit, provided they're wholly and exclusively for the business.
Source: Investopedia ↗. This glossary is written for small business owners, so definitions are simplified. Tax rates and thresholds reflect 2026/27 UK rules and change over time. Berified does not provide accounting, tax or legal advice; always check the source or a qualified adviser.