Personal income from a sole proprietorship

When you have a sole proprietorship, you must calculate and state personal income from your enterprise. Personal income is the basis for calculation of national insurance contributions, which gives you pension points and sickness benefit.

Does this apply to me?

It applies to you if you run a sole proprietorship.

What you need to do

You must calculate and enter the personal income from net business income from your enterprise in the tax return.

It’s important that you enter your personal income, because it’s the basis for calculating national insurance contributions. The national insurance contributions gives you pension points and the right to sick pay.

See information about your pension points with Nav.

More about taxable income in a sole proprietorship 

Tax in a sole proprietorship

We will not tax your business income twice.

You pay income tax at a rate of 22 percent (2024) on your net business income (income after deductions). Net business income and other taxable net income are reduced by a personal allowance before the tax is calculated.

National insurance contributions are calculated on personal income and comes in addition to the income tax.

Bracket tax (previously surtax) is calculated on your personal income if you have an income of NOK 208,051 (2024) or more. The bracket tax is in addition to the income tax and national insurance contributions. Bracket tax is a percentage share that changes depending on how much you have earned.

For many small sole proprietorships, personal income and net business income will often be the same amount, or approximately the same amount.

Calculating personal income from the enterprise

When you calculate your personal income, you must use the enterprise’s net business income as the basis. You must make adjustments for income and expenses that are not related to the business.

 
+/- Amount
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  • Capital income (yield and gains) that are included in your business income, for example, gains from the sale of bonds, promissory notes, or claims/receivables.
  • Capital income, such as rental income from real estate that has not been a part of the enterprise, for example, from renting out housing previously used for retired farmers or renting out waterfall rights.
  • Income from businesses assessed as partnerships and gains/losses on the sale of company shares.

These adjustments reduces your personal income.

You do not make adjustments for:

  • interest income and foreign exchange gain linked to customer receivables
  • gain on the divestment of fixed assets (selling assets), including gain from a profit and loss account.
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  • interest costs on debt that your enterprise has to, for example, financial institutions and debentures
  • interest costs on trade credit/bank overdraft
  • interest costs for loans that have been taken out and repaid during the income year

These corrections reduces your personal income.

You cannot refrain from adjusting for interest costs to increase the calculated personal income. 
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If you have ownership interests or shares in a housing company, with a right to rent the premises that you use in your enterprise, you can add a set reduction amount from your business income.

This also applies when you own bonds with the right to use this type of premise, and when the rent amounts to a maximum of 50 percent of the market rent.

You set the reduction amount, which is considered a yield on capital in this case, to the difference between gross yield from the contribution and the actual rent.

These adjustments reduce your personal income. 
+
  • capital costs and losses that are included in your business income, for example, losses from the sale of bonds, promissory notes or claims/receivables
  • maintenance costs linked to rented out buildings that are not included in the enterprise

This increases the personal income.

You do not make adjustments for interest costs or foreign exchange losses on customer receivables. 
-

 

The adjustment reduces the personal income.
+

 

The adjustment increases the personal income.
-

You can choose to reduce your personal income with a risk-free return allowance if you have assets in the enterprise and the value of the assets are higher than the enterprise’s debt.

The value of assets and debt at the beginning and end of the year make up the risk-free return base. These values are added and then divided by two to find the average value.

The deduction for risk-free return is multiplied by a risk-free return, which in 2024 was a maximum of 4.9 percent.

The risk-free return allowance will result in a lower personal income. 
=   Calculated personal income (before coordination/carry-forward)
 

If spouses run a joint enterprise, they can claim that positive personal income is distributed between them according to the same share as they have distributed net business income.
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If you had negative personal income in a previous year, you may reduce this year’s positive personal income by making an adjustment for it. If you choose not to carry forward previous year’s negative personal income, you lose the right to carry forward the amount you could have claimed. 
=   Calculated personal income

 

 

Examples of how to calculate personal income

Example of selling shares with a gain that reduces the personal income

Otto is a carpenter and has an operating profit of NOK 350,000. He also has gain on shares of NOK 50,000. The net business income will then be NOK 400,000. The calculated personal income will be NOK 350,000 (NOK 400,000 - NOK 50,000).

The gain on shares is deducted when calculating the personal income. This is because the gain on shares is not income from Otto’s carpentry enterprise.

Example of selling shares at a loss that increases the personal income

Maria is an electrician and has a net business income of
NOK 350,000. She has sold shares at a loss of NOK 50,000. The net business income will then be NOK 300,000 (350,000 - 50,000), but the calculated personal income will be NOK 350,000 (NOK 300,000 + NOK 50,000).

The loss on shares is not a cost in Maria’s electrician enterprise and the amount must therefore be added when she is calculating her personal income.

Example of a risk-free return allowance

Skjermingsgrunnlaget er gjennomsnittsverdien av eiendeler og gjeld ved årets begynnelse og slutt. 

Knut har en netto næringsinntekt på kr 400 000. Som kjøpmann har Knut en varebil i virksomheten. 1. januar har varebilen en verdi på kr 200 000 og 31. desember har den en verdi på kr 150 000. Bilens gjennomsnittsverdi for året blir da kr 175 000.

Knut har også gjeld i virksomheten. 1. januar er gjelden på kr 100 000 og 31. desember er gjelden på kr 50 000. Gjennomsnittlig gjeld for året blir da kr 75 000.

For å finne skjermingsgrunnlaget, må Knut trekke gjennomsnittlig gjeld fra gjennomsnittlig verdi av bilen:
kr 175 000 – kr 75 000 = kr 100 000.

For å finne ut hvilket skjermingsfradrag han kan få, må han gange skjermingsgrunnlaget (kr 100 000) med en skjermingsrente. Skjermingsrenten for 2024 er på 4,9 %.

Skjermingsfradraget blir da:
kr 100 000 x 4,9 % = kr 4 900.

Med en netto næringsinntekt på kr 400 000, vil beregnet personinntekt bli kr 395 100 (kr 400 000 – kr 4 900).