UK tax glossary
Plain-English definitions of payroll and Self Assessment terms. Each entry includes examples and links to our in-depth guides and calculators.
Additional Rate Taxpayer
Pays 45% Income Tax on income above £125,140 in England, Wales, and Northern Ireland.
Adjusted Net Income
Total income after deducting pension contributions and Gift Aid — used to test key thresholds.
Annual Exempt Amount (CGT)
The amount of capital gains you can make each year before Capital Gains Tax applies.
Annual Investment Allowance (AIA)
100% first-year deduction for business plant and machinery — £1 million per year.
Basic rate (20%)
The first main band of UK Income Tax after your Personal Allowance.
Basic Rate Taxpayer
Someone whose taxable income falls within the 20% band — between £12,571 and £50,270.
Basis Period
The period of trading profits charged to tax in a given tax year — changed for 2024/25 onwards.
Benefit in kind (BiK)
Non-cash perks from your employer that may be taxable.
Bonus tax
Bonuses are taxed through PAYE like normal pay, often in one pay period.
BR tax code
Basic Rate — 20% tax on all income from that job, no Personal Allowance.
Business Asset Disposal Relief (BADR)
Reduced 14% CGT rate on qualifying business disposals — lifetime limit of £1 million.
Capital Gains Tax (CGT)
Tax on the profit when you sell or dispose of an asset that has increased in value.
Car Benefit Charge (Company Car Tax)
Taxable benefit from a company car, calculated as P11D value × CO₂ BiK percentage.
CEST (Check Employment Status for Tax)
HMRC's online tool for determining whether a worker is employed or self-employed for tax.
Childcare Vouchers
Legacy employer scheme for tax-free childcare — closed to new entrants since October 2018.
Class 1 National Insurance
Employee and employer NI on employed earnings.
Class 2 National Insurance
Flat weekly NI paid by self-employed people above the small profits threshold.
Class 4 National Insurance
Profit-based NI for self-employed people.
Coding Notice (P2)
Letter from HMRC explaining how your tax code has been calculated.
Corporation Tax
Tax on a limited company's profits, paid to HMRC nine months after the accounting period ends.
Cumulative tax calculation
Normal PAYE method — tax reflects total pay year-to-date.
CWF1 (self-employment registration)
The form used to register as self-employed with HMRC for tax and National Insurance.
Cycle to Work
Employer scheme for tax-free bikes and equipment via salary sacrifice.
Dividend Allowance
Tax-free dividend income each year — £500 in 2026/27.
Dividend Tax
Tax on dividends above the £500 allowance at 8.75%, 33.75%, or 39.35% depending on your rate band.
EIS (Enterprise Investment Scheme)
Tax reliefs for investing in small unquoted UK companies.
Electric Vehicle Benefit in Kind
Very low BiK rate on company electric cars — 3% in 2025/26, rising gradually.
Emergency tax code
Temporary code used when HMRC lacks full employment information.
Employment Allowance
Reduces an employer's National Insurance bill by up to £10,500 per year.
Fiscal drag
When frozen tax thresholds pull more income into higher tax bands as wages rise.
Furnished Holiday Let (FHL)
Previously a special tax category for short-term holiday lettings — abolished April 2025.
Gift Aid
Scheme allowing charities to reclaim basic-rate tax on your cash donations.
Gross pay
Total earnings before any tax, NI, or other deductions.
High Income Child Benefit Charge (HICBC)
Tax charge that claws back Child Benefit when the higher earner in a household earns over £60,000.
Higher rate (40%)
Income Tax band above the basic rate threshold.
Higher Rate Taxpayer
Someone paying 40% Income Tax on income above £50,270 in England, Wales, or Northern Ireland.
HMRC
His Majesty's Revenue and Customs — the UK tax authority.
Income from Property
Rental income from UK property is taxable — reported on Self Assessment SA105.
Inheritance Tax (IHT)
40% tax on estates above the £325,000 nil-rate band — with additional residential allowances.
IR35 (Off-Payroll Working Rules)
Rules that tax contractors as employees if they would be employed 'but for' their company.
ISA (Individual Savings Account)
Tax-free savings and investment wrapper — £20,000 annual allowance in 2026/27.
Jointly Held Property
Rental income from jointly owned property is split 50/50 by default between spouses.
K tax code
Negative allowance — taxable pay is increased to collect extra tax.
Let Property Campaign
HMRC's disclosure facility for landlords with undeclared rental income.
Making Tax Digital (MTD)
HMRC's programme to require digital record-keeping and quarterly tax submissions.
Marriage Allowance
Transfer 10% of Personal Allowance between spouses or civil partners.
Mortgage Interest Relief (Property)
Landlords get a 20% tax credit on mortgage interest — no longer a full deduction.
National Insurance
Contributions that fund state benefits and count toward your State Pension.
National Living Wage
Minimum hourly pay rate for workers aged 21 and over — £12.21/hour from April 2026.
Net pay (take-home pay)
What you receive after all payroll deductions.
NI Number (National Insurance Number)
Your personal identifier for National Insurance and the tax system.
Office of Tax Simplification (OTS)
Former independent advisory body that recommended simplifications to UK tax law — abolished 2022.
Personal Tax Account (HMRC Online)
HMRC's online portal to view and manage your tax, codes, and repayments.
P11D
Reports taxable benefits in kind from your employer.
P11D(b)
Employer's declaration of the total Class 1A NI due on benefits in kind.
P45
Form issued when you leave a job — pass it to your next employer.
P60
End-of-year summary of pay and tax from your current employer.
P800 tax calculation
HMRC letter showing you over- or under-paid tax after the year ends.
PAYE
Pay As You Earn — how employers deduct tax and NI from wages before you are paid.
PAYE Settlement Agreement (PSA)
Employer agreement to pay tax on minor or irregular benefits on employees' behalf.
Payment on account
Advance payments toward next year's Self Assessment bill.
Pension Annual Allowance
Maximum pension contributions receiving tax relief each year — £60,000 in 2026/27.
Pension Lifetime Allowance
The Lifetime Allowance was abolished from April 2024 — pension pots now have no overall cap.
Personal Allowance
The amount you can earn each tax year before paying Income Tax.
Personal Savings Allowance
Tax-free savings interest: £1,000 for basic-rate, £500 for higher-rate taxpayers.
Principal Private Residence Relief (PPR)
Exempts your main home from Capital Gains Tax when you sell.
Property Allowance
£1,000 tax-free allowance for property income — no reporting needed below this.
Redundancy pay
Statutory and contractual redundancy payments may have special tax treatment.
Relief at source (pension)
Pension contributions taken from net pay with basic-rate tax relief added.
Remittance Basis
Non-domiciled individuals can elect to pay UK tax only on income remitted to the UK.
Rent a Room Scheme
Earn up to £7,500 tax-free from letting a furnished room in your own home.
Rollover Relief (CGT)
Defer CGT on business asset gains by reinvesting proceeds into new qualifying assets.
SA100 (Self Assessment Tax Return)
The main Self Assessment form for reporting income, gains, and reliefs to HMRC.
SA302
HMRC's official summary of your Self Assessment tax calculation, often used for mortgage applications.
Salary sacrifice
Giving up part of gross pay for a benefit such as pension — often saving tax and NI.
Scottish taxpayer
Someone whose main home is in Scotland — pays Scottish income tax rates.
Self Assessment
HMRC system for reporting income tax when PAYE does not cover everything.
Stamp Duty Land Tax (SDLT)
Tax paid on property purchases in England and Northern Ireland — rates vary by price and buyer type.
Starter Checklist (formerly P46)
Form completed by a new employee who has no P45 to hand to their employer.
Statutory Maternity Pay (SMP)
Minimum paid maternity leave: 90% of pay for 6 weeks, then flat rate for 33 weeks.
Statutory Sick Pay (SSP)
Minimum sick pay: £116.75/week for up to 28 weeks — paid by your employer.
Student Loan Plan 2
Repayment plan for most undergraduates who started 2012–2023 in England/Wales.
Student Loan Plan 5
Repayment plan for courses starting from August 2023 in England.
Taper Relief (CGT — historical)
Former CGT relief that reduced gains based on how long an asset was held — abolished 2008.
Tax code
The code on your payslip that tells your employer how much tax-free pay to give you.
Tax Credit (Child/Working)
Legacy means-tested benefits administered by HMRC — being replaced by Universal Credit.
Tax-Free Childcare
Government adds 25p for every 80p you save — up to £2,000/year per child.
Tax Investigation
HMRC enquiry into your tax affairs — can be a routine check or a full investigation.
Tax year
UK tax year runs 6 April to 5 April the following year.
Tonnage Tax
Optional CT regime for shipping companies — tax based on vessel tonnage, not actual profits.
Trading Allowance
£1,000 tax-free allowance for miscellaneous trading or casual income.
Uniform and Workwear Tax Relief
Claim tax relief on washing, replacing, or purchasing job-specific uniform or PPE.
UTR (Unique Taxpayer Reference)
Ten-digit number HMRC assigns when you register for Self Assessment.
VCT (Venture Capital Trust)
Listed investment fund offering 30% Income Tax relief on shares in smaller companies.
Void Period (Property)
Period when a rental property is empty between tenancies — expenses still allowable.
Voluntary Class 3 NI
Contributions you can pay to fill gaps in your National Insurance record.
Welsh Rates of Income Tax (WRIT)
Welsh Government sets income tax rates for Welsh taxpayers — currently matching England.
Working from home tax relief
Claim for extra household costs when required to work at home.
Working Tax Credit
Legacy benefit for low-income workers — being replaced by Universal Credit.
Want more detail? Browse our tax guides or try the salary calculator.