UK Tax Glossary A-Z

The highest rate of Income Tax in the UK. For 2026/27 it is 45% and applies to income over £125,140. In Scotland, the equivalent top rates are 45% (Advanced) and 48% (Top). Calculate your tax rate

The maximum amount you can contribute to your pension each year and still receive tax relief. For 2026/27 it is £60,000. Higher earners (income over £260,000) may have a reduced tapered allowance.

The amount of capital gains you can make each year without paying Capital Gains Tax. For 2026/27 it is £3,000. Gains above this amount are taxed at 10% or 20% (18% or 24% for property). Calculate CGT

Anything of value that you own. For tax purposes, this includes property, shares, savings, cryptocurrency, business equipment and personal possessions worth over £6,000. Different assets have different tax treatments when sold.

The rate set by HMRC that self-employed people can claim for business miles driven in their own vehicle. For 2026/27 it is 45p per mile for the first 10,000 miles and 25p per mile thereafter. This rate covers fuel, maintenance and depreciation.

An annual update from the Chancellor of the Exchequer, usually in November, announcing changes to tax and spending policy. The Autumn Statement can include changes to Income Tax, NICs, VAT and other taxes that take effect from the next tax year.

The lowest rate of Income Tax after the personal allowance. For 2026/27 it is 20% and applies to income between £12,571 and £50,270. Most UK taxpayers fall into this band. Calculate your tax

Non-cash benefits provided by your employer, such as a company car, private health insurance, or accommodation. These have a cash value and may be taxable. Your employer reports them on form P11D, and you pay tax on the taxable value.

An extra tax-free allowance for people who are registered blind or severely sight impaired. For 2026/27 it is £3,070 on top of the standard personal allowance. You can also transfer this to your spouse if you do not use it.

A tax code meaning all your income from this source is taxed at the basic rate (20%) with no personal allowance applied. Commonly used for second jobs, pensions and emergency tax situations. Check your tax code

An asset used for business purposes, such as equipment, machinery, vehicles or property. When you sell a business asset, you may pay Capital Gains Tax, but you can claim various reliefs including Business Asset Disposal Relief (10% rate).

A tax on the profit you make when you sell an asset that has increased in value. Common assets include property (not your main home), shares, and cryptocurrency. Rates are 10%/20% for assets and 18%/24% for property, depending on your Income Tax band. Calculate CGT

A payment made to parents or guardians of children under 16 (or under 20 if in approved education/training). For 2026/27 it is £25.60/week for the first child and £16.95/week for additional children. If you earn over £60,000, the High Income Child Benefit Charge applies. Calculate HICBC

A scheme where contractors deduct money from a subcontractor's payments and pass it to HMRC. Deductions count as advance payments towards the subcontractor's tax and National Insurance. Most subcontractors have 20% deducted; those not registered with HMRC have 30% deducted. Estimate your CIS refund

NICs paid by employees and employers. For 2026/27, employees pay 8% on earnings between £12,570 and £50,270, and 2% above. Employers pay 13.8% on earnings above £9,100. Class 1 contributions count towards your State Pension and benefits.

A flat-rate weekly NIC paid by self-employed people with profits above £6,725. For 2026/27 it is £3.50 per week (£182/year). Paying Class 2 ensures you build entitlement to the State Pension and certain benefits. If profits are below £6,725, you can pay voluntarily.

NICs paid by self-employed people on their profits. For 2026/27, the rate is 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270. Class 4 contributions do not count towards your State Pension — only Class 2 and Class 1 do.

A tax on the profits of limited companies. For 2026/27, the main rate is 25% for profits over £250,000. Small companies with profits under £50,000 pay 19%. Profits between £50,000 and £250,000 benefit from marginal relief. Companies must file a Corporation Tax return (CT600) within 12 months of their accounting period end.

A local tax on domestic properties in England, Scotland and Wales. The amount depends on your property's valuation band (A to H) and your local council's rate. Single occupants receive a 25% discount, and some people are exempt (students, severely mentally impaired).

A tax code meaning all income from this source is taxed at the higher rate (40%) with no personal allowance. Used for second jobs where your personal allowance is already used by your main employment. Common for people with multiple income sources.

A tax code meaning all income from this source is taxed at the additional rate (45%) with no personal allowance. Used for very high earners with multiple income streams where all allowances are already used.

A payment made by a company to its shareholders out of its profits. Dividends have their own tax rates, which are lower than Income Tax rates. For 2026/27, you have a £500 dividend allowance, then pay 8.75% (basic), 33.75% (higher) or 39.35% (additional). Calculate dividend tax

The amount of dividend income you can receive each year tax-free. For 2026/27 it is £500 (reduced from £1,000 in 2024/25 and £2,000 before that). Dividends above this allowance are taxed at 8.75%, 33.75% or 39.35% depending on your Income Tax band.

A temporary tax code used by HMRC when they do not have enough information about your income. Common codes include 1257 W1/M1 (week 1/month 1 basis) and OT. You may pay too much tax initially, but this is usually corrected once HMRC receives the correct information.

NICs paid by employers on their employees' wages. For 2026/27, employers pay 13.8% on earnings above £9,100 per year. This is in addition to the employee's own NICs and does not come out of the employee's pay.

A reduction in the Employer's National Insurance bill for eligible businesses. For 2026/27, eligible employers can reduce their NIC bill by up to £5,000 per year. You cannot claim if you are a company with only one employee who is also a director.

Income that is not subject to tax. Common examples include income from ISAs, lottery winnings, premium bond prizes, certain state benefits (Child Benefit, Housing Benefit), and the first £1,000 of trading income (trading allowance) or property income (property allowance).

A type of property rental that qualifies for special tax treatment. To be an FHL, the property must be in the UK or EEA, available for letting at least 210 days a year, and actually let for at least 105 days. FHLs can claim capital allowances on furniture and fixtures, and qualify for certain CGT reliefs.

A scheme that allows charities to claim an extra 25p for every £1 you donate, at no extra cost to you. If you are a higher or additional rate taxpayer, you can also claim the difference between your tax rate and the basic rate on your donations through your Self Assessment. You must have paid at least as much tax as the charity claims.

The online system used to access HMRC services. You need a Government Gateway account (with a User ID and password) to file your Self Assessment, check your tax code, view your tax account, and manage VAT. You create it on the GOV.UK website.

The middle rate of Income Tax. For 2026/27 it is 40% and applies to income between £50,271 and £125,140 in England, Wales and Northern Ireland. In Scotland, the equivalent is split into a 42% Higher Rate (£43,663-£75,000) and a 45% Advanced Rate (£75,001-£125,140).

A tax charge that applies if you or your partner earn over £60,000 and receive Child Benefit. The charge is 1% of the Child Benefit for every £100 of income between £60,000 and £80,000. At £80,000+, the charge equals 100% of the benefit. Calculate HICBC

Her Majesty's Revenue and Customs — the UK government department responsible for collecting taxes, administering benefits, and enforcing customs and excise duties. HMRC manages Income Tax, National Insurance, VAT, Corporation Tax, Capital Gains Tax and Inheritance Tax.

A tax on your income, including earnings from employment, self-employment, pensions, property rentals, savings interest and dividends. The UK uses a progressive system with personal allowance, basic rate (20%), higher rate (40%) and additional rate (45%). Scotland has its own rates. Calculate your Income Tax

A historical method of adjusting the cost of an asset for inflation when calculating Capital Gains Tax. It was frozen in December 2017 and abolished for individuals and trustees from January 2018. Companies can still use it for certain assets.

A tax on the estate (property, money and possessions) of someone who has died. The standard rate is 40% on amounts above the nil-rate band (£325,000). A residence nil-rate band of £175,000 applies when passing a home to direct descendants. Married couples can combine allowances for up to £1,000,000 tax-free. Calculate IHT

A tax-free savings or investment account. For 2026/27, you can contribute up to £20,000 per year across all ISAs. Types include Cash ISA, Stocks & Shares ISA, Lifetime ISA (£4,000 limit, 25% government bonus) and Junior ISA (£9,000 limit). All returns are completely tax-free.

A tax-free savings account for children under 18. For 2026/27, the annual limit is £9,000. The money belongs to the child and cannot be withdrawn until they turn 18, when it converts to an adult ISA. Parents, grandparents and others can contribute.

A tax code used when your untaxed income (such as taxable state benefits or company perks) exceeds your personal allowance. The K code adds the excess to your taxable income. For example, K500 means £5,000 is added to your taxable income before tax is calculated.

The property tax paid when buying a property in Wales, administered by the Welsh Revenue Authority. Rates for 2026/27: 0% up to £225,000, 6% on £225,001-£400,000, 7.5% on £400,001-£750,000, 10% on £750,001-£1.5m, 12% above. Second homes attract a 4% surcharge. Calculate LTT

A type of ISA for people aged 18-39. You can save up to £4,000 per year and the government adds a 25% bonus (up to £1,000/year). The money can be used to buy your first home (up to £450,000) or for retirement from age 60. Withdrawals for other purposes incur a 25% penalty.

A tax relief that lets you transfer £1,260 of your personal allowance to your spouse or civil partner. To qualify, you must earn below the personal allowance (£12,570) and your partner must be a basic rate taxpayer. The tax saving is up to £252 per year. Calculate your saving

The rate of tax you pay on the next pound you earn. For example, if you are a basic rate taxpayer, your marginal rate is 20% for Income Tax plus 8% for National Insurance = 28% total. For a Scottish higher rate taxpayer, it could be 42% + 2% = 44%. Understanding your marginal rate helps you decide whether extra work is worthwhile.

See Authorised Mileage Rate. If you use your own vehicle for work, you can claim 45p per mile for the first 10,000 business miles and 25p per mile thereafter. This is the simplest way to claim vehicle expenses. Alternatively, you can claim actual costs using receipts.

Contributions paid by employees, employers and self-employed people that fund state benefits including the State Pension, NHS, and unemployment benefits. Different classes apply: Class 1 (employees), Class 2 (self-employed flat rate), Class 3 (voluntary), and Class 4 (self-employed profit-based). See NIC calculations

The minimum hourly wage that employers must pay workers aged 21 and over. For April 2026 it is £12.21 per hour. Different rates apply for younger workers (18-20: £9.18, 16-17: £6.83, apprentice: £6.40). These rates increase every April.

Your take-home pay after all deductions have been made. This includes Income Tax, National Insurance, pension contributions, student loan repayments, and any other deductions. Net pay is what actually goes into your bank account. Calculate your net pay

The amount of an estate that is not subject to Inheritance Tax. For 2026/27 it is £325,000. Any estate value above this is taxed at 40% (reduced to 36% if 10% or more is left to charity). The nil-rate band has been frozen at £325,000 since 2009. Calculate IHT

A tax code meaning you have no personal allowance and all income from this source is taxed. The rate depends on how much you earn — it could be 20%, 40% or 45%. Used when HMRC has not been able to issue a proper tax code, for example when you start a new job without a P45.

A form given to you by your employer when you leave a job. It shows your tax code, total pay and tax paid to date in that tax year. You give it to your new employer so they can put you on the correct tax code. If you do not have a P45, you may be put on an emergency tax code.

A summary of your pay and deductions for the tax year, given to you by your employer by 31 May each year. It shows your total pay, tax deducted, NICs and any statutory payments. You need your P60 for your Self Assessment tax return and for claiming tax refunds.

A form your employer submits to HMRC by 6 July each year, reporting any benefits in kind you received (company car, private medical insurance, etc.). The taxable value of these benefits is added to your income and you pay tax on them. You receive a copy for your records.

Advance payments towards your next tax bill, required if your Self Assessment tax bill exceeds £1,000. Each payment is roughly half of your previous year's tax bill. The first is due 31 January and the second 31 July. If your income drops, you can apply to reduce your payments. Read our guide

The system HMRC uses to collect Income Tax and National Insurance from employees. Your employer deducts tax from your wages before paying you, based on your tax code. Most UK employees pay tax through PAYE and do not need to file a Self Assessment return. Calculate PAYE tax

The amount of income you can earn each year without paying Income Tax. For 2026/27 it is £12,570. It is reduced by £1 for every £2 you earn above £100,000 and is fully withdrawn at £125,140. Everyone resident in the UK is entitled to this allowance.

A relief from Capital Gains Tax when you sell your main home. If the property has been your only or main residence throughout your ownership, you pay no CGT. Partial relief applies if the property was not your main home for the entire period, or if you let out part of it.

A tax relief that lets you earn up to £7,500 per year tax-free from letting a furnished room in your home. If you share the income with a partner, the limit is £3,750 each. If your rental income exceeds £7,500, you can choose to pay tax on the excess or deduct actual expenses.

An additional Inheritance Tax allowance for passing a home to direct descendants (children, grandchildren). For 2026/27 it is £175,000 per person, on top of the standard £325,000 nil-rate band. Combined, a married couple can pass up to £1,000,000 to their children tax-free.

The standard tax code for a Scottish taxpayer. The "S" prefix tells the employer to apply Scottish Income Tax rates. The "1257" means a personal allowance of £12,570 and "L" means you are entitled to the standard personal allowance. Check your tax code

An arrangement where you give up part of your salary in exchange for a non-cash benefit. Common examples include pension contributions, cycle-to-work schemes, electric car schemes and childcare vouchers. Both you and your employer save on National Insurance. The benefit is tax-free or tax-reduced.

The system for reporting your income to HMRC and calculating your tax bill. You must complete a tax return if you are self-employed, a landlord, a company director, or have untaxed income. The deadline for online filing is 31 January after the tax year ends. Calculate your tax

The tax paid when buying property or land in England and Northern Ireland. Rates depend on the purchase price and whether it is your main residence or an additional property. First-time buyers pay no SDLT up to £425,000. Second homes attract a 3% surcharge. Calculate SDLT

A regular payment from the government when you reach State Pension age (currently 66, rising to 67 by 2028). The full new State Pension for 2026/27 is £221.20 per week. The amount you receive depends on your National Insurance record — you need 35 qualifying years for the full amount.

Money deducted from your salary to repay your student loan. The amount depends on your plan type and income. For 2026/27: Plan 1 (£24,990 threshold, 9%), Plan 2 (£28,030 threshold, 9%), Plan 4 (£31,395 threshold, 9%), Plan 5 (£26,065 threshold, 9%), Postgraduate (£21,000 threshold, 6%). Calculate repayments

A code used by HMRC to tell your employer how much tax-free income you should receive. It is usually a number followed by a letter. For example, 1257L means £12,570 tax-free allowance. Your tax code can change during the year if your circumstances change. Decode your tax code

A payment made by the government to people on low incomes. Working Tax Credit and Child Tax Credit have been replaced by Universal Credit for most new claimants. If you currently receive tax credits, you will eventually be moved to Universal Credit through managed migration.

The UK tax year runs from 6 April to 5 April the following year. This dates back to the switch from the Julian to the Gregorian calendar in 1752. Tax rates and allowances typically change at the start of each new tax year. Download tax calendar

A tax-free allowance of £1,000 per year for trading income (self-employment or casual earnings). If your trading income is below £1,000, you do not need to report it to HMRC. If it is above £1,000, you can deduct either the £1,000 allowance or your actual expenses, whichever is higher.

A single monthly payment that replaces several means-tested benefits including Working Tax Credit, Child Tax Credit, Housing Benefit, Income Support and Jobseeker's Allowance. The amount you receive depends on your income, savings and circumstances. It is administered by the DWP, not HMRC.

A 10-digit number that identifies you to HMRC. You need a UTR to file a Self Assessment tax return, register a business, or communicate with HMRC about your tax affairs. You can find your UTR on your tax return, your HMRC online account, or letters from HMRC.

A consumption tax added to most goods and services in the UK. The standard rate is 20%, with a reduced rate of 5% for some items and zero rate for others. Businesses must register for VAT if their taxable turnover exceeds £85,000 in a 12-month period. Calculate VAT

A suffix on a tax code (e.g., 1257L W1 or 1257L M1) meaning your tax is calculated only on the current week or month's pay, not on your total income for the year. This is an emergency basis and may mean you pay more tax initially. It is corrected once HMRC receives the correct information.

A flat-rate allowance of £6 per week (£26/month) that you can claim for working from home, without needing to provide evidence of extra costs. If your actual costs are higher, you can claim the exact amount with receipts. Available to employees who work from home regularly by choice or requirement.

Goods and services that are taxable for VAT but at a 0% rate. This means no VAT is charged, but the seller can still reclaim VAT on their costs. Common zero-rated items include most food, children's clothes, books and newspapers, and passenger transport.