Glossary of tax and accounting terms
This glossary explains, in plain English, the tax and accounting terms you are likely to come across as a sole trader, landlord, company director or employer in the UK. Where a definition gives a figure we say which tax year it applies to, and everything here is general information rather than tax advice.
A
- Accounting period
- For corporation tax, the accounting period is the time covered by a Company Tax Return, and it cannot be longer than 12 months. It is usually the same as the period covered by the company's annual accounts, although the two can differ, for example in a company's first year.Read moreSource: Accounting periods for Corporation Tax, GOV.UK
- Accounting reference date
- The date on which a company's financial year ends each year, which Companies House sets when the company is formed. The annual accounts are made up to this date, and a company can apply to change it.Read more
- Accruals basis
- A way of keeping accounts in which income and costs are recorded when they are earned or incurred, for example on the invoice date, rather than when money changes hands. Companies use it, and sole traders can choose it instead of the cash basis, where GOV.UK calls it traditional accounting.Read moreSource: Cash basis, GOV.UK
- Adjusted net income
- Your total taxable income less certain deductions, such as pension contributions and Gift Aid donations. HMRC uses it to decide whether your personal allowance is reduced, which for 2026 to 2027 starts once it goes above £100,000.Read moreSource: Income Tax rates and allowances for current and past years, GOV.UK
- Allowable expenses
- Business costs you can deduct from your income when working out your taxable profit, because they are incurred wholly for the business. Personal spending is not allowable, and the cost of long-lasting assets is usually claimed through capital allowances instead.Read more
- Annual accounts
- The financial statements a limited company prepares for each financial year, normally including a balance sheet and a profit and loss account. A private company must file them at Companies House within 9 months of the end of its accounting reference period, or within 21 months of incorporation for its first accounts.Read moreSource: Late filing penalties, Companies House, GOV.UK
- Annual exempt amount
- The amount of capital gains you can make in a tax year before any capital gains tax is due. For 2026 to 2027 it is £3,000 for individuals.Read moreSource: Capital Gains Tax rates and allowances, GOV.UK
- Annual investment allowance
- A capital allowance that lets a business deduct the full value of qualifying equipment and machinery from its profits in the period it buys them, up to an annual limit. GOV.UK gives the limit as £1 million (checked November 2026), adjusted for accounting periods that are not 12 months long.Read moreSource: Claim capital allowances: annual investment allowance, GOV.UK
- Anti-money laundering supervision
- Every business that provides accountancy or tax services must be supervised for anti-money laundering purposes, either by a professional body or by HMRC. Trading without this is a criminal offence, so it is reasonable to ask any accountant who supervises them.Read moreSource: Money Laundering Regulations: who needs to register, GOV.UK
- Auto-enrolment
- The duty on employers to put eligible staff into a workplace pension and pay into it. For 2026 to 2027 the earnings trigger for automatic enrolment is £10,000 a year.Read moreSource: Review of the automatic enrolment earnings trigger and qualifying earnings band for 2026/27, DWP, GOV.UK
B
- Balance sheet
- A summary of what a business owns, what it owes and what is left for its owners on a particular date, usually the last day of its financial year. It forms part of a limited company's annual accounts.Read more
- Balancing payment
- The amount still owed on a self assessment bill once any payments on account have been taken off. It is due by 31 January after the end of the tax year, which is also when the first payment on account for the next year falls due.Read moreSource: Understand your Self Assessment tax bill: payments on account, GOV.UK
- Bookkeeping
- The day-to-day recording of a business's sales, purchases, payments and receipts. Accounts, tax returns and VAT returns are all built from these records, so keeping them up to date saves time later.Read more
- Business asset disposal relief
- A capital gains tax relief that can lower the rate on gains when you sell all or part of a qualifying business, or shares in one. For 2026 to 2027 qualifying gains are taxed at 18%, and a cut in the lifetime limit from £1 million to £500,000 from 6 April 2027 has been announced but is not yet law.Source: Capital Gains Tax rates and allowances, GOV.UK
C
- Capital allowances
- Tax relief a business claims when it buys assets it keeps and uses, such as equipment, machinery and business vehicles, instead of deducting the cost as an everyday expense. The annual investment allowance is one type.Read moreSource: Claim capital allowances: annual investment allowance, GOV.UK
- Capital gains tax
- Tax on the gain you make when you sell or give away something that has gone up in value, such as a second property or shares. For 2026 to 2027 individuals pay 18% or 24% depending on their income, and where tax is due on UK residential property it must usually be reported and paid within 60 days of completion.Read moreSource: Capital Gains Tax rates and allowances, GOV.UK
- Cash basis
- A way of keeping records in which you count income when you receive it and expenses when you pay them. GOV.UK describes it as the standard way for sole traders and partnerships without corporate partners, although you can choose traditional accounting instead.Read moreSource: Cash basis, GOV.UK
- Chartered accountant
- A title reserved for members of the chartered institutes, such as ICAEW, ICAS and Chartered Accountants Ireland, under their Royal Charters and rules. The word accountant on its own is not protected by UK law, so anyone can use it.Read moreSource: Chartered Accountant, UK Regulated Professions Register
- CIS
- The Construction Industry Scheme, under which contractors take a deduction from payments to subcontractors and pass it to HMRC. The deduction is 20% for registered subcontractors and 30% for those who are not registered, and it counts as an advance payment towards the subcontractor's tax and National Insurance.Read moreSource: What you must do as a Construction Industry Scheme (CIS) subcontractor, GOV.UK
- Class 2 National Insurance
- A class of National Insurance for the self-employed. For 2026 to 2027, if your profits are above the small profits threshold of £7,105 a year, Class 2 contributions are treated as paid and there is nothing to pay, while below it you can choose to pay voluntary contributions of £3.65 a week to protect your record.Read moreSource: Self-employed National Insurance rates, GOV.UK
- Class 4 National Insurance
- National Insurance the self-employed pay on their profits, collected through self assessment. For 2026 to 2027 it is 6% on profits over £12,570 up to £50,270 and 2% on profits over £50,270.Read moreSource: Self-employed National Insurance rates, GOV.UK
- Companies House
- The UK government's registrar of companies, which forms companies and keeps the public register of their details, accounts and confirmation statements. It is separate from HMRC, which deals with a company's tax.Read more
- Confirmation statement
- A statement a company files at Companies House at least once every 12 months to confirm that its registered details are up to date. It can be filed up to 14 days after the end of the review period, and it includes confirming that each director has verified their identity.Read moreSource: Filing your company's confirmation statement, GOV.UK
- Corporation tax
- The tax a limited company pays on its taxable profits. For the financial years 2025 and 2026 the small profits rate is 19% on profits under £50,000 and the main rate is 25% on profits over £250,000, with marginal relief in between.Read moreSource: Corporation Tax rates and allowances, GOV.UK
- CT600
- The Company Tax Return a limited company sends to HMRC for each accounting period. It is due 12 months after the end of the accounting period, while the corporation tax itself is usually due 9 months and one day after the end of the period.Read moreSource: Company Tax Returns, GOV.UK (UK Government Web Archive copy, August 2026)
D
- Director's loan account
- A record of money a director takes out of, or puts into, their company that is not salary, dividends or a repayment of expenses. If the account is overdrawn when the company's year ends there can be extra tax to pay, so it is worth keeping it up to date.Read more
- Dividend
- A payment to a company's shareholders out of profits left after corporation tax. A company can only pay dividends from profits it has available, and they are taxed differently from salary.Read more
- Dividend allowance
- The amount of dividend income you can receive in a tax year without paying tax on it. For 2026 to 2027 it is £500, and dividends above it are taxed at 10.75%, 35.75% or 39.35% depending on your income tax band.Read moreSource: Income Tax rates and allowances for current and past years, GOV.UK
- Dormant company
- A company that is not active. For corporation tax, HMRC treats a company as dormant when it is not active and not within the charge to corporation tax, but it still has filing duties at Companies House.Read moreSource: Corporation Tax: trading and non-trading, GOV.UK
E
- Employer National Insurance
- National Insurance an employer pays on employees' earnings, on top of their wages. For 2026 to 2027 it is 15% on earnings above the secondary threshold of £5,000 a year.Read moreSource: Rates and thresholds for employers 2026 to 2027, GOV.UK
- Employment allowance
- A reduction in the employer National Insurance bill that eligible employers can claim each year. For 2026 to 2027 it is £10,500.Read moreSource: Rates and thresholds for employers 2026 to 2027, GOV.UK
F
- Final declaration
- The end of year step in Making Tax Digital for Income Tax, where you confirm your figures and submit your tax return from compatible software. For the 2026 to 2027 tax year the deadline is 31 January 2028.Read moreSource: Making Tax Digital quarterly updates, HMRC
H
- HMRC
- HM Revenue and Customs, the UK government department that collects income tax, corporation tax, VAT and National Insurance. It also runs PAYE and the Construction Industry Scheme.
I
- Identity verification
- Companies House now requires directors and people with significant control to verify their identity, through GOV.UK One Login or an authorised corporate service provider. Existing directors confirm this as part of the company's next confirmation statement.Read moreSource: When you need to verify your identity for Companies House, GOV.UK
- Income tax bands
- The slices of taxable income that are taxed at different rates. In England, Wales and Northern Ireland for 2026 to 2027, the basic rate of 20% applies up to £37,700 of taxable income, the higher rate of 40% from £37,701 to £125,140 and the additional rate of 45% above £125,140. Scotland sets its own bands for earnings, pensions and property income.Read moreSource: Income Tax rates and allowances for current and past years, GOV.UK
- Independent examination
- A check of a charity's accounts by an independent person with enough accounting skill, which is lighter than a full audit. For financial years ending on or after 30 September 2026, charities in England and Wales need one if their income is over £40,000 and they do not need an audit.Read moreSource: Charity accounts: threshold changes at a glance, Charity Commission, GOV.UK
- IR35
- The off-payroll working rules, which decide whether a contractor working through their own company should be taxed like an employee. In most cases the client decides the worker's status and should give a status determination statement, but for a small client outside the public sector the contractor's own company decides.Read moreSource: Understanding off-payroll working (IR35), GOV.UK
L
- Limited company
- A business that is a legal person in its own right, separate from its owners and registered at Companies House. The shareholders' liability is usually limited to what they have put in, and the company pays corporation tax on its profits.Read more
M
- Making Tax Digital
- HMRC's rules requiring digital records and returns sent from compatible software. For Income Tax it applies to sole traders and landlords with qualifying income over £50,000 from 6 April 2026, over £30,000 from 6 April 2027 and over £20,000 from 6 April 2028, and all VAT-registered businesses already use it for VAT.Read moreSource: Sole traders and landlords earning more than £30,000 urged to act now, HMRC, GOV.UK
- Marginal relief
- A corporation tax relief for companies with profits between £50,000 and £250,000, which brings the effective rate up gradually from the 19% small profits rate towards the 25% main rate. These limits apply for the financial years 2025 and 2026.Read moreSource: Corporation Tax rates and allowances, GOV.UK
P
- P11D
- The form an employer uses to report employees' taxable expenses and benefits, such as a company car, to HMRC. Employers report these, and give employees the details, by 6 July after the end of the tax year.Read moreSource: SAM70010: advice regarding forms P60 and P11D, HMRC manual, GOV.UK
- P45
- A form an employer gives an employee who leaves, showing their pay and the tax taken so far in the tax year. The employee passes it to their next employer so that the right tax is taken from the start.Read more
- P60
- A summary of an employee's pay and the tax deducted over a tax year. Employers must give one to everyone they employ at the end of the tax year by 31 May.Read moreSource: Payroll: annual reporting and tasks, GOV.UK
- PAYE
- Pay As You Earn, the system employers use to take income tax and National Insurance from wages before paying staff and to pass it to HMRC. Workplace and private pensions are also taxed through PAYE.Read more
- Payments on account
- Advance payments towards your next self assessment bill, each normally half of the tax you owed for the previous year, due by 31 January and 31 July. You do not have to make them if last year's bill was less than £1,000 or if you paid more than 80% of your tax outside self assessment, for example through PAYE.Read moreSource: Understand your Self Assessment tax bill: payments on account, GOV.UK
- Person with significant control
- Someone who owns or controls a company, for example through a large share of its shares or voting rights. Companies must record them and report them to Companies House, and they must verify their identity.Read more
- Personal allowance
- The amount of income you can have in a tax year before paying income tax. For 2026 to 2027 it is £12,570, and it goes down by £1 for every £2 of adjusted net income above £100,000.Read moreSource: Income Tax rates and allowances for current and past years, GOV.UK
- Profit and loss account
- A summary of a business's income and costs over a period, usually its financial year, showing whether it made a profit or a loss. It forms part of a company's annual accounts and is the starting point for working out taxable profit.Read more
- Property allowance
- A tax exemption of up to £1,000 a year on property income, for example from letting a parking space or occasional short lets. For 2026 to 2027 it is £1,000, and if your property income is higher you can deduct £1,000 instead of your actual expenses.Read moreSource: Tax-free allowances on property and trading income, GOV.UK
Q
- Qualifying income
- For Making Tax Digital for Income Tax, your total gross income from self-employment and property before any expenses or allowances are taken off. HMRC compares it with the threshold to decide when you must join.Read moreSource: Sole traders and landlords earning more than £30,000 urged to act now, HMRC, GOV.UK
- Quarterly update
- A summary of business or property income and expenses sent to HMRC every three months from Making Tax Digital software. For the 2026 to 2027 tax year the deadlines are 7 August 2026, 7 November 2026, 7 February 2027 and 7 May 2027.Read moreSource: Making Tax Digital quarterly updates, HMRC
R
- RTI
- Real Time Information, the way employers report payroll to HMRC each time they pay their staff. The Full Payment Submission must be sent on or before payday.Read moreSource: Running payroll: reporting to HMRC, GOV.UK
S
- Section 24
- The rule that restricts tax relief on mortgage interest and other finance costs for residential landlords to the basic rate of income tax, fully in place from 6 April 2020. Instead of deducting these costs from rental profit, landlords get a reduction in their tax bill.Read moreSource: Changes to tax relief for residential landlords, GOV.UK
- Self assessment
- HMRC's system for collecting income tax that is not taken automatically, for example from many self-employed people and landlords. You must tell HMRC by 5 October if you need to file a return for the previous tax year, and online returns are due by 31 January after the tax year ends.Read moreSource: Self Assessment tax returns: deadlines, GOV.UK
- Simplified expenses
- A way for sole traders and some partnerships to claim certain costs, such as using a vehicle or working from home, with flat rates instead of working out the actual cost.Read more
- Sole trader
- Someone who runs a business as an individual and is self-employed, rather than trading through a company. The profits are taxed as the owner's own income through self assessment, and the owner is personally responsible for the business's debts.Read more
T
- Tax code
- The code an employer or pension provider uses to work out how much income tax to take from your pay. It is based mainly on your personal allowance, and HMRC can change it, for example to collect tax owed from an earlier year.Read more
- Tax year
- The period over which income tax is worked out, which ends on 5 April each year. The 2026 to 2027 tax year runs from 6 April 2026 to 5 April 2027.Read moreSource: Payroll: annual reporting and tasks, GOV.UK
- Trading allowance
- A tax exemption of up to £1,000 a year on trading income, for example from occasional selling or a small side job. For 2026 to 2027 it is £1,000, and an increase to £3,000 from 6 April 2027 has been announced but is not yet law.Read moreSource: Income Tax: increasing the trading allowance, policy paper, GOV.UK
U
- UTR
- Your Unique Taxpayer Reference, a 10-digit number HMRC gives you when you register for self assessment or set up a limited company. You need it to file returns and when contacting HMRC.Read moreSource: Find your UTR number, GOV.UK
V
- VAT
- Value Added Tax, charged on most goods and services sold by VAT-registered businesses. The standard rate is 20%, with a reduced rate of 5% and a zero rate for items such as most food and children's clothes.Read moreSource: VAT rates, GOV.UK
- VAT flat rate scheme
- A simpler way for smaller businesses to work out VAT, paying a fixed percentage of their VAT-inclusive turnover that depends on their trade. You can join if your VAT turnover is £150,000 or less excluding VAT, and businesses that spend very little on goods, known as limited cost businesses, pay a higher rate of 16.5%.Read moreSource: VAT Flat Rate Scheme, GOV.UK
- VAT registration threshold
- The level of taxable turnover at which a business must register for VAT. You must register if your taxable turnover for the last 12 months goes over £90,000, or if you expect it to go over £90,000 in the next 30 days alone.Read moreSource: Register for VAT, GOV.UK
- VAT return
- The return a VAT-registered business sends HMRC, usually every 3 months, showing the VAT it has charged and the VAT it can reclaim. The deadline for sending it and paying is usually one calendar month and 7 days after the end of the period.Read moreSource: Send a VAT Return, GOV.UK (UK Government Web Archive copy, July 2026)
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