A
Accounting Period Ch 01
The period for which a company prepares its accounts and calculates its Corporation Tax liability. Usually 12 months, but can be shorter. Not the same as the tax year.
Allowable Expense Ch 08
A cost that can be deducted from income before calculating tax. Must be incurred wholly and exclusively for business purposes to qualify.
Annual Exempt Amount (AEA) Ch 05
The tax-free allowance each individual has for Capital Gains Tax each year. Set at £3,000 for 2026/27. Cannot be carried forward if unused.
Annual Investment Allowance (AIA) Ch 08
Allows businesses to deduct 100% of the cost of most plant and machinery in the year of purchase, up to £1,000,000. Excludes cars and gifted assets.
Associated Company Ch 01
A company under common control — for example, two companies both owned by the same individual. Having associated companies divides the Corporation Tax profit thresholds.
Augmented Profits Ch 01
A company's taxable profits plus any dividends received from non-group companies. Used to determine which Corporation Tax rate applies.
Auto-Enrolment (AE) Ch 07
The legal obligation for employers to enrol eligible workers into a qualifying workplace pension automatically. Minimum total contribution is 8% of qualifying earnings.
B
Bad Debt Relief Ch 08
The ability to deduct a specific debt from taxable income when it becomes genuinely irrecoverable and is written off in the accounts. General provisions do not qualify.
Balancing Allowance / Charge Ch 08
When a business stops trading, the remaining value in a capital allowance pool is either relieved in full (balancing allowance) or taxed if sale proceeds exceed the pool value (balancing charge).
Benefits in Kind (BIK) Ch 07
Non-cash benefits provided to employees by their employer — such as company cars, private medical insurance, or gym memberships — which are subject to income tax and Class 1A NI.
BADR — Business Asset Disposal Relief Ch 05
Reduces CGT to 18% on qualifying business disposals, up to a £1m lifetime limit. Formerly Entrepreneurs' Relief. Requires 2 years' ownership and a 5% shareholding.
Bridging Software Ch 09
Software that connects a spreadsheet to HMRC's MTD API, allowing businesses to submit returns digitally without switching to full accounting software.
C
Capital Allowances Ch 08
Tax relief on capital expenditure (assets like plant, machinery, vehicles). Replaces accounting depreciation for tax purposes. Types include AIA, WDA, and FYA.
Capital Gains Tax (CGT) Ch 05
Tax charged on the profit made when disposing of a chargeable asset — shares, property (not your main home), crypto, or a business. Rates are 18% / 24% in 2026/27.
Cash Accounting Scheme Ch 04
A VAT scheme where output tax is accounted for when payment is received (not when invoiced) and input tax is reclaimed when payment is made to suppliers.
CIHC — Close Investment Holding Company Ch 01
A company that exists to hold investments rather than trade. Always taxed at the 25% main rate regardless of profit level — no small profits rate or Marginal Relief available.
CIS — Construction Industry Scheme Ch 07
HMRC's scheme requiring contractors to deduct 20% (or 30% for unverified subcontractors) from payments and submit monthly returns. Separate from PAYE obligations.
Corporation Tax (CT) Ch 01
Tax charged on the taxable profits of UK limited companies and certain other entities. Rates range from 19% to 25% depending on profit level in 2026/27.
CT600 Ch 01
The form used to file a Company Tax Return with HMRC. Due within 12 months of the accounting period end — always after the CT payment deadline.
D
Director's Loan Account (DLA)
A record of money borrowed from or lent to a company by its director. Loans outstanding more than 9 months after the year-end trigger a 33.75% S455 tax charge on the company.
Dividend Ch 02
A payment made to shareholders from a company's post-tax profits. Not subject to NI, which makes them more tax-efficient than salary above the Personal Allowance — even after the April 2026 rate increase.
Dividend Allowance Ch 02
The amount of dividend income you can receive tax-free each year. Set at £500 for 2026/27. Applies on top of the Personal Allowance.
E
EIS — Enterprise Investment Scheme Ch 05
A government scheme offering tax reliefs to investors in qualifying small companies. Includes CGT deferral relief, income tax relief (now at 20%), and loss relief.
Employment Allowance Ch 03
Reduces an eligible employer's annual Class 1 NI bill by up to £10,500. Not available to sole directors with no other employees, or those with a previous-year pay bill above £100,000.
EPS — Employer Payment Summary Ch 07
An RTI submission sent to HMRC to report reclaims (e.g. statutory payments), confirm the Employment Allowance claim, or notify HMRC of a nil payment period.
Exempt Supply Ch 04
A supply that is outside the scope of VAT entirely. Unlike zero-rated supplies, businesses making exempt supplies cannot reclaim the VAT on their related costs. Examples: education, healthcare, insurance.
F
Final Declaration Ch 09
The end-of-year submission under MTD for ITSA that replaces the traditional Self Assessment return. Confirms income, claims reliefs, and makes adjustments. Due 31 January after the tax year.
Fiscal Drag Ch 02
The effect of frozen tax thresholds combined with rising incomes. As wages grow, more taxpayers are pulled into higher bands — a tax rise in practice, without any change to headline rates.
Flat Rate Scheme (FRS) Ch 04
A simplified VAT scheme where businesses pay a fixed industry percentage of gross turnover to HMRC, rather than tracking individual input and output VAT. Turnover must be below £150,000 to join.
FPS — Full Payment Submission Ch 07
The RTI report submitted to HMRC on or before every payday, detailing each employee's earnings, tax deducted, and NI contributions for that pay period.
FYA — First Year Allowance Ch 08
An accelerated capital allowance allowing a higher percentage of an asset's cost to be claimed in the year of purchase. The new 40% FYA applies to qualifying main pool assets from January 2026.
G
Gift Aid Ch 02
A scheme allowing charities to reclaim basic rate tax on donations. For higher and additional rate taxpayers, Gift Aid donations extend the basic rate band, reducing the effective rate on other income.
Gift Hold-Over Relief Ch 05
Allows the gain on a gift of business assets or company shares to be deferred — held over and passed on to the recipient. A joint election is required. Useful for succession planning.
H
HMRC
His Majesty's Revenue and Customs. The UK government department responsible for collecting taxes, administering benefits, and enforcing tax compliance. The body all returns are filed with and all tax is paid to.
I
Input VAT Ch 04
The VAT a business pays on its purchases. VAT-registered businesses can reclaim input VAT against their output VAT liability, paying only the net difference to HMRC.
Investors' Relief (IR) Ch 05
CGT relief reducing the rate to 18% on gains from unlisted trading company shares, where the investor is not an employee. Lifetime limit reduced to £1m in October 2024.
L
Lower Earnings Limit (LEL) Ch 03
The minimum weekly earnings (£129 in 2026/27) an employee must receive to be eligible for statutory payments such as SSP and SMP, even though no NI contributions are due below the primary threshold.
M
Making Tax Digital (MTD) Ch 09
HMRC's programme to replace paper records and annual filing with mandatory digital record-keeping and regular submissions. Already live for VAT; rolling out for Income Tax from April 2026.
Marginal Relief Ch 01
A mechanism that tapers Corporation Tax between the 19% small profits rate and the 25% main rate for companies with profits between £50,000 and £250,000. Calculated using the formula: (upper limit − profits) × 3/200.
N
National Insurance (NI / NICs) Ch 03
Compulsory contributions paid by employees, employers, and the self-employed. Funds state benefits including the NHS and State Pension. Different classes apply depending on employment status.
NLW — National Living Wage Ch 07
The minimum hourly rate payable to workers aged 21 and over. Set at £12.71 from 1 April 2026. Separate (lower) rates apply for ages 16–17, 18–20, and apprentices.
O
Output VAT Ch 04
The VAT a VAT-registered business charges on its sales. Collected on behalf of HMRC and remitted via the VAT return, net of any input VAT reclaimable on purchases.
P
P11D Ch 07
The form used to report taxable benefits in kind provided to employees and directors. Due 6 July after the tax year end. Class 1A NI on those benefits is paid by 19/22 July.
P60 Ch 07
An annual certificate issued to all employees by 31 May, showing total pay, income tax, and NI deducted in the tax year. Required by employees when completing their own Self Assessment.
Patent Box Ch 01
A Corporation Tax regime allowing companies to apply a 10% effective CT rate to profits attributable to qualifying patents and intellectual property.
PAYE — Pay As You Earn Ch 07
The system by which employers deduct income tax and employee NI from wages before paying employees, and remit the deductions to HMRC monthly or quarterly.
Personal Allowance Ch 02
The amount of income an individual can earn before income tax applies. Set at £12,570 and frozen until April 2031. Tapers to zero for income above £100,000.
Payments on Account (POA) Ch 06
Advance payments toward the following year's Self Assessment bill, each equal to 50% of the prior year's liability. Due 31 January and 31 July. Triggered when the SA bill exceeds £1,000.
PRR — Private Residence Relief Ch 05
Exempts the gain on disposal of an individual's main home from CGT. The final 9 months of ownership always qualify. Lettings relief is now restricted to shared occupancy situations.
R
R&D Tax Relief Ch 01
Corporation Tax relief for companies investing in qualifying research and development. The merged SME/RDEC scheme offers a 20% taxable credit on qualifying expenditure for most businesses from April 2024.
RTI — Real Time Information Ch 07
HMRC's payroll reporting system. Employers must submit a Full Payment Submission on or before each payday — not after. Late submissions trigger automatic penalties based on headcount.
S
Salary Sacrifice Ch 03
A contractual arrangement where an employee gives up part of their cash salary in exchange for a non-cash benefit (e.g. pension, EV lease). Reduces gross pay on which both NI and income tax are calculated.
Self Assessment (SA) Ch 06
HMRC's system for individuals to report income not fully taxed at source and calculate their own tax liability. Annual online return due 31 January. Being replaced by MTD for ITSA for many taxpayers from 2026.
SSP — Statutory Sick Pay Ch 07
The minimum sick pay employers must pay eligible employees. Set at £123.25 per week in 2026/27. Now payable from day one of absence — the previous 3-day waiting period was abolished April 2026.
T
Tax Code Ch 07
A code issued by HMRC to employers indicating how much tax-free income an employee is entitled to. The standard code for 2026/27 is 1257L, reflecting the £12,570 Personal Allowance.
Trivial Benefit Ch 08
A benefit worth under £50, not cash or a cash voucher, and not contractual. Exempt from tax and NI, with no P11D reporting required. Directors are limited to £300 total per year.
U
Upper Earnings Limit (UEL) Ch 03
The level of earnings (£50,270 in 2026/27) above which the employee NI rate drops from 8% to 2%. The employer rate of 15% has no equivalent upper limit.
V
VAT — Value Added Tax Ch 04
A consumption tax added to most UK goods and services. Standard rate 20%. Businesses with taxable turnover above £90,000 must register. Businesses collect VAT on behalf of HMRC.
W
WDA — Writing Down Allowance Ch 08
An annual capital allowance on assets in a pool — deducted as a percentage of the pool's reducing balance. The main pool rate reduced from 18% to 14% from 1 April 2026. Special rate pool remains 6%.
Wholly and Exclusively Ch 08
The fundamental HMRC test for allowable expenses. A cost is deductible only if it was incurred solely for the purposes of the business. Dual-purpose costs must be apportioned — or may be entirely disallowed.
Z
Zero-Rated Supply Ch 04
A VAT-taxable supply charged at 0%. Unlike exempt supplies, zero-rated businesses can still reclaim input VAT on their costs. Common examples: most food, books, children's clothing, and exports.