Accounting Glossary

Accounting Glossary: Make Sense of Financial and Tax Jargon Fast

Understanding accounting and tax terms is essential for running your business effectively. Our Accounting Glossary is designed to simplify complex jargon so you can make informed decisions with confidence.

From everyday bookkeeping phrases to more technical HMRC terminology, this guide explains key concepts clearly and in plain English. Whether you’re a sole trader, limited company director, or property investor, you’ll find practical definitions that help you stay compliant, save time, and avoid costly mistakes.

At SBX Accountants, we believe knowledge is power. This glossary isn’t just about definitions; it’s a tool to help you understand your obligations and take control of your business finances. Bookmark this page as a quick reference whenever you come across unfamiliar terms.

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1257L

Tax code 1257L is the standard UK code giving you a £12,570 tax-free allowance under PAYE, used when you have one job and no taxable benefits.

A

Agent

A professional or firm authorised to deal with HMRC on your behalf. To appoint SBX Accountants, you must complete the Authorising Your Agent Form 64-8.

AMAP (Approved Mileage Allowance Payments)

The maximum mileage rate HMRC allows for business travel. If your employer pays less, you can claim tax relief on the difference.

Annual Allowance

The maximum amount of tax-free pension contributions you can make in a single tax year.

Annual Tax Summary

A summary from HMRC showing how much tax you’ve paid and where that money has been allocated.

Article 151 Bodies

International organisations outside the scope of UK VAT rules.

At Source

Tax deducted before you receive payment. Applies to PAYE employees and self-employed workers under the CIS scheme.

Authorising Your Agent Form 64-8

This form gives SBX permission to speak to HMRC on your behalf. Without it, HMRC cannot discuss your account with us.

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B

B2B (Business to Business)

When services are supplied between two businesses. VAT is charged based on where the customer is located.

B2C (Business to Customer)

When services are supplied directly to consumers. VAT is charged based on where the supplier is located.

Bankruptcy

A legal process where an individual or business is declared unable to pay debts, overseen by the court system.

Basic Rate Tax

The lowest rate of income tax currently set at 20%. It applies to earnings above the personal allowance threshold.

Benefits

Perks provided by an employer, such as company cars or private healthcare, which may affect taxable income.

Bench Fees

Fees charged for using business or academic facilities, such as equipment or workspace.

Bookkeeping

The recording and organisation of all financial transactions. SBX offers bookkeeping services to ensure accurate, compliant records.

Business Rates

Local taxes paid on non-domestic properties used for business purposes, such as offices or shops.

Business Structure

The legal setup of your business, such as sole trader, partnership, or limited company. See our guide to choosing the right structure.

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C

Capital Gains Tax (CGT)

A tax on profits from selling assets like property, shares, or valuable items.

CIS (Construction Industry Scheme)

A HMRC scheme where contractors deduct tax at source before paying subcontractors. Learn more with SBX’s accounting for tradespeople services.

CIS Card

A card showing registration details for workers in the Construction Industry Scheme.

CIS Calculator

A tool used to estimate Construction Industry Scheme deductions at 20%, 30%, or 0%, helping contractors and subcontractors calculate payments due under HMRC CIS rules.

Compliance

The act of following tax laws and regulations to avoid penalties and remain in good standing with HMRC.

Confirmation Statement

An annual submission to Companies House confirming your company details are correct. SBX can handle your confirmation statement filing.

Consideration

Payment or compensation given in exchange for goods or services.

Corporation Tax

A tax paid by limited companies on profits earned from their activities.

CSCS Card

A separate card from the CIS card showing skills and qualifications for construction work.

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D

D0 Tax Code

A tax code where all income from a job is taxed at the higher rate of 40%, without a personal allowance.

Deductions

Allowable expenses subtracted from your taxable income to reduce the amount of tax you owe.

Director Self Assessment

A tax return completed by company directors to report personal income and dividends. SBX provides self-assessment services for directors.

Disability Adaptation Works

Specialist equipment or property alterations for disabled individuals that may qualify for zero-rated VAT.

Dispute Resolution

HMRC’s process for resolving tax disputes with individuals or businesses, sometimes involving tribunals or mediation.

Dividend

Profits distributed to company shareholders after tax has been paid.

Dividend Tax

Tax paid on dividends received from company profits, charged at different rates depending on your income tax band.

Double Taxation Agreement (DTA)

An agreement between two countries to prevent the same income being taxed twice, common for overseas work or investments.

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E

Electronic Filing

Submitting tax returns and documents online through HMRC’s secure digital services.

Employment Allowance

A scheme that allows eligible employers to reduce their annual National Insurance contributions.

Employment Status

Determines whether someone is classed as an employee or self-employed for tax purposes, affecting PAYE and National Insurance obligations.

Enterprise Investment Scheme (EIS)

A government scheme that provides tax incentives for investors supporting small, high-risk companies.

Enquiry

An HMRC investigation into a tax return or claim to check accuracy and entitlement. SBX handles enquiries on behalf of clients to minimise stress and errors.

ESA (Employment Support Allowance)

A government benefit paid to individuals unable to work due to illness or disability.

Estates

All assets, property, and possessions left behind when a person passes away, relevant for inheritance tax planning.

Exempt Supplies

Goods or services that are within VAT rules but are exempt from VAT charges, such as certain financial or educational services.

Excise Duty

A tax on specific goods such as alcohol, tobacco, and fuel.

Expenses

Costs incurred for business purposes. Sole traders and limited companies can claim allowable expenses to reduce their taxable income. See SBX’s bookkeeping services for support.

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F

Flat Rate Expenses (FRE)

A fixed amount of tax relief for employees based on work-related costs like uniforms, tools, or travel.

Flat Rate Scheme

A simplified VAT scheme for small businesses, allowing them to pay VAT at a set percentage of turnover instead of calculating VAT on every transaction.

Foreign Income

Income earned from sources outside the UK, which must be reported to HMRC and may be subject to UK tax rules.

Fraud Investigation Service

An HMRC department responsible for investigating serious cases of tax fraud and evasion.

Fuel and Power VAT Rate

Certain fuel and power supplies can be charged at a reduced VAT rate of 5%, usually for domestic or charitable use.

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G

Gift Aid

A scheme allowing UK charities to reclaim basic rate tax on donations made by taxpayers, increasing the value of the donation at no extra cost to the donor.

Goods

Tangible items transferred from seller to buyer in exchange for payment, subject to VAT depending on the nature of the goods.

Gross Income

Total income before any deductions such as tax or National Insurance contributions.

GST (Goods and Services Tax)

A consumption tax similar to VAT, applied in countries outside the UK on goods and services.

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H

High Income Child Benefit Charge

A tax charge applied to individuals earning above a certain threshold who also claim Child Benefit. The higher the income, the greater the charge.

High Net Worth Unit

A specialist HMRC team managing the tax affairs of the UK’s wealthiest individuals.

HM Revenue & Customs (HMRC)

The UK government department responsible for tax collection, compliance, and enforcement. HMRC oversees Income Tax, VAT, Corporation Tax, and National Insurance.

HMRC Enquiry

An investigation by HMRC to ensure tax returns are accurate and compliant. SBX supports clients throughout the process to avoid penalties and stress.

Higher Rate Tax

The 40% tax rate applied to earnings above the basic rate threshold. Rates and thresholds are updated annually.

HMRC Registration

The process of registering with HMRC as a sole trader, limited company, or employer. SBX offers HMRC registration services to simplify the setup process.

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I

Income Tax

A tax on earnings from employment, self-employment, pensions, and investments. The amount you pay depends on tax bands and allowances.

Inheritance Tax

A tax on the estate (property, money, possessions) of a deceased person. Certain allowances and reliefs can reduce this liability.

Input Tax

The VAT paid by a business on goods or services purchased. This VAT can often be reclaimed if the business is VAT registered.

Inspection

An HMRC check of financial records to ensure compliance with tax laws. SBX can assist clients during inspections to resolve issues quickly.

Insurance Premium Tax (IPT)

A tax on general insurance premiums, such as home, car, and business insurance policies.

Intrastat

A system for collecting trade statistics on goods traded between UK and EU member states.

IR35

Tax legislation designed to prevent workers operating through a limited company from avoiding employment taxes when they are effectively employees. See SBX’s IR35 guide for detailed advice.

IR35 Calculator

An online tool that estimates a contractor’s take-home pay inside and outside IR35. The SBX IR35 Calculator compares PAYE deductions, National Insurance, and company expenses to show how IR35 status affects net income.
See the IR35 Guide for full details and compliance advice.

Invoice

A document provided by a business requesting payment for goods or services supplied. VAT-registered businesses must issue invoices containing specific information required by HMRC.

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J

Job Expenses

Work-related costs employees can claim back, such as travel, uniforms, tools, and accommodation. Accurate records are required to support claims.

Job Retention Scheme

A temporary UK government scheme providing financial support to employers to help retain staff during periods of reduced business activity, such as the COVID-19 pandemic.

Joint Income

Income received jointly by two or more individuals, often relevant for couples managing rental property or investments.

Joint Tenancy

A form of property ownership where two or more people share equal rights to the property. Tax rules apply to how rental income is reported to HMRC.

JSA (Jobseeker’s Allowance)

A state benefit paid to individuals who are unemployed and actively seeking work.

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K

Key Dates

Important tax deadlines for filing returns, paying tax, and meeting HMRC obligations. See SBX’s Tax Calendar 2025/26 for details.

Key Information Document (KID)

A document provided to investors outlining risks, charges, and expected performance of certain financial products such as ISAs and investment trusts.

Key Performance Indicator (KPI)

A measurable value that indicates how effectively a business is achieving its objectives, such as revenue growth or profit margins.

Knowledge Intensive Companies (KICs)

High-growth, innovative companies that qualify for specific tax reliefs and investment schemes, such as the Enterprise Investment Scheme (EIS).

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L

Late Filing Penalties

Fines imposed by HMRC for submitting tax returns after the deadline. The penalty amount increases the longer the return is overdue.

Lifetime Allowance

The maximum value of pension savings an individual can accumulate without incurring additional tax charges.

Limited Company

A business structure where the company is a separate legal entity from its owners. SBX offers limited company formation services and compliance support.

Local Compliance

HMRC teams responsible for addressing tax compliance issues within specific regions or sectors.

Loss Relief

A tax provision allowing businesses to offset trading losses against current, previous, or future profits to reduce their tax liability.

Lower VAT Rate

The 5% reduced VAT rate in the UK, applicable to certain goods and services, such as energy-saving materials and domestic fuel.

Loan to Directors

Funds taken by company directors from their business, which must be declared and managed in line with HMRC rules to avoid penalties.

Loan Repayment Calculator

An online calculator that estimates loan or hire purchase repayments based on amount borrowed, interest rate, and term, showing total interest and repayment cost.

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M

Making Tax Digital (MTD)

A UK government initiative to modernise the tax system by requiring businesses and individuals to keep digital records and submit tax returns using approved software like QuickBooks.

Married Couples Allowance

A tax allowance available to married couples or civil partners where at least one partner was born before 6 April 1935, allowing part of their tax-free allowance to be transferred.

Management Accounting

Financial reporting focused on internal business decisions, helping owners and directors make informed choices. Learn more about SBX’s management accounting services.

Marginal Rate of Tax

The rate of tax applied to the last pound of income earned, affecting how much additional earnings are taxed.

Marriage Allowance

A tax benefit allowing one spouse or civil partner to transfer a portion of their Personal Allowance to the other, reducing their overall tax bill.

Materiality

An accounting concept referring to the significance of a transaction or item in financial statements.

Mortgage Interest Relief

A relief previously available for landlords to offset mortgage interest costs against rental income. Now limited and replaced by a basic rate tax credit.

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N

National Insurance

A tax paid by employees, employers, and the self-employed that funds state benefits such as the NHS and pensions. Learn more about contributions on our Self Assessment page.

National Insurance Number (NI No.)

A unique identifier used by HMRC to track an individual’s tax and National Insurance records.

Net Income

The income remaining after deductions such as tax and National Insurance contributions.

Non-Business Activity

Transactions or activities where there is no exchange of goods or services for payment, meaning they are outside the scope of VAT.

Non-Resident Landlord

A landlord who lives outside the UK but earns rental income from UK property. Special HMRC rules apply for tax reporting and withholding.

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O

Obligations

The legal duties taxpayers and businesses must fulfil, such as filing tax returns, paying taxes on time, and keeping accurate financial records.

Off-Payroll Working Rules (IR35)

HMRC rules ensuring contractors working like employees pay similar tax and National Insurance. Learn more in our IR35 Guide.

Online Services

HMRC’s digital platform where businesses and individuals can manage their taxes, file returns, and access records securely online.

Operating Profit

The profit a business earns from its core activities before tax, interest, and other non-operational expenses.

Overdraft

A short-term borrowing facility provided by banks, often used to manage cash flow during periods of fluctuating income and expenses.

Overseas Income

Income earned outside the UK, such as foreign investments or property rental, which must be reported to HMRC under UK tax laws.

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P

P11D

HMRC form listing taxable benefits provided by an employer, such as company cars or medical insurance. Employees receive this annually for tax reporting.

P45

An HMRC form issued when an employee leaves a job, showing total earnings and tax paid in the current tax year.

P60

End-of-year HMRC form summarising total income and tax paid. Employers must issue this to employees each April.

P800

An HMRC tax calculation form showing whether you have overpaid or underpaid tax during the year.

PAYE (Pay As You Earn)

The system employers use to deduct tax and National Insurance from employee wages before payment. It ensures taxes are paid directly to HMRC.

Payroll Giving

A scheme allowing employees to donate to charities directly from their salary before tax deductions.

Partial Exemption

A VAT rule for businesses that have both taxable and exempt supplies, determining how much VAT they can reclaim.

Partnership

A business structure where two or more people share responsibility for running the business and its liabilities. See our Partnership Services.

Payments on Account

Advance payments towards next year’s tax bill, required by HMRC for self-employed individuals with significant tax liabilities.

Personal Allowance

The annual amount of income you can earn before paying Income Tax. This can be transferred between spouses in some cases.

Property Income

Rental income earned from residential or commercial properties. HMRC requires this to be reported through Self Assessment.

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Q

Quick Assessment

A simplified tax calculation by HMRC based on information provided in a Self Assessment tax return, issued instead of a full formal review.

QuickBooks

Cloud-based accounting software for managing invoices, expenses, and payroll. Learn more about our QuickBooks services.

Quarterly Instalment Payments

Tax payments made quarterly by certain businesses and self-employed individuals to spread the cost of tax bills across the year.

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R

R&D Tax Credits

Government incentives allowing businesses to claim tax relief for costs spent on innovation and research activities.

Rebate

A repayment of tax by HMRC when too much tax has been paid during the year. Also known as a tax refund.

Record Keeping

The practice of maintaining accurate financial documents, such as invoices and receipts, essential for compliance and tax reporting.

Reduced Rate VAT

A lower VAT rate of 5% applied to certain goods and services, such as energy-saving materials and residential utilities.

Registration with HMRC

The process of registering your business or self-employment with HMRC to receive a Unique Taxpayer Reference (UTR). Learn about our HMRC registration services.

Residence Test

A test used to determine whether an individual is considered a UK resident for tax purposes, affecting their tax obligations.

Revenue

The total income a business receives before expenses are deducted. In taxation, it also refers to money collected by HMRC.

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S

SA1

HMRC form used to register individuals for Self Assessment when they are not self-employed but need to declare additional income. See our HMRC Registration Help page.

SA302 / Tax Calculation

A statement from HMRC showing whether you have overpaid or underpaid tax for a specific tax year.

SDLT (Stamp Duty Land Tax)

A tax payable when you buy property or land above a certain value threshold in England or Northern Ireland.

Self Assessment

HMRC’s system for individuals and businesses to declare income and calculate tax liabilities. Learn about our Self Assessment services.

Self Assessment Record

A record held by HMRC containing details of all Self Assessment tax returns submitted on your behalf.

Self Assessment Tax Return

The form used to declare income and expenses to HMRC. Late filing can result in fines. SBX offers full tax return filing support.

Self-Employed

Working for yourself as a sole trader or partner. You must register with HMRC and submit tax returns annually.

Sole Trader

A business structure where one person owns and runs the business, personally responsible for all profits and liabilities. See our Sole Trader Package.

Standard Rate VAT

The default VAT rate in the UK, currently set at 20%, applied to most goods and services.

Subcontractor

Someone who performs construction or other services under a contractor but is not directly employed by them. Relevant for IR35 and CIS rules.

Supply

The provision of goods or services in return for payment. Supplies can be taxable, exempt, or outside the scope of VAT.

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T

Take-Home Pay Calculator

An SBX tool to estimate your take-home pay after Income Tax, National Insurance, pension contributions, and student/postgraduate loans. Enter your salary, pick your tax year and region, and compare pension types. Results update as you type.

Tax Code

The code used by HMRC to determine how much tax should be deducted from an employee’s pay under PAYE. Check with SBX for help with tax code queries.

Tax Credit

Government payments designed to support low-income families and individuals.

Tax Return

The form submitted to HMRC detailing income, expenses, and tax owed for a tax year. Can be paper or online submission.

Tax Refund

Money repaid by HMRC when you have overpaid tax. SBX can help check eligibility and process claims.

Tax Year

The UK tax year runs from 6th April to 5th April of the following year.

Taxable Supplies

Goods or services subject to VAT, including standard, reduced, and zero-rated supplies.

Trading Allowance

A tax-free allowance for small-scale trading or casual income, such as selling items online or freelancing part-time.

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U

U.K. Residency Test

A test to determine if an individual is considered a UK resident for tax purposes, affecting obligations on worldwide income.

Uniform Business Rate

The standard tax rate applied to business properties in calculating business rates.

Unique Taxpayer Reference (UTR)

A 10-digit reference number issued by HMRC, essential for Self Assessment tax returns and other tax dealings.

Universal Credit

A government benefit combining multiple previous benefits, providing financial support for low-income individuals and families.

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V

Value Added Tax (VAT)

A tax charged on most goods and services in the UK. Businesses must register for VAT once turnover exceeds the threshold. Learn more on our VAT Returns page.

VAT Return

A form submitted to HMRC showing the VAT charged on sales and VAT paid on purchases. It determines how much VAT a business owes or can reclaim.

VAT Threshold

The level of turnover at which a business must register for VAT, currently set at £90,000 per year.

VAT Exempt Supplies

Goods or services not subject to VAT, such as certain medical treatments and education services. No VAT is charged or reclaimed on exempt supplies.

VAT Zero-Rated Supplies

Items sold at 0% VAT, such as most food and children’s clothing. Businesses can reclaim VAT on related purchases even though they do not charge VAT on sales.

Venture Capital Trust (VCT)

A type of investment fund that provides tax incentives to investors who support small and medium-sized UK businesses.

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W

W8 Form

A U.S. tax form used by non-U.S. organisations, such as UK businesses, to confirm exemption from U.S. tax withholding on certain income types.

Withholding Tax

Tax deducted at source from payments made to non-UK residents. Common in international transactions to ensure tax compliance across borders.

Working Tax Credit

A government benefit designed to support individuals on a low income who are currently in employment or self-employment.

Working Rule Agreement (WRA)

An industrial agreement in the construction sector that sets minimum pay rates, travel allowances, and benefits. Often relevant for CIS and IR35 contractors.

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X

Exemption

A type of income or transaction not subject to tax, such as certain charitable donations or zero-rated VAT items.

External Stakeholders

Individuals or organisations outside HMRC, such as taxpayers, accountants, and professional bodies, who have an interest in tax processes or policy.

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Y

Year-End

The end of the UK tax year, which runs from 6th April to 5th April. Essential for financial reporting, filing tax returns, and finalising accounts.

Yield

The return on an investment, such as interest, dividends, or rental income, is used to calculate taxable profits.

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Z

Zero-Rated Goods and Services

Products or services with a VAT rate of 0%, such as most food, books, and children’s clothing. Businesses can still reclaim VAT on related purchases.