UK Tax Glossary
63 UK tax terms explained in plain language. From Personal Allowance and PAYE to Capital Gains Tax and VAT.
A
Additional RateThe highest income tax rate in England, Wales, and Northern Ireland, charged at 45% on taxable income above £125,140.Annual AllowanceThe maximum amount you can contribute to registered pension schemes each tax year while still receiving tax relief, currently set at £60,000.Annual Exempt AmountThe amount of capital gains you can make in a tax year before Capital Gains Tax becomes due, currently £3,000 for individuals.Auto-EnrolmentThe legal requirement for employers to automatically enrol eligible workers into a workplace pension scheme and make contributions on their behalf.
B
Basic RateThe standard income tax rate of 20% applied to taxable income between the Personal Allowance and the higher-rate threshold, currently £12,571 to £50,270 in England, Wales, and Northern Ireland.Blind Person's AllowanceAn additional tax-free allowance of £3,250 (2026/27) available to registered blind individuals, added on top of the Personal Allowance to reduce taxable income.Business Asset Disposal Relief (BADR)A Capital Gains Tax relief on qualifying business disposals — charged at a flat rate of 10% for 2024/25, 14% for 2025/26, and 18% from April 2026 — up to a £1 million lifetime limit per individual.
C
Capital Gains TaxA tax on the profit (gain) you make when you sell or dispose of an asset that has increased in value, such as shares, investment property, or business assets.Carry ForwardA pension allowance rule that lets you use any unused Annual Allowance from the previous three tax years, potentially allowing contributions well above the current year's £60,000 limit.CISAcronym for Construction Industry Scheme — the HMRC regime under which contractors deduct tax from payments to construction subcontractors at 20% (registered) or 30% (unregistered), with the labour element only, and subbies reconcile via Self Assessment.Class 1 National InsuranceNational Insurance contributions paid by employees and employers on earnings above the Primary Threshold.Class 2 National InsuranceA flat-rate National Insurance contribution historically paid by self-employed people to build entitlement to the State Pension and other contributory benefits.Class 4 National InsuranceNational Insurance paid by self-employed individuals on their taxable profits, calculated as part of their Self Assessment tax return.Construction Industry SchemeHMRC scheme requiring contractors to deduct tax (20% for registered subcontractors, 30% for unregistered) from payments to subcontractors for construction work.
D
Dividend AllowanceThe amount of dividend income you can receive each tax year completely free of tax, currently set at £500.Dividend TaxTax payable on dividend income received from shares in UK and overseas companies, above the Dividend Allowance.Dividend Tax RatesThe rates at which dividends are taxed in excess of the Dividend Allowance.
E
F
G
H
I
Investors' ReliefA Capital Gains Tax relief that applies a reduced flat rate on gains from disposing of shares in unlisted trading companies, aimed at encouraging external investors in small businesses.ISAAn Individual Savings Account — a tax-free savings or investment wrapper that lets you earn interest, dividends, and capital gains without paying UK tax on them.
L
M
Marginal RateThe rate of tax paid on the next pound of income you earn, which determines the tax cost or saving of earning slightly more or less.Marriage AllowanceAllows one partner in a marriage or civil partnership to transfer £1,260 of their unused Personal Allowance to the other, reducing the recipient's tax bill by up to £252 per year.
N
National InsuranceA system of compulsory contributions paid by employees, employers, and the self-employed that funds state benefits including the State Pension, Statutory Sick Pay, and Maternity Pay.National Living WageThe legally required minimum hourly rate that employers must pay workers aged 21 and over, set at £12.NI NumberA unique personal reference number issued to UK residents to track their National Insurance record, in the format two letters, six digits, one letter (e.
P
P11DA form employers must submit to HMRC to report the cash equivalent of benefits in kind and expenses provided to employees and directors that are not put through payroll.P45A form your employer gives you when you leave a job, showing your tax code, total pay, and total tax paid in the current tax year up to your leaving date.P60An annual certificate your employer gives you at the end of the tax year (by 31 May) summarising your total pay and total tax deducted under PAYE for the year.PAYEPay As You Earn — the system by which employers deduct income tax and National Insurance directly from employees' wages before paying them, and remit the deductions to HMRC on their behalf.Pension Tax ReliefA government top-up on pension contributions that effectively returns income tax paid on the contributed amount, making pensions a highly tax-efficient saving vehicle.Personal AllowanceThe amount of income you can earn in a tax year before paying income tax, currently £12,570 and frozen until April 2031 (the freeze was extended by three years at the Autumn Budget 2025).Personal Allowance TaperThe gradual withdrawal of the Personal Allowance for people with adjusted net income above £100,000, reducing it by £1 for every £2 of income above that level.Postgraduate LoanA student loan available to UK residents studying a postgraduate master's or doctoral course, repaid through payroll deductions at 6% of income above the postgraduate repayment threshold (£21,000 per year).Primary ThresholdThe level of earnings above which employees start paying Class 1 National Insurance contributions, set at £12,570 per year (£242 per week) for 2026/27.
R
Reduced Rate VATA 5% VAT rate applied to certain goods and services deemed essential or beneficial, including domestic fuel and power, children's car seats, and some energy-saving materials.Relief at SourceA method of pension tax relief where you contribute from your net (after-tax) pay and the pension provider claims basic-rate tax relief of 20% directly from HMRC, topping up your pension automatically.Repayment ThresholdThe level of annual income above which you must start making student loan repayments, which differs depending on your loan plan.Residential Property CGTCapital Gains Tax on gains from selling UK residential property that is not your main home, charged at 18% for basic-rate taxpayers and 24% for higher- and additional-rate taxpayers.
S
Salary SacrificeAn arrangement where you give up part of your salary in exchange for a non-cash benefit such as employer pension contributions, a cycle-to-work scheme, or an electric car.Self AssessmentThe system by which individuals report their own income, gains, and reliefs to HMRC each year through an online or paper tax return, rather than having tax collected automatically under PAYE.SLCThe Student Loans Company — the government-owned company that administers student loans in the UK, including issuing funds to students, collecting repayments through payroll (via HMRC), and managing loan balances.Standard Rate VATThe main VAT rate of 20% applied to most goods and services sold in the UK by VAT-registered businesses.Student Loan Plan 1The earliest student loan repayment plan, applicable to UK students who took out their first loan before 1 September 2012.Student Loan Plan 2The repayment plan for students who started an undergraduate course in England or Wales from 1 September 2012 onwards.Student Loan Plan 4The repayment plan for Scottish students who took out their first student loan on or after 1 September 1998 under the Student Awards Agency for Scotland.Student Loan Plan 5The newest undergraduate repayment plan, applying to students starting courses in England from 1 August 2023 onwards.
T
Tapered Annual AllowanceA reduced Annual Allowance for individuals whose adjusted income exceeds £260,000, with the allowance reduced by £1 for every £2 of income above that threshold.Tax BandsThe ranges of taxable income to which different income tax rates apply, creating the UK's progressive tax system.Tax CodeA code issued by HMRC to your employer to tell them how much income tax to deduct from your pay each period.Tax YearThe 12-month period used for UK tax purposes, running from 6 April to the following 5 April.Tax-Free SavingsSavings held in tax-advantaged wrappers such as ISAs, where interest, dividends, and capital gains accumulate without being subject to UK tax.Taxable IncomeThe portion of your total income that is actually subject to income tax after deducting the Personal Allowance and any other reliefs or deductions you are entitled to.
U
V
Value Added TaxA consumption tax charged at each stage of production and distribution on goods and services, with the final burden falling on the end consumer.VAT Registration ThresholdThe level of taxable turnover above which businesses must register for VAT, currently £90,000 per rolling 12-month period.VAT ReturnA periodic report that VAT-registered businesses must submit to HMRC, typically quarterly, showing the VAT they have charged customers and the VAT they have paid on purchases.
Z
About this glossary
All definitions reflect current HMRC rules for the 2026/27 tax year. Tax rules can change — always check the latest guidance at gov.uk or consult a qualified tax adviser.
Frequently asked questions
How many UK tax terms does this glossary cover?
The glossary currently defines 63 UK tax terms in plain language, spanning income tax, National Insurance, Capital Gains Tax, VAT, pensions, and Stamp Duty.
Where do the definitions come from?
Definitions are written in plain English but sourced from HMRC, HM Treasury and (for Scottish-specific terms) the Scottish Government. Each entry links to the relevant gov.uk reference for the full legal detail.
Does each glossary term link to a calculator?
Most do. Where a term has a matching calculator on this site — such as Personal Allowance, Capital Gains Tax, or Stamp Duty Land Tax — the glossary entry links directly to it so you can apply the definition to your own numbers.
Are the definitions kept up to date each tax year?
Yes. Definitions reflect current HMRC rules for the 2026/27 tax year and are reviewed whenever rates or thresholds change at a Budget or fiscal event.