UK tax terms can feel like another language. This glossary cuts through the noise and explains the most common jargon in plain English.
Whether you’re a sole trader, landlord, or contractor, you deserve to know what it all means – without needing a degree in tax law.
Income Tax
Tax you pay on your earnings, like salary, self-employed profits, pensions, and some savings income. The more you earn, the higher the rate (within set bands).
National Insurance (NI)
A separate contribution to the government that goes towards things like the State Pension and benefits. Self-employed people pay Class 2 and Class 4 contributions.
VAT (Value Added Tax)
A tax added to most goods and services. If your business turnover is above £90,000 (as of 2025), you need to register for VAT and charge it to customers.
Corporation Tax
If you run a limited company, you pay Corporation Tax on your profits. It’s separate from your personal tax.
Self Assessment
The system HMRC uses to collect Income Tax from people who don’t have it automatically taken from their wages. If you’re self-employed or have untaxed income, you file a tax return each year.
Capital Gains Tax (CGT)
Tax on the profit you make when selling something valuable, like property or shares. There are annual tax-free allowances and reliefs available.
Inheritance Tax (IHT)
Tax on the value of a person’s estate when they die. Planning ahead can help reduce the amount owed.
PAYE (Pay As You Earn)
The system employers use to deduct Income Tax and NI from wages before paying employees.
Personal Allowance
The amount of income you can earn each tax year before you pay Income Tax. In 2025/26, it’s £12,570.
Allowable Expenses
Business costs you can deduct from your income before calculating tax. Things like travel, office supplies, or phone bills (if they’re for work).
Flat Rate Scheme
A simplified VAT scheme for small businesses. You charge standard VAT rates but pay HMRC a lower fixed rate, keeping the difference.
Tax Code
A series of numbers and letters HMRC uses to tell your employer or pension provider how much tax to deduct.
Payment on Account
Advance payments towards your next tax bill. If your last bill was over £1,000, you usually pay half in January and half in July.
Dividend
A share of profits paid to company shareholders. Often used by PSC contractors as a tax-efficient way to pay themselves.
PSC (Personal Service Company)
A limited company that typically has one main director/shareholder providing services to clients. PSCs often deal with IR35 rules.
IR35
Tax rules that determine whether a contractor should be classed as an employee for tax purposes. Affects how tax and NI are paid.
HMRC
Her Majesty’s Revenue and Customs. The UK government body that collects tax.
Still confused?
That’s where Buzz comes in. We help you stay on top of tax without the jargon. No fluff. No stress. Just sorted.
