Here are some common jargon words that you might encounter when dealing with UK tax returns, along with their meanings:
National Insurance Contributions (NICs) - These are payments made by employees and employers to fund the UK's social security system. They are calculated based on the employee's earnings and are deducted from their pay.
Self Assessment - This is the process of reporting your income and paying tax to HM Revenue & Customs (HMRC) if you are self-employed, a company director, or have other sources of income that are not taxed at source.
PAYE - Pay As You Earn (PAYE) is a system used by employers to deduct income tax and National Insurance Contributions (NICs) from employees' pay before it is paid to them.
Tax code - This is a series of letters and numbers that HMRC uses to determine how much tax to deduct from an individual's pay. The tax code is based on the individual's personal allowance, any deductions, and other factors.
Capital gains tax (CGT) - This is a tax on the profit made from selling an asset, such as property, shares, or business assets. The tax is calculated based on the gain made and the individual's tax rate.
Corporation tax - This is a tax on the profits made by companies registered in the UK. The tax is calculated based on the company's profits and is paid annually.
P11D - This is a form used by employers to report expenses and benefits provided to employees, such as company cars or private medical insurance. The information on the form is used to calculate the employee's tax liability.
Inheritance tax - This is a tax on the value of an individual's estate when they die. The tax is calculated based on the value of the estate and the individual's tax rate.
Taxable benefits - These are benefits provided by employers to employees, such as company cars or medical insurance, that are subject to tax. The value of the benefit is added to the employee's taxable income when calculating their tax liability.
Dividend tax - This is a tax on the income received from dividends paid on shares held by individuals. The tax is calculated based on the individual's tax rate and the amount of dividends received.