UK Tax & Salary Glossary

The highest Income Tax band in the UK, charged at 45% (47% in Scotland) on income over £125,140.

Extra State Pension you can get on top of the basic State Pension, based on your NI contributions.

Your total taxable income before personal allowances, used to calculate if your personal allowance is reduced.

Historical increased personal allowance for those born before 6 April 1938, now frozen.

The maximum amount you can contribute to your pension each year and still receive tax relief (currently £60,000).

The amount of capital gains you can make each tax year before paying Capital Gains Tax (£6,000 for 2024/25).

A 0.5% payroll tax on employers with an annual pay bill over £3 million to fund apprenticeships.

Automatic enrollment of eligible employees into a workplace pension scheme, with minimum contributions from both employer and employee.

Income Tax charged at 20% on income between £12,571 and £50,270 (2024/25).

Non-cash benefits provided by your employer (e.g., company car) that are subject to Income Tax and National Insurance.

An extra tax-free allowance of £3,070 available to registered blind or severely sight-impaired people.

Tax on the profit when you sell (or 'dispose of') an asset that has increased in value, charged at 10% or 20% for most assets.

The ability to use unused pension annual allowance from the previous three tax years to make larger pension contributions.

A payment to help with the costs of raising a child, which may be subject to the High Income Child Benefit Charge if you earn over £60,000.

National Insurance contributions deducted from employed earnings, paid by both employee (8-12%) and employer (13.8%).

Fixed-rate weekly NI contributions paid by self-employed people earning over £12,570 per year.

Voluntary NI contributions to fill gaps in your NI record and protect your State Pension entitlement.

Profit-based NI contributions paid by self-employed people (6% on profits £12,570-£50,270, 2% above).

Tax charged on the benefit of having a company car, calculated based on the car's P11D value and CO2 emissions.

Tax deduction scheme for contractors in construction, where tax is deducted at source (20% or 30%) from payments to subcontractors.

The first £500 of dividend income in 2024/25 that is tax-free, regardless of your tax band.

Tax on dividend income above the dividend allowance, charged at 8.75% (basic), 33.75% (higher), or 39.35% (additional).

A temporary tax code (usually 1257L W1/M1) used when HMRC doesn't have enough information about your circumstances.

Work-related costs you can claim tax relief on, such as professional fees, travel, and equipment needed for your job.

The effect of frozen tax thresholds combined with wage growth, causing more people to pay higher rates of tax over time.

A scheme that allows charities to reclaim basic rate tax on your donations, increasing their value by 25% at no extra cost to you.

Your total income before any deductions such as tax, National Insurance, or pension contributions.

A tax charge that claws back Child Benefit if you or your partner earn over £60,000, fully withdrawn at £80,000.

Income Tax charged at 40% on income between £50,271 and £125,140 (2024/25).

His Majesty's Revenue and Customs - the UK government department responsible for collecting taxes.

A progressive tax on your earnings, charged at 20%, 40%, or 45% depending on your income level (after personal allowance).

Off-payroll working rules that determine if a contractor should be taxed as an employee, affecting those working through intermediaries.

A tax code where your allowances are negative, meaning you have untaxed income or benefits that need to be collected through PAYE.

The standard tax code suffix indicating you're entitled to the basic personal allowance (e.g., 1257L for 2024/25).

The maximum pension pot you could build without triggering extra taxes - abolished from April 2024, replaced by new lump sum allowances.

The minimum earnings level (£6,396 for 2024/25) at which you start building qualifying years for State Pension, though you don't pay NI.

The rate of tax you pay on your next pound of income, which can be higher than your effective rate due to allowance withdrawal.

Allows you to transfer £1,260 of your personal allowance to your spouse/civil partner if they earn more than you (saving them £252 in tax).

Tax relief for married couples where at least one partner was born before 6 April 1935, worth £4,010-£11,080 depending on income.

A payment of up to £184.03 per week for 39 weeks if you're pregnant or have recently given birth but don't qualify for Statutory Maternity Pay.

A reduced annual allowance of £10,000 that applies once you've flexibly accessed your pension, limiting future tax-relieved contributions.

Mandatory contributions that fund State benefits including the State Pension, charged at different rates for employees, employers, and self-employed.

A unique identifier (format: AB 12 34 56 C) used to track your National Insurance contributions and tax records.

The minimum hourly wage for workers aged 21 and over, set at £11.44 per hour from April 2024.

The minimum hourly wage for workers under 21, with rates varying by age: £8.60 (18-20), £6.40 (under 18), £6.40 (apprentices).

Your take-home pay after all deductions including tax, National Insurance, and pension contributions.

A form employers use to report benefits in kind and expenses to HMRC, determining the tax you pay on these benefits.

A document you receive when leaving a job, showing your earnings and tax paid to date, needed by your next employer.

An annual summary of your earnings and deductions for the tax year, provided by your employer by 31 May each year.

The system employers use to deduct Income Tax and National Insurance from your wages before you're paid.

A scheme to donate to charity directly from your salary before tax is deducted, giving tax relief at your marginal rate.

Money paid into your pension pot, receiving tax relief at your marginal rate (20%, 40%, or 45%), up to the annual allowance.

Government top-up on pension contributions through tax relief, automatically added at 20% with higher earners claiming additional relief.

The amount of income you can earn tax-free each year (£12,570 for 2024/25), reduced if you earn over £100,000.

Tax-free savings interest you can earn: £1,000 (basic rate), £500 (higher rate), £0 (additional rate).

The earnings level at which employees start paying National Insurance (£12,570 annual, £242 weekly for 2024/25).

Earnings between £6,240 and £50,270 used to calculate minimum auto-enrolment pension contributions.

A method of giving pension tax relief where your pension provider claims 20% tax relief directly from HMRC on your behalf.

An arrangement where you give up part of your salary in exchange for a non-cash benefit (e.g., extra pension), saving tax and NI.

Separate Income Tax rates and bands for Scottish taxpayers, with 5 bands and a top rate of 47% vs 45% in rest of UK.

The earnings level at which employers start paying National Insurance on employee salaries (£9,100 annual, £175 weekly for 2024/25).

The system for reporting income and paying tax if you're self-employed, have untaxed income, or earn over £150,000.

Running your own business as a sole trader or partner, responsible for paying your own tax and National Insurance through Self Assessment.

A regular payment from the government when you reach State Pension age (currently 66), based on your National Insurance record.

The age at which you can start claiming State Pension, currently 66 and rising to 67 by 2028.

Up to 39 weeks of pay during maternity leave: 90% of average earnings for 6 weeks, then £184.03/week or 90% (whichever is lower).

Payment from your employer if you're off sick for 4+ days, currently £116.75 per week for up to 28 weeks.

Automatic deductions from salary to repay student loans: Plan 1 (9% over £24,990), Plan 2 (9% over £27,295), Plan 4 (9% over £31,395).

Your net salary after all mandatory deductions including Income Tax, National Insurance, and pension.

The rate at which your personal allowance or other benefits are reduced: £1 allowance lost per £2 earned over £100,000.

Gradual reduction of allowances or benefits as your income increases, such as personal allowance withdrawal above £100,000.

Income ranges taxed at different rates: Basic (20%), Higher (40%), Additional (45%) in England/Wales/NI; Scotland has 5 bands.

A code used by employers to calculate how much tax to deduct from your pay, usually starting with a number (e.g., 1257L).

Means-tested benefits for working families (being replaced by Universal Credit), including Working Tax Credit and Child Tax Credit.

Reductions in your tax bill for certain expenses or contributions, such as pension payments, charitable donations, or work expenses.

The 12-month period from 6 April to 5 April the following year used for tax calculations in the UK.

Your total income minus any allowances and reliefs, on which Income Tax is calculated.

Typically 25% of your pension pot that can be taken tax-free when you access your pension (subject to Lump Sum Allowance of £268,275).

A means-tested benefit that replaces six older benefits, providing financial support for those on low income or out of work.

The earnings level above which you pay reduced rate (2%) National Insurance rather than the standard rate (12% for 2024/25 at £50,270).

A pension scheme set up by your employer with automatic enrollment for eligible workers, receiving contributions from both you and your employer.