YF AccountingUK accounting & tax glossary
The tax and accounting terms small business owners, directors and the self-employed actually run into, explained in plain English by Yoni Finke FCCA.
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A to Z glossary
Accounting period
The span of time your accounts cover, usually 12 months. For a limited company it is also the period your Corporation Tax is worked out on, and it normally matches your company year-end at Companies House.
Related: Accounts & Corporation Tax
Accruals basis
Recording income and costs when they are earned or incurred, not when the cash actually moves. It is the standard basis for limited company accounts and gives a truer picture of profit than simple cash accounting.
Related: Bookkeeping guide
Corporation Tax 2026/27
The tax a limited company pays on its profits. The main rate is 25% for profits over £250,000, with a 19% small profits rate for profits up to £50,000, and Marginal Relief easing the jump in between. It is filed on a CT600 return and paid nine months and one day after the year-end.
Dividend 2026/27
A share of company profit paid to shareholders. The first £500 a year is covered by the dividend allowance and is tax-free. Above that, dividends are taxed at 10.75% in the basic-rate band, 35.75% at higher rate and 39.35% at additional rate, on top of any Corporation Tax the company already paid on the profit.
Related: Salary vs dividends 2026/27
Director’s loan account (S455)
A record of money you take from your company that is not salary, dividend or expense repayment. If the loan is still outstanding nine months after the year-end, the company pays a temporary S455 charge of 35.75%, refunded once you repay the loan. Overdrawn director’s loans are a common source of unexpected tax bills.
Related: Director’s loan accounts in 2026/27
Employment Allowance 2026/27
A relief that lets eligible employers reduce their annual employer’s National Insurance bill by up to £10,500. Most small businesses with more than one employee can claim it, but single-director companies with no other staff usually cannot.
Related: Payroll services
Flat Rate Scheme (VAT)
A simplified VAT scheme where you pay a fixed percentage of your gross turnover to HMRC instead of tracking VAT on every purchase. It can save time and sometimes money for smaller businesses, though it is not right for everyone.
Related: VAT guide
HMRC
His Majesty’s Revenue and Customs, the UK’s tax authority. It collects Income Tax, Corporation Tax, VAT, National Insurance and more, and runs the online systems you use to file returns and pay what you owe.
Related: Self Assessment guide
IR35 (off-payroll working)
Rules that decide whether a contractor working through their own company is, in reality, employed for tax purposes. If a contract is inside IR35, broadly the same tax and National Insurance applies as if the worker were an employee.
Related: IR35 explained
ISA 2026/27
An Individual Savings Account, a tax-free wrapper for savings and investments. You can pay in up to £20,000 across your ISAs in a tax year, and any interest, dividends or growth inside it are free of tax.
Related: Personal tax
Making Tax Digital (MTD)
HMRC’s programme requiring digital record-keeping and quarterly updates through compatible software. MTD for Income Tax is being phased in for self-employed people and landlords above set income levels, replacing the once-a-year manual return.
Related: MTD for Income Tax
Marriage Allowance 2026/27
A relief letting a lower-earning spouse or civil partner transfer £1,260 of their Personal Allowance to the other, worth up to £252 a year in tax. It applies where one partner earns below the Personal Allowance and the other is a basic-rate taxpayer.
Related: Personal tax
National Insurance (NIC)
Contributions paid by employees, employers and the self-employed that fund state benefits and the State Pension. The class and rate you pay depend on whether you are employed (Class 1), self-employed (Class 4) or running payroll as an employer.
Related: Payroll & PAYE guide
P11D
A form reporting taxable benefits in kind given to employees or directors, such as a company car or private medical cover. It is filed after the tax year ends, with a deadline of 6 July, and feeds into the recipient’s tax position.
Related: P11D and the 6 July deadline
PAYE
Pay As You Earn, the system employers use to deduct Income Tax and National Insurance from wages before paying staff, and send it to HMRC each payday under Real Time Information (RTI).
Related: Payroll services
Payments on account
Advance payments towards your next Self Assessment bill, each normally half of last year’s tax, due on 31 January and 31 July. They catch many people out the first year they apply, because you effectively pay one and a half years’ tax at once.
Related: Payments on account explained
Personal Allowance 2026/27
The amount of income you can earn before paying Income Tax, currently £12,570. It tapers away by £1 for every £2 you earn over £100,000 and reaches zero at £125,140. Income above the allowance is taxed at 20%, then 40%, then 45%.
Related: Understanding personal tax rates
Self Assessment
The system HMRC uses to collect tax that is not taken automatically through PAYE. If you are self-employed, a director, a landlord or have other untaxed income, you file a return each year; the online deadline is 31 January.
Related: Self Assessment guide
Sole trader vs limited company
The two most common ways to run a UK business. A sole trader and their business are legally the same, with simpler admin; a limited company is a separate legal entity that can be more tax-efficient and limits personal liability, but carries more reporting.
Related: Sole trader vs limited company
Trivial benefits 2026/27
Small gifts to employees or directors that are tax-free if each one costs £50 or less, is not cash or a reward for work, and is not in their contract. Company directors can receive up to £300 of trivial benefits a year this way.
Related: Trivial benefits explained
VAT 2026/27
Value Added Tax, a tax added to most goods and services at a standard rate of 20%. VAT-registered businesses charge it on sales, reclaim it on purchases, and report the difference to HMRC, usually every quarter.
Related: VAT service
VAT registration threshold 2026/27
The turnover level at which VAT registration becomes compulsory, currently £90,000 measured over any rolling 12-month period, not just your accounting year. You can also register voluntarily below it if it suits your business.