Do I need to file a Self Assessment tax return?

You must file if you are self-employed with income over £1,000, earned over £100,000, or have untaxed income such as rental income, dividends, or foreign income. The deadline is 31 January following the end of the tax year.

What is an ISA and how does it work?

An ISA (Individual Savings Account) is a tax-free wrapper for savings or investments. You can save up to £20,000 per tax year in 2025/26 and pay no UK income tax, dividend tax, or capital gains tax on anything earned inside it.

How much can I earn before paying tax in 2025/26?

Most people have a Personal Allowance of £12,570 for 2025/26. Income above this is taxed at 20% (basic rate up to £50,270), 40% (higher rate up to £125,140), or 45% (additional rate above £125,140). The Personal Allowance is reduced by £1 for every £2 you earn above £100,000.

What is the National Living Wage in 2025?

From April 2025, the National Living Wage is £12.21 per hour for workers aged 21 and over. The rate for 18–20 year olds is £10.00 per hour, and for under 18s and apprentices it is £7.55 per hour.

How much stamp duty do I pay as a first-time buyer?

From 1 April 2025, first-time buyers pay 0% stamp duty on the first £300,000 and 5% on the portion from £300,001 to £500,000. Properties above £500,000 do not qualify for first-time buyer relief and standard rates apply.

What is the difference between HP and PCP car finance?

Hire Purchase (HP) means you pay fixed monthly instalments and own the car outright at the end. Personal Contract Purchase (PCP) has lower monthly payments but a large optional balloon payment at the end — you only own the car if you pay the balloon.

What is the difference between a SIPP and a workplace pension?

A SIPP is a personal pension you manage yourself with wider investment choice. A workplace pension is employer-provided and includes employer contributions. Always contribute enough to get the full employer match before paying into a SIPP.

How do I check if my tax code is correct?

Your tax code appears on your payslip. The most common code is 1257L, which gives you a £12,570 personal allowance. If your code has a K prefix, W1 or M1 suffix, or an unexpected number, it may be wrong. Use our Tax Code Checker or contact HMRC on 0300 200 3300.

What benefits can I claim in the UK?

Common UK benefits include Universal Credit, Child Benefit, Council Tax Reduction, Pension Credit, Carer's Allowance, and the 30-hour free childcare entitlement. Billions of pounds in benefits go unclaimed every year — use our Benefits Checker to see what you may be entitled to.

How much should I save for retirement?

A common rule of thumb is to save half your age as a percentage of your salary — so if you start at 30, save 15% of salary. For a comfortable retirement, most guidance suggests a pension pot of around 25 times your expected annual spending. Use our Pension Forecast calculator to see if you are on track.

Reference

UK Finance Glossary

Plain-English definitions for every financial term you will encounter in HMRC letters, mortgage offers, pension statements and beyond. 91+ terms updated for 2025/26.

This glossary is for information only and does not constitute financial advice. For personal situations, consult a regulated adviser via MoneyHelper.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

91+

Terms Defined

Letters Covered

2025/26

Tax Year

100%

Free

A

Additional Rate Tax: Income tax at 45%, applying to taxable income above £125,140 in 2025/26. The personal allowance is fully withdrawn at this level.
AEA — Annual Exempt Amount: The amount of capital gains you can make each tax year before CGT applies. For 2025/26 it is £3,000 (reduced from £12,300 in 2022/23).
Annual Allowance (Pension): The maximum you can contribute to pensions each year while still receiving tax relief — £60,000 for 2025/26 (or 100% of earnings if lower). Unused allowance can be carried forward up to 3 years.
Annuity: A financial product bought with pension savings that pays a guaranteed income for life (or a fixed period). Once purchased, annuities are irreversible, so they should be bought after careful shopping around.
Auto-enrolment: The legal requirement for employers to automatically enrol eligible workers into a qualifying workplace pension. Employees contribute a minimum of 5% (including tax relief) and employers must contribute at least 3% of qualifying earnings.
AVC — Additional Voluntary Contribution: Extra pension contributions you make on top of your standard workplace pension to boost retirement savings, often with tax relief.

B

BADR — Business Asset Disposal Relief: A CGT relief (formerly Entrepreneurs' Relief) that reduces CGT on qualifying business asset sales, up to a £1 million lifetime limit. The rate is 14% for 2025/26 (rising to 18% from April 2026).
Base Rate: The interest rate set by the Bank of England that influences mortgage rates, savings rates and wider borrowing costs throughout the UK economy. Also called the Bank Rate.
Basic Rate Tax: Income tax at 20%, applying to taxable income between £12,571 and £50,270 in 2025/26.
Benefits in Kind (BIK): Non-cash perks provided by employers (e.g. company car, private medical insurance) that are taxable. HMRC adds the BIK value to your income for tax purposes; employers report via P11D.

C

Capital Allowances: Tax relief for businesses and the self-employed on capital expenditure (e.g. equipment, machinery). The Annual Investment Allowance (AIA) allows 100% deduction up to £1 million in the year of purchase.
Cash ISA: An ISA that holds cash savings rather than investments. Interest earned is free from UK income tax. Subject to the overall £20,000 annual ISA allowance.
CGT — Capital Gains Tax: Tax on profit when you sell an asset that has increased in value. 2025/26 rates: 18% (basic rate) or 24% (higher rate) on property; 18%/24% on other assets. First £3,000 of gains is tax-free (AEA). See our Capital Gains Tax guide.→ Capital Gains Tax Guide
Child Benefit: A government payment for parents with children under 16 (or 20 in approved education). The High Income Child Benefit Charge applies above £60,000 income, clawing back 1% of benefit for every £200 over the threshold. Fully withdrawn at £80,000.
Class 2 NI: National Insurance for the self-employed. Abolished from April 2024 — self-employed now only pay Class 4 NI (plus any voluntary Class 3 contributions).
Class 4 NI: National Insurance paid by the self-employed on profits. 6% on profits between £12,570–£50,270 and 2% above £50,270 for 2025/26.
Compound Interest: Interest calculated on both the original principal and accumulated interest from previous periods. This "interest on interest" effect means savings and investments grow exponentially over time — the key principle behind long-term investing.
Council Tax: A local tax set by councils based on property valuation band (A–H). Discounts include 25% for single occupants, 50% for certain exemptions, and Council Tax Reduction for low-income households.
Credit Score: A numerical score (and report) summarising your credit history, used by lenders to assess your creditworthiness. Main UK reference agencies: Experian, Equifax and TransUnion (accessed free via services such as Credit Karma).
CTF — Child Trust Fund: A government-backed savings account for children born between 2002–2011. Can be transferred to a Junior ISA. Funds are accessible when the child turns 18.

D

DB Pension — Defined Benefit: A workplace pension where your retirement income is based on salary and length of service (a "final salary" or "career average" scheme). Rare in the private sector but still common in the public sector.
DC Pension — Defined Contribution: A pension where you and your employer pay in, and the pot grows through investment returns. Your retirement income depends on what you contribute and how investments perform.
Dividend Allowance: The amount of dividend income you can receive before paying dividend tax. For 2025/26 it is £500. Dividend tax rates: 8.75% (basic rate), 33.75% (higher rate), 39.35% (additional rate).
DWP — Department for Work and Pensions: The government department responsible for benefits, pensions and welfare, including Universal Credit, State Pension, Personal Independence Payment and Pension Credit.

E

EIS — Enterprise Investment Scheme: A tax relief encouraging investment in small UK companies. Offers 30% income tax relief (on up to £1 million/year), CGT deferral and loss relief, but investments are high-risk and illiquid.
ETF — Exchange Traded Fund: A fund traded on a stock exchange that tracks an index, sector or asset class. Popular for low-cost, diversified investing inside ISAs and SIPPs. Typically has lower ongoing charges than active funds.

F

FIRE: Financial Independence, Retire Early. A movement focused on aggressive saving and investing to achieve financial independence well before traditional retirement age, typically through living frugally and maximising investment returns.
Fiscal Drag: The effect of frozen tax thresholds pulling more taxpayers into higher tax bands as wages rise with inflation. Also called "stealth tax". The UK personal allowance and higher rate threshold have been frozen since 2021, with the freeze running until 2028.
Fixed-Rate Mortgage: A mortgage where the interest rate is fixed for a set period (e.g. 2 or 5 years), giving certainty over monthly payments. At the end of the fixed term, you usually revert to the lender's Standard Variable Rate unless you remortgage.
FSCS — Financial Services Compensation Scheme: The UK's statutory compensation fund. Protects cash savings up to £85,000 per person per authorised institution; investment claims up to £85,000; and mortgage advice claims up to £85,000.

G

GIA — General Investment Account: An investment account with no tax wrapper. Gains and dividends are taxable (unlike inside an ISA or SIPP). Used once ISA and pension allowances are exhausted.
Gift Aid: A UK tax scheme allowing charities to reclaim 20% basic rate tax on donations from taxpayers. Higher rate taxpayers can also claim additional relief via Self Assessment. Donating £80 costs a basic rate taxpayer £64 after Gift Aid is considered.
Gross Income: Your total income before tax and deductions. Contrasts with net income (take-home pay). Used by HMRC for tax calculations and by lenders for affordability assessments.

H

HICBC — High Income Child Benefit Charge: A tax charge that claws back Child Benefit if anyone in the household earns over £60,000. The charge is 1% of the benefit for every £200 of income above £60,000, with benefit fully withdrawn at £80,000. Can be avoided by making pension contributions to bring income below the threshold.
Higher Rate Tax: Income tax at 40%, applying to taxable income between £50,271 and £125,140 in 2025/26. At £100,000+ income the personal allowance begins to taper, creating an effective 60% marginal tax rate on income from £100,000–£125,140.
HMRC — His Majesty's Revenue and Customs: The UK's tax authority responsible for collecting income tax, NI, VAT and other taxes, and for administering Self Assessment. Also administers child benefit, tax credits and certain statutory payments.

I

IHT — Inheritance Tax: A tax on the estate of someone who has died, applied above the nil-rate band of £325,000 at 40%. A residence nil-rate band of £175,000 may apply when leaving property to direct descendants. Frozen until 2030. Pensions will be brought into the IHT net from April 2027.
Index Fund: A fund that passively tracks a market index (e.g. FTSE 100, S&P 500) rather than being actively managed. Typically has lower fees than active funds and has outperformed most active managers over long periods.
Inflation: The rate at which prices rise over time, eroding the purchasing power of money. The UK government targets 2% CPI inflation. Inflation above this rate means savings earning less than the inflation rate are losing real value.
Interest-Only Mortgage: A mortgage where monthly payments cover only interest — the capital balance does not reduce. At the end of the term, the full loan amount is still owed. Requires a credible repayment vehicle. More common in buy-to-let.
ISA — Individual Savings Account: A tax-free savings or investment wrapper. You can save up to £20,000 per tax year (2025/26). Interest, dividends and gains inside an ISA are free from UK tax and do not need to be declared on a tax return.→ ISA Calculator

J

JISA — Junior ISA: A tax-free savings account for children under 18. The 2025/26 annual allowance is £9,000. Funds are locked until age 18 and can be held as cash or stocks and shares.

L

LBTT: Land and Buildings Transaction Tax — the Scottish equivalent of Stamp Duty Land Tax, charged on property purchases in Scotland. Different rates and bands apply; the nil-rate threshold for standard purchases is £145,000.
LISA — Lifetime ISA: An ISA for first-time buyers or retirement saving, available to those aged 18–39. You can contribute up to £4,000/year and receive a 25% government bonus (up to £1,000/year). A 25% penalty (which returns less than you put in) applies for non-qualifying withdrawals.
LTA — Lifetime Allowance: The maximum pension pot you could build up before paying a tax charge. Abolished from April 2024, replaced by the Lump Sum Allowance (£268,275 tax-free cash) and Lump Sum and Death Benefit Allowance (£1,073,100).
LTV — Loan to Value: The ratio of your mortgage to the property value, expressed as a percentage. Lower LTV generally means better mortgage rates. A 60% LTV (40% deposit) attracts the best rates; 95% LTV (5% deposit) is available but significantly more expensive.

M

Making Tax Digital (MTD): HMRC's programme requiring businesses and self-employed individuals to keep digital tax records and file updates via software. MTD for Income Tax (ITSA) begins from April 2026 for sole traders and landlords with income over £50,000.
Mortgage: A secured loan used to purchase property, with the property as collateral. Common types: repayment mortgage (capital + interest each month), interest-only, fixed rate, tracker, and offset. Use our Mortgage Calculator to estimate payments.→ Mortgage Calculator
MPAA — Money Purchase Annual Allowance: A reduced pension annual allowance of £10,000/year, triggered when you flexibly access pension funds (e.g. take income drawdown or a flexi-access UFPLS). Restricts further money purchase pension contributions once triggered.

N

Net Income: Income after deduction of income tax, NI contributions, and other mandatory deductions. Also called take-home pay for employees. Use our Take Home Pay Calculator to see your exact net pay.→ Take Home Pay Calculator
NI — National Insurance: Contributions paid by employees, employers and the self-employed to fund state benefits including the NHS and State Pension. Employees pay 8% (2025/26) on earnings from £12,570–£50,270, and 2% above.
NLW — National Living Wage: The minimum wage for workers aged 21 and over. From April 2025: £12.21/hour. The National Minimum Wage rates: £10.00/hour (18–20), £7.55/hour (under 18 and apprentices).
Nominal vs Real Returns: Nominal return is the stated rate of return. Real return adjusts for inflation. If your savings account pays 4% but inflation is 3%, your real return is approximately 1%. Real returns matter more for long-term wealth building.

O

OBR — Office for Budget Responsibility: The independent body responsible for providing official UK economic and fiscal forecasts. Publishes forecasts alongside the Budget and Spring Statement, and scrutinises government spending plans.
Offset Mortgage: A mortgage linked to a savings account. Your savings balance is offset against your mortgage balance, reducing the interest you pay. Useful for higher rate taxpayers who would otherwise pay tax on savings interest.
Overpayment (Mortgage): Making mortgage payments above the required monthly amount. Reduces the outstanding balance faster, saves significant interest over the mortgage term, and shortens repayment period. Most lenders allow overpayments of up to 10%/year without early repayment charges on fixed-rate deals.

P

P60: An annual summary from your employer showing your total pay and deductions (tax and NI) for the tax year. Provided by 31 May. Use it to check you have paid the correct amount of tax and to complete Self Assessment.
P800: A tax calculation letter from HMRC showing you have paid too much or too little tax. Issued automatically after the tax year. If you overpaid, HMRC will refund you directly or adjust your tax code.
PA — Personal Allowance: The amount of income you can earn before paying income tax. For 2025/26 it is £12,570. Tapered away for income above £100,000 (losing £1 for every £2 earned); fully removed at £125,140.
PAYE — Pay As You Earn: The system by which employers deduct income tax and NI from wages before paying employees. Most employed people pay all their tax this way without needing to file a Self Assessment return.
Pension Credit: A means-tested benefit for people over State Pension age with low income. Guarantee Credit tops up income to at least £218.15/week (single) or £332.95/week (couple) for 2025/26. Also a gateway to other benefits including the Winter Fuel Payment.
PIP — Personal Independence Payment: A benefit for people with long-term health conditions or disabilities, replacing Disability Living Allowance for working-age adults. Not means-tested. Subject to reform from November 2026 following the Spring Statement 2025 announcement.
Premium Bond: A savings product from NS&I where instead of interest, your money is entered into a monthly prize draw with prizes from £25 to £1 million. All prizes are tax-free. The prize fund rate is broadly equivalent to an interest rate and changes regularly.
Property Allowance: A £1,000 tax-free allowance for rental income. If your gross rental income is under £1,000, you do not need to declare it. If above £1,000, you can either deduct actual expenses or use the £1,000 allowance.

Q

Qualifying Year (State Pension): A tax year counting towards your State Pension entitlement. You need 35 qualifying years for the full new State Pension. A year qualifies if you pay NI contributions, get NI credits (e.g. through Universal Credit or caring responsibilities), or make voluntary contributions.

R

Remortgage: Switching to a new mortgage deal, either with your existing lender or a new one, without moving house. Typically done when a fixed-rate deal ends to avoid reverting to the lender's SVR. See our Mortgage Calculator.
Rent-a-Room Scheme: A tax relief allowing you to earn up to £7,500/year tax-free from letting furnished accommodation in your own home. If your rental income is under £7,500 you do not need to declare it or pay tax.
Repayment Mortgage: The standard mortgage type where your monthly payment covers both interest and a portion of the capital. Over the term (typically 25 years), the balance reduces to zero.
RPI — Retail Price Index: An older measure of inflation that includes housing costs (mortgage interest payments). Higher than CPI. Still used for some purposes including student loan interest calculations (Plan 1) and some index-linked gilts.

S

S&S ISA — Stocks and Shares ISA: An ISA that holds investments such as shares, funds and bonds rather than cash. Returns are tax-free but the value can fall as well as rise. Best suited for investing with a 5+ year time horizon.
Salary Sacrifice: An arrangement where you give up part of your salary in exchange for a non-cash benefit (most commonly pension contributions or an electric vehicle). Reduces your gross salary, saving both income tax and NI. Particularly valuable for higher earners.
SDLT — Stamp Duty Land Tax: A tax paid when buying property in England or Northern Ireland. Rates vary by price band and buyer type (first-time buyer, additional property, etc.). From April 2025, standard nil-rate band reverted to £125,000. Use our Stamp Duty Calculator.→ Stamp Duty Calculator
Self Assessment: The HMRC system for filing a tax return. Required if you are self-employed, have income over £100,000, have rental income, receive Child Benefit above the HICBC threshold, or have other untaxed income. Online deadline: 31 January.→ Self Assessment Guide
SIPP — Self-Invested Personal Pension: A personal pension where you choose and manage your investments. Contributions receive tax relief at your marginal rate. More investment choice than a standard stakeholder pension. Suitable for those who want to control their own pension investments.
SMP — Statutory Maternity Pay: Maternity pay paid by your employer, funded by HMRC. 90% of average weekly earnings for the first 6 weeks, then £187.18/week (or 90% of earnings if lower) for the next 33 weeks. Total maximum paid period is 39 weeks.
SSP — Statutory Sick Pay: The minimum sick pay employers must pay eligible employees who are too ill to work. £118.75/week for 2025/26, payable for up to 28 weeks. Qualifying conditions: earn at least £123/week; off for 4+ consecutive days.
State Pension: The government pension paid from State Pension age (66 for men and women in 2025). The full new State Pension is £230.25/week (£11,973/year) for 2025/26, requiring 35 qualifying NI years. Check your forecast at gov.uk/check-state-pension.→ State Pension 2025 Guide
Student Loan Repayment: Income-contingent repayments deducted via PAYE (or Self Assessment). Plan 2: 9% of income above £27,295; Plan 5 (from 2026): 9% above £25,000. Loan is written off after 30 years (Plan 2) or 40 years (Plan 5).
SVR — Standard Variable Rate: The default mortgage rate set by a lender that you revert to at the end of a fixed-rate or tracker deal. SVRs are typically significantly higher than the best available fixed rates. Staying on an SVR costs most borrowers hundreds of pounds per year.

T

Tax Code: A code from HMRC that tells your employer how much tax to deduct. The standard code for 2025/26 is 1257L (£12,570 personal allowance). L suffix means you get the standard personal allowance. Check yours with our Tax Code Checker.→ Tax Code Checker
Tax Relief (Pension): The government top-up on pension contributions. Basic rate taxpayers receive 20% relief (contributing £80 costs £64 net). Higher rate taxpayers can claim an additional 20% via Self Assessment. Effectively makes pension contributions the most tax-efficient way to save.
Tracker Mortgage: A mortgage with an interest rate that tracks the Bank of England base rate (or another rate) plus a set margin. Unlike a fixed rate, monthly payments change when the base rate changes. Useful when base rates are expected to fall.
Trading Allowance: A £1,000 tax-free allowance for self-employed income, casual trading, or "gig economy" income. If gross income from trading is under £1,000, no tax return is needed for that income.
Triple Lock: The government's commitment to increase the State Pension each year by the highest of earnings growth, CPI inflation, or 2.5%. In 2025/26, the State Pension rose by 4.1% (based on earnings). The triple lock is guaranteed until 2029.

U

UC — Universal Credit: A monthly benefit payment for people on low income or out of work, replacing six legacy benefits. The standard allowance (£400.14/month for a single person over 25 in 2025/26) can be topped up by elements for children, disability, housing and childcare costs.→ Universal Credit Guide
UFPLS — Uncrystallised Funds Pension Lump Sum: A way of taking pension money directly without setting up drawdown. Each payment is 25% tax-free and 75% taxable. Taking UFPLS triggers the MPAA, restricting future pension contributions to £10,000/year.
UTR — Unique Taxpayer Reference: A 10-digit reference number assigned by HMRC when you register for Self Assessment. Used on all correspondence and tax returns. If you lose it, find it in your HMRC online account or on previous correspondence.

V

VAT — Value Added Tax: A consumption tax added to most goods and services in the UK. Standard rate: 20%. Reduced rate: 5% (domestic energy, children's car seats, etc.). Zero rate: children's clothing, food, books. Businesses must register when turnover exceeds £90,000.
VCT — Venture Capital Trust: A listed company that invests in small early-stage companies. Offers 30% income tax relief on investments up to £200,000/year, plus tax-free dividends. High-risk, illiquid and only appropriate for sophisticated investors.

W

Workplace Pension: A pension arranged by your employer. Under auto-enrolment, employers must contribute at least 3% of qualifying earnings and employees at least 5% (including tax relief). The combined minimum is 8%. You can opt out but will miss employer contributions.
Write-off (Bad Debt): The accounting treatment of removing a debt from the books when it is deemed unrecoverable. For self-employed individuals and landlords, genuinely irrecoverable debts can be claimed as a tax-deductible expense.

Missing a term? Browse our In-Depth Guides or use our free calculators.

↑ Back to top