Why is this important? The information we provide differs between countries. To get information for your country, please select from the dropdown.

Terms used in tax information

Benefits in kind

Benefits in kind are non-cash benefits such as company cars, given to employees. They used to be called fringe benefits. Most benefits in kind are taxable. There are different rules if an employee earns less than a certain amount each year.

For more information about benefits in kind, see Benefits in kind.

Capital Gains Tax

Capital gains tax (CGT) is a tax on the increase in value of assets such as property or shares, over the time you own them. You pay CGT tax when you sell the assets or give them away. You don't have to pay CGT on your car, your main home (provided certain conditions are met), ISAs or personal belongings worth £6,000 or less when you sell them.

Every year, you are entitled to a tax-free amount of capital gains.

Fringe benefits

HM Revenue and Customs now use the term benefits in kind.

Gift Aid

Gift aid is a way of giving regular or a one-off amount from taxed income to charities. The charity may then claim the tax back.

HM Revenue and Customs (HMRC)

HM Revenue and Customs (HMRC) is the government department responsible for assessing and collecting most types of tax, including VAT. HMRC is also responsible for paying tax credits and child benefit.

Income tax

Income tax is a tax on income. You have to pay income tax on the following types of income:

  • income from employment
  • pension income
  • social security income
  • self-employment income
  • income from property
  • income from savings and investments
  • miscellaneous income.

Income tax allowances

Everyone who normally lives in the United Kingdom is entitled to receive a certain amount of income each year before they have to start paying tax. This amount is called the personal allowance. There are also other additional allowances which can reduce the tax you have to pay. The amounts of the allowances are usually announced each year.

For more information about income tax allowances, see Income tax allowances and amounts.

Income tax code

Income tax code is a code given by HM Revenue and Customs, which shows what allowances an employee is getting under the Pay As You Earn (PAYE) system. The code is usually a three figure number followed by a letter.

For more information about tax codes and PAYE, see The Pay As You Earn (PAYE) system.

Income tax rates

Income tax rates are the percentage rates at which tax is paid. More than one percentage rate may apply at a time, depending on your level of income and the type of income being taxed. Income tax rates and income bands are announced each year in the budget and can be found on the HM Revenue and Customs website at: www.hmrc.gov.uk.

Income tax relief

As a taxpayer, if you spend money on certain outgoings, the amount you spend can be deducted from your total income. This means you will pay less tax. These amounts are called tax reliefs.

You have to claim some reliefs by writing to your tax office, although most are automatic. You don't need to take action to claim automatic reliefs.

For more information about income tax reliefs, see Tax reliefs.

Independent taxation

Married couples used to be treated as one unit for tax purposes, but since 6 April 1990, each spouse is taxed independently of the other.

Inheritance tax

Inheritance tax is a tax paid on a person’s estate after death. It was formerly known as estate duty or capital transfer tax. Inheritance tax may also be payable on some gifts made during a person’s lifetime. Some gifts are completely free of inheritance tax whether you make them during your lifetime or on death and some are free of inheritance tax if you make them during your lifetime. For more information about inheritance tax, go to the GOV.UK website at: www.gov.uk.

Inland Revenue

Inland Revenue used to be the government department for assessing and collecting most types of tax. It is now called HM Revenue and Customs (HMRC).

ISA

ISA stands for Individual Savings Account. You can save money up to a certain amount each year in an ISA without having to pay tax on the income from your savings. For more information about ISAs, go to the HMRC website at www.hmrc.gov.uk.

PAYE

This stands for Pay As You Earn. It is the UK system for collecting tax and national insurance contributions from the wages and salaries of employees and the tax from some pensions.  The employer or pension provider deducts the tax from the employee’s wages or pension and sends it to HM Revenue and Customs.

For more information about PAYE, see The Pay As You Earn (PAYE) system.

Payroll Giving

If you pay tax through PAYE (Pay As You Earn), Payroll Giving is a way to reduce the cost to you of making regular gifts to UK charities. It allows you to authorise your employer or company/personal pension payer to make the donation from your wages or pension before deducting any tax.

Personal tax allowances

See Income tax allowances

Remission of tax arrears

If you are a taxpayer with tax arrears, you may have some or all of them 'remitted'. This means you will not have to pay all of the arrears if you meet certain conditions.

Self assessment

If you're a taxpayer, you're responsible for informing HMRC about any income or gains which may be taxable. Some taxpayers are required to complete a form every year called a Self Assessment tax return, telling HMRC about income and capital gains in that year. HMRC uses the figures on the tax return to work out how much tax is payable. Self Assessment also allows you to claim tax allowances or reliefs against your tax bill and HMRC to collect certain national insurance contributions and student loan repayments. There are strict deadlines for tax returns and making payments under Self Assessment.

For more information about tax returns, see Tax returns.

For more information about Self Assessment, visit the GOV.UK website at www.gov.uk.

Online self assessments - If you have to send HM Revenue & Customs (HMRC) a self assessment tax return, you can now do it online. When you send your tax return online, your figures are calculated automatically. You also know what tax you owe or are due back right away and you can view your account online 24 hours a day. You have until 31 January folloiwng the end of the tax year to file the tax return online.

Paper self assessments - In many cases, HM Revenue and Customs (HMRC) sends out self assessment forms automatically. However, if your circumstances change and your income increases or you make a capital gain,you are responsible for letting HMRC know so a form can be issued to you. If you fill in your tax return on paper, you must send it back to HMRC by no later than 31 October following the end of the tax year. You can either:

  • ask (HMRC) to calculate the tax due based on the figures in the tax return ( a Revenue calculation) or
  • calculate the amount of tax due yourself, see Taxpayer calculation.

As an alternative to paper self assessments, you can choose to send in the self assessment tax return online. There are a very few cases where online tax returns can't be made. In these cases, the deadline by which the paper return must reach HMRC is 31 January.

For more information about tax returns, see Tax returns.

Stamp Duty Land Tax

Stamp Duty Land Tax is a tax that you pay on a land transaction, for example, buying a house or being granted the lease on a property. For more information about Stamp Duty Land Tax, go to the HM Revenue and Customs website at www.hmrc.gov.uk and for more information about Stamp Duty Land Tax in Northern Ireland, go to the NI Direct website at www.nidirect.gov.uk.

Stamp duty reserve tax

Stamp duty reserve tax is stamp tax payable when you buy shares.

Taxable income

Taxable income is the part of your total income you pay income tax on. To work out your taxable income, you ignore any income that is not taxable and you take off any allowances and other deductions you can claim.

For more information about taxable income, see Taxable and non-taxable income.

Tax arrears

Tax arrears are a

debt to HM Revenue and Customs for tax owed and are usually a priority debt.

For more information about priority debts, see Help with debt.

For more information about income tax arrears, see Income tax arrears in Credit and debt fact sheet.

Tax assessment

Tax assessment is the amount of tax which someone must pay. See Self Assessment.

Non-taxable income

Non-taxable income is income on which income tax is never payable, for example, income from National Savings certificates and lottery winnings.

Tax refunds

Tax refunds are payments from HM Revenue and Customs to someone who has paid too much tax in any particular year. They used to be called tax rebates.

Tax relief

See Income tax relief.

Tax return

A tax return is a form that you may need to complete, depending on the type and amount of your income. It is also known as a self-assessment tax return.

For more information about tax returns, see Tax returns.

Tax years

A tax year starts on 6 April in one year and ends on 5 April the next calendar year.

VAT

VAT stands for Value Added Tax, which is a tax on goods and services. It is payable at a certain percentage, which is announced by the government in each year’s Budget. It is administered and collected by HM Revenue and Customs.

Back to top

Citizens Advice

Rate this page Give feedback