Many of us find tax confusing, but there are ways to get help. Read our jargon buster guide to find out about the main types of tax, common terms you’ll come across and where to go if you need support.
In the UK, lots of us find the tax system complicated and difficult to navigate. Around 78% of people think we don’t know enough about tax, according to research by Deloitte. But, as something that impacts all of us, it’s important to understand how it works and where to go if you need further support or information.
Common types of tax
Here are the main types of tax in the UK and some of the terms you might come across. For more help and guidance on tax, visit the Citizens Advice website.
|Type of tax||What it means|
|Capital gains tax||A tax that’s due on the profit you make when you sell something that’s increased in value – this only applies to certain assets and you don’t have to pay it if it comes in under your tax-free allowance.|
|Corporation tax||A tax due on profits from doing business as a limited company, a foreign company with a UK branch or office, a club, co-operative or other unincorporated association, such as a community group or sports club.|
|Council tax||An annual fee, usually split into 10 monthly payments, that you pay to your local council, which is put towards funding local services. How much you pay depends on where you live, your circumstances and your council’s requirements.|
|Excise duties||A tax chargeable on certain types of goods and products, such as alcohol and tobacco.|
|Income tax||A tax on income, including earnings from employment, self-employment, shares, some types of savings, certain benefits and pensions (not all types of income are taxable).|
|Inheritance tax||A tax on the estate (property, money and possessions) of someone who’s died. There’s normally no tax to pay if the value of your estate is below the inheritance tax threshold, or you leave everything above the threshold to your spouse, civil partner or to charity. The standard threshold is £325,000, but this can rise to as much as £1million depending on your circumstances.|
|Insurance premium tax||A tax on premiums received under taxable insurance contracts. This is charged at 12% on certain insurance policies, such as car and house insurance, and at 20% on travel insurance policies.|
|National insurance contributions||A tax on earnings that’s paid by employees, employers and the self-employed, helping to build your entitlement to certain state benefits and the state pension.|
|Stamp duty land tax||A tax due if you buy a property or land over a certain price in England and Northern Ireland. In Scotland, you pay Land and Buildings Transaction Tax and in Wales you pay Land Transaction Tax.|
|VAT (value added tax)||The tax you pay when you buy goods or services. Some things are exempt from VAT, such as postage stamps, financial and property transactions.|
- Local authority: Local authorities are officially responsible for all the public services and facilities in particular areas. Local councils are the most common type of local authority, and you can find yours at GOV.UK.
- National minimum/living wage: The national minimum wage is the minimum pay per hour almost all workers are entitled to. The national living wage is higher than the minimum wage and workers get it if they’re over 25.
- PAYE: Pay As You Earn is a method of paying income tax and national insurance contributions, where the tax is deducted from your salary before you receive it.
- Personal allowance: The amount of income everyone is entitled to receive tax-free each year.
- Tax code: A code provided by HMRC that’s used by your employer or pension provider to work out how much income tax to take from your pay or pension.
- Tax credits: A type of benefit for people on lower incomes, which includes working tax credits and child tax credits. These are slowly being replaced by universal credit.
- Tax rebate: A refund of tax that’s been overpaid.
- Tax residence: A place where you’re legally required to pay taxes.
- Tax return (self-assessment): A form where you report details of your taxable income, along with any capital gains, as well as claim tax allowances and tax reliefs.
- Tax year: A tax year in the UK runs from 6 April to the following 5 April.
- Unique taxpayer reference: A code assigned to you by HMRC to track your tax records (this is different to your tax code).
Support and information
Information and guidance on tax issues, ranging from income tax to refunds and problems with tax.
The government department responsible for the collection of taxes in the UK.
HMRC Online Services
The online portal where you can check your personal or business tax account, self-assessment, corporation tax, PAYE for employers and VAT.
A government service that provides support to help you prepare for, find, and stay in work.
A charity that helps people on low incomes who are under 60 or self-employed when they get into difficulties with their taxes.
Tax Help for Older People
A charity that helps people who are close to 60 or over and on a low income when they have any kind of personal tax problem.
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