Tax is a complex beast. For people who aren’t tax professionals but still have to navigate their way around the industry in order to pay their taxes or run a business, it can be a daunting industry full of complicated rules and nebulous vocabulary.

To help more people better understand their way around the world of tax, tax refund experts, RIFT Tax Refunds, have created a jargon busting glossary of tax terms to bring clarity and confidence to those who need it.

The basics
Emergency tax number
If you cannot provide a new employer with a P45 from your old employer, the new employer will use an emergency tax code in order for you to pay taxes while HMRC identifies your correct code.

K codes
When a tax code contains the letter ‘K’, it means the deductions are greater than the allowances.

Liability
The amount of tax due against one’s income, profits or other gains.

PAYE
It stands for Pay As You Earn and is a system of paying income tax and National Insurance contributions each month. The money you owe is automatically taken out of your pay cheque before it reaches your bank account, so you don’t even have to think twice about it. Unless you’re self-employed, you probably pay your taxes through PAYE.

Personal Allowance
This is the amount of income you can earn each tax year before having to pay income tax.

Self Assessment
If you’re not on PAYE, you likely pay your taxes through Self Assessment. It’s a form on which you provide HMRC with details about your earnings and expenses so that they can calculate how much tax you need to pay each year.

Tax refund
A tax refund – also known as a tax rebate – is the money that you get back from HMRC if you previously have paid too much in tax or have paid expenses related directly to your job, such as uniform purchases or travel costs.

UTR
UTR stands for Unique Taxpayer Reference. It’s a 10 digit number that is unique to either you or your company. It is how HMRC identifies you and ensures all of your tax affairs are in order

Letters and forms
Coding notice
This is a letter from HMRC that tells you what your tax code is and how it has been worked out. It’s important you check this carefully and ensure it is right otherwise you might end up paying too much or too little tax.

Form 64-8
If you’re using a third-party to handle all of your tax issues, you must let HMRC know by filling in Form 64-8 – also known as the ‘authorising your agent’ form.

P45
A form that your employer gives you when you leave a job. It states how much you have earned with them and how much tax you have paid.

P11D
A form that’s sometimes called an Expenses and Benefits form. It lists any taxable benefits you receive from your employer such as medical cover or a company car.

P60
Similar to a P45, except2 your employer will give you a P60 at the end of every year rather than when you leave a job.

SA1
A form that registers you for self assessment tax returns and thus provides you with a UTR. Used by people who are not self employed but need to register for other reasons.

SA302
A letter from HMRC letting you know if you have overpaid or underpaid tax.

Types of tax
CGT
Capital Gains Tax – a tax charged on the profit you get from selling an asset or investment that has increased in value, eg a house.

Class 2 and Class 4 contributions
Two types of National Insurance contribution paid by self-employed people in fixed weekly amounts. Instalment sizes depend on income.

IHT
Inheritance Tax – tax on the estate someone leaves behind when they die. Applies to estates worth more than £325,000 with up to 40% charged on the amount above that. Can be avoided if everything is left to a spouse or civil partner.

Pensions and Benefits
CIS
Construction Industry Scheme – a tax scheme that regulates payments to subcontractors in the Construction Industry.

ESA
Employment Support Allowance – a benefit paid if you are unable to work due to illness.

JSA
Jobseeker’s Allowance – a benefit paid by the Department of Work and Pensions if you are unemployed but are able to work and actively seeking employment.

Lifetime allowance
The maximum amount of pension savings you can build up over your lifetime without facing a potential tax charge.

Pensions annual allowance
The amount you can contribute to your pension in a tax year while still benefiting from tax relief.

Pensions tax relief
This is a top up you can get from the government when you pay into a pension

WRA
Working Rule Agreement – the largest industrial agreement with the construction industry. It sets out minimum pay rates, travel expenses and death and accident benefits for industry workers.

CEO of RIFT Tax Refunds, Bradley Post, commented:

“Dealing with HMRC and tax related issues can be a mind melting endeavour at times and it’s a complex world that many of us are expected to navigate and understand, without ever receiving even the most basic level of teaching.

That’s why lots of people choose to trust their tax affairs to trained professionals, but even then a certain degree of input can be required and the various industry terms, forms and jargon can make it difficult to keep up.

A little knowledge can go a long way and so hopefully this guide can help arm those in need so that they can better negotiate their tax activities without too much of a headache.”

Information sourced from RIFT Tax Refunds
Additional information sourced from LITRG, SJP, and TRS.