First Call Financials A – Z Jargon Buster

Jargon Buster For Finance and AccountancyFinance is full of jargon! We know because we answer so many queries from our clients about what certain acronyms, words and phrases mean.

To make sure you’re never left confused again, we’ve pulled together an A-Z jargon buster with common accountancy, financial, business and employment terms and their meanings.

AAT – This stands for the ‘Association Of Accounting Technicians’, AAT is a UK based body offering skills-based accountancy and finance qualifications. The association currently has around 133,000 members worldwide.

Annual Return – This is an annual check companies must carry out to ensure that the information held by Companies House about their business is correct – this has been replaced by the ‘Confirmation Statement’ from 5th April 2016.

ATT – ‘The Association Of Taxation Technicians’ ATT provide entry level qualifications for those providing UK tax compliance services. ATT currently has over 8,300 members and Fellows along with over 5,000 students.

Auto Enrolment – Under auto enrolment legislation, employers must automatically enrol their eligible employees to join the workplace pension scheme.

Bookkeeping – Bookkeeping is a broad term used to describe keeping records of a business’s financial transactions or ‘books’. This can be done in-house or outsourced to an accountant.

CGT – ‘Capital Gains Tax’ or CGT is a tax paid on the profit when you sell a possession or asset that has increased in value since being purchased. Read our blog for more information on personal capital gains tax or capital gains tax for the self-employed and sole traders.

CIS – ‘Construction Industry Scheme’ – this is a scheme set up for construction industry subcontractors to deduct a subcontractor’s income tax from their invoices to be paid to HMRC. This scheme tackles tax avoidance within the industry.

Cloud Accounting – Cloud based accounting involves keeping your accounting records in the ‘cloud’ or internet, read our blog to find out the benefits and pitfalls of cloud based accounting.

Confirmation Statement – The confirmation statement replaced the ‘Annual Return’ from 5th April  2016, companies must confirm that all information held by companies house about the business is correct and ensure their PSCs are up to date.

Dividends – A dividend is a sum of money paid regularly to shareholders of a company, this money comes from the companies profits.

Entrepreneurs Relief – Entrepreneurs relief allows eligible individuals to take advantage of a lower rate (10%) of Capital Gains Tax when disposing of or closing down their business.

Flat Rate VAT Scheme – The flat rate VAT scheme is a scheme available for smaller businesses under specific criteria. The current rate of flat rate VAT is 16.5%.

Gig Economy – The gig economy is a term coined for those working for companies such as Deliveroo and Uber that have their staff working on short-term contracts without the same benefits that employees are given.

HMRC – ‘Her Majesty’s Revenue and Customs’ or HMRC are the Government body responsible for collecting taxes.

ICAEW – ‘The institute of Chartered Accountants in England and Wales’ ICAEW is a world leading professional membership organisation providing qualifications and professional development for those working in accountancy and finance. ICAEW supports over 147,000 chartered accountants worldwide.

Income Tax – Income Tax is a tax paid on any income that exceeds your ‘personal allowance’ it is used to provide funding for public services such as the NHS.

Inheritance Tax – Inheritance tax is a tax paid on assets such as land and property that is left in a will when someone dies, the current rate of inheritance tax is 40%.

JSA – ‘Job Seeker’s Allowance’ is an unemployment benefit given to those who are currently unemployed but are actively seeking work.

‘K’ Tax Code – If a tax code begins with a K, it means there is income that isn’t being taxed another way and is worth more than your tax-free allowance.

Legal Structure – There are various different structures under which a business can operate, this includes sole traders, partnerships, limited companies etc. Take a look at our blog on choosing the right legal structure for your business for more advice on each structure.

MTD – ‘Making Tax Digital’ is HMRC’s scheme to have a fully digital tax system by 2020, this will bring a lot of changes to the way individual and business tax is managed. You can find out more about MTD and the time frames currently in place here.

NI – ‘National Insurance’ is paid by the majority of the workforce and builds up your entitlement towards state benefits such as pensions. Read our blog for more information on National Insurance and why you pay it.

NIC – ‘National Insurance Contributions’ as explained above, NIC’s are the rates of National Insurance that you pay – these are split into 4 classes.

NLW – ‘National Living Wage’ This is the minimum rate that employees over 25 must be paid.

NMW – ‘National Minimum Wage’ This is the minimum rate that employees under 25 must be paid. You can find out the current rates of both the NMW and NLW here.

Outsourced Accounting – Outsourced accounting is the process of having a professional accountant (like us!) manage your accounts for you, as opposed to using an internal resource.

P45 – A P45 is a document employers must give their employees upon them leaving the business.

P60 – A P60 is a document employers must give to their employees by 31st May of each year for the previous tax year, detailing the amount of gross pay and tax that has been deducted.

PAYE – ‘Pay As You Earn’ is the name given to the tax system whereby an employees income tax and National Insurance contributions are deducted from their salary before being paid.

PSC – ‘People With Significant Control’ – UK companies are required to identify and record people who own or control their company. Changes must now be notified immediately. You can find out more about the PSC register here.

Quarterly – Quarterly refers to something that must be done 4 times per year, VAT returns and MTD updates must both be done on a quarterly basis.

RTI – ‘Real Time Information’ was introduced in 2013 and means that employers are obliged to report PAYE information to HMRC on a monthly basis digitally.

Self AssessmentSome individuals including the self-employed, will need to submit and pay the tax owed to HMRC for the year, this is done through a self-assessment tax return form.

Self Employed – A self-employed person is someone that works for themselves as opposed to working for a business.

SME’s – ‘Small and Medium Enterprises’ are businesses with fewer than 250 employees, in 2014, 99% of all businesses were SME’s.

Tax Code – Your tax code determines how much tax you pay from your gross pay each pay period, read our guide to understanding your tax code to find out how the codes are made up and what they mean.

Tax-Free Childcare – The tax-free childcare scheme is a government initiative set up for working parents. Eligible parents are able to open a savings account with a registered provider which will then be topped up 20% by the government. You can find out more about the scheme here.

Tax Inspection – A tax inspection from HMRC can be the result of poor record keeping, suspected fraud or tax evasion. Take a look at our guide to tax inspections for help and advice on minimising the possibility of a tax inspection.

UTR – ‘Unique Tax Payer Reference’, this is a 10 digit number given to the self-employed when registering for self-assessment, it also issued when setting up a limited company.

VAT – ‘Value Added Tax’ is a tax paid on almost everything we buy. Businesses will need to register for VAT once their annual taxable turnover exceeds £85,000. Take a look at our guide to VAT for business for more information.

VAT Annual Accounting Scheme – Under this scheme, businesses will only need to submit their VAT returns once a year, as opposed to 4 under the normal VAT scheme.

VAT Cash Accounting Scheme – Under this scheme, businesses are only required to report and pay their VAT on sales and purchase invoices that have been paid.

Worker – ‘Worker’ is a new employment status recognised in the UK and applies to those working in the ‘gig economy’ meaning they are entitled to some of the benefits that regular employees are.

Xmas Party Tax Relief– An annual event such as a Christmas party can qualify as a tax-free benefit providing the total cost per head does not exceed £150 and the event is open to all employees.

Year End – The year end is the closing period of a companies account year – this falls on the anniversary of the end of the month in which the company was incorporated.

Zero Rate – Zero rated means that goods are still VAT-able, but the rate you must charge to customers is 0%. Examples of zero rate goods include books and newspapers and children’s clothing.

Need A Hand?

We hope our jargon buster has helped you with accounting terminology you may have come across whilst managing your business. If you’re looking for an accountant to help manage your accounts, or require any help or advice on the terms mentioned in this post; please don’t hesitate to give one of our friendly team a call on 0117 379 0810.

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Steph Roffey

Steph is a Chartered Accountant with many years’ experience working in audit compliance and general accountancy. She is a Fellow of the ICAEW and has extensive knowledge of accountancy and tax for the self employed.
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