Cheat Sheet
Your handy guide to tax terminology.
What is Tax?
Money you pay to the Government based on your income. It funds public services like the NHS, education, and infrastructure.
HMRC
Her Majesty's Revenue & Customs. The UK Government department handling all taxes.
Tax Year
Runs 6th April to 5th April the following year. The period HMRC uses to measure tax.
Personal Allowance
Amount you can earn tax-free. For 2026/27, it's £12,570.
Employed vs Self-Employed
Employed: work for one person/company, regular pay, tax deducted automatically. Self-employed: run your own business, manage your own taxes, file a tax return.
Tax Rebate
A refund when you've paid more tax than you owe. Common if you do employed/P.A.Y.E work and don't earn over the Personal Allowance.
P60/P45
Payslip summaries for employed work. P60 if you stay employed, P45 if you leave employment.
Business Expenses
Money you spend running your business (equipment, software, travel, training). You can deduct these from your income to reduce your tax bill.
Tax Return
Form to fill in with your income and expenses for the tax year. For the 2026/27 tax year, file by 31st January 2028. Self-Assessment deadline.
Making Tax Digital (MTD)
HMRC's system for keeping records and sending tax information digitally. If you earn over the VAT threshold, you must use MTD software to file your Self-Assessment.
Self-Employed Responsibilities
Keep records of all income and expenses, register with HMRC, file a tax return by January 31st, pay tax bills on time, and keep evidence for 5 years.
National Insurance
Contributions that build your state pension and provide benefits like maternity leave. Self-employed pay Class 2 and Class 4 contributions; employed pay Class 1.
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