Tax refund jargon buster

Tax terminology has a reputation for being complicated, but it’s easy to digest once you speak the language. Start off by using our tax refund jargon buster, designed to remove the stress of your annual tax return.

Tax refund jargon buster

Don’t let tax terminology get the better of you. A simple understanding of tax terms can remove the stress of your annual tax return. Photo credit: Isengardt via photopin ccphoto credit: Isengardt via photopin cc

  • Allowances: Tax-free amounts set by the government each year. Nearly everyone who lives and works in the UK is entitled to an Income Tax Personal Allowance, which is essentially the amount of income you may receive each year without having to pay tax on it.
  • Basic Rate Tax: The standard percentage of tax that you pay. This is currently 20%, meaning you pay 20p for every taxable £1 you earn at the basic rate.
  • Benefits: The term for anything your employer gives you other than your salary – this can include a company car, medical or dental insurance and accommodation.
  • Deductions: Items deducted off your earnings to get to your taxable income – they reduce your tax payable and increase any refund due to you.
  • Gross income: The salary you earn before any tax is deducted.
  • National Insurance (NI) number: Issued to anyone who is legally allowed to work in the UK. Yours is a unique number and can be found on your payslips, tax returns and other relevant tax documents.
  • PAYE: A system for paying income tax and national insurance contributions, whereby your employer deducts these contributions from your salary before paying you.
  • P45: A form showing your taxable pay and tax paid from the start of the tax year up to your leaving date. It is issued by your employer when you leave a job.
  • P60: This form is issued by your employer just after the end of the tax year and shows taxable pay and tax deducted, the tax code operated on, details of national insurance contributions paid, and any relevant deductions.
  • Self Assessment tax return: Issued by the Tax Office to all individuals who have to report their income and pay tax. Those who are self-employed must fill and file a Self Assessment tax return by 31 January following the end of the tax year.
  • Tax refund: Payments from HMRC to someone who has paid too much tax in any particular year. They used to be called tax rebates. A tax refund is a repayment of tax that you have overpaid during the tax year, as determined by HM Revenue & Customs (HMRC).
  • Tax year: Also known as the financial year or the year of assessment, the tax year runs from April 6 until April 5 the following year. So the 2012/2013 tax year was 6 April 2012 to 5 April 2013.
  • Unique Tax Reference: All those registered as self-employed are issued with a Unique Tax Reference (UTR). The format is 10 numbers in two groups of five (e.g. 12345 67890) and can be found on your tax return and most other correspondence from HMRC.

Not yet applied for your tax refund? You could be due a bundle. Visit 1st Contact Tax Refunds for your free assessment.

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