The plain-English tax glossary
Allowable expense
A business cost HMRC lets you deduct from income before tax is worked out: materials, tools, business travel, insurance, phone, software, professional fees and so on.
Balancing payment
The difference between what you actually owe for a tax year and the payments on account you already made towards it.
Bridging software
Software that takes digital records kept somewhere else, like a spreadsheet or an export from another app, and submits them to HMRC's Making Tax Digital system.
Business entertainment
Hospitality for clients, suppliers or customers: meals, drinks, events.
Cash basis
The standard way sole traders record income and expenses: money counts when it's received or paid, not when it's invoiced.
CIS
The Construction Industry Scheme.
CIS deduction rates
20% for registered subcontractors, 30% for unregistered, 0% with gross payment status.
Class 2 National Insurance
Most self-employed people no longer pay Class 2.
Class 4 National Insurance
The National Insurance the self-employed pay on profits, through Self Assessment.
Digital record
Under Making Tax Digital, the record you must keep for each business transaction, in software: the amount, the date, and the category it belongs to.
Disallowable expense
A cost that can't be deducted, however business-adjacent it feels.
Gross payment status
A CIS status for subcontractors who meet HMRC's conditions: contractors pay you in full, with no deduction, and you settle all tax and National Insurance yourself at Self Assessment..
HMRC-recognised software
Software that has passed HMRC's recognition process and can connect to the Making Tax Digital system to submit updates.
Income Tax bands
For 2026-27 in England, Wales and Northern Ireland, after the £12,570 Personal Allowance: basic rate 20% to £50,270, higher rate 40% to £125,140, additional rate 45% above that.
Making Tax Digital for Income Tax
HMRC's new way for sole traders and landlords to keep records and report income: business records kept digitally, and a summary update sent to HMRC every quarter.
Mileage flat rate
HMRC's per-mile alternative to claiming actual vehicle costs.
Payments on account
Advance instalments towards next year's tax bill: two payments, each half of this year's bill, due 31 January and 31 July.
Penalty points (MTD)
HMRC's late-submission system under Making Tax Digital: a point for each missed quarterly update or tax return deadline, and at four points a £200 penalty.
Personal Allowance
The income you can earn before Income Tax starts: £12,570 for 2026-27.
Qualifying income
Your gross income from self-employment and property added together, before any expenses come off.
Quarterly update
The summary your software sends HMRC four times a year under Making Tax Digital: totals for each income and expense category.
SA303
The form (online or post) for reducing your payments on account when you expect to earn less.
Scottish Income Tax
If you live in Scotland, Scottish rates apply to your trading profit.
Self Assessment
The system for reporting and paying tax on self-employed income: an annual tax return, due by 31 January after the tax year ends, with the tax paid the same day.
Simplified expenses
HMRC flat rates you can use instead of working out actual costs, in two places: vehicles (a rate per business mile) and working from home (a monthly flat rate by hours).
Tax year
The UK tax year runs 6 April to 5 April.
Trading allowance
The first £1,000 of self-employment income in a tax year is tax-free under the trading allowance.
Turnover
Your total business income before any expenses come off.
Use-of-home flat rate
HMRC's monthly flat rate for working from home, available at 25 or more hours a month: £10 for 25 to 50 hours, £18 for 51 to 100, £26 for 101 or more (2026-27).
UTR
Your Unique Taxpayer Reference: the 10-digit number HMRC sends when you register for Self Assessment.
VAT registration threshold
VAT registration becomes compulsory when taxable turnover passes £90,000.
Every claim, caught automatically
Snap the receipt and SoleTax files it under the right HMRC category, flags what isn't claimable, and keeps the tax number running. 14 days free, no card needed.
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