Tax and pay glossary

Plain-English meanings of the tax and pay terms used on this site. Figures are for the 2026/27 tax year and were checked against GOV.UK on 12 October 2026. You can see every rate in one place on our UK tax rates page.

A

Adjusted net income

Your total taxable income for the year, minus certain things such as pension contributions paid under relief at source (grossed up) and Gift Aid donations. HMRC uses it to decide whether your Personal Allowance is reduced and whether you pay the Child Benefit charge.

Try it: Child Benefit tax calculator

Allowance taper

Once your adjusted net income goes over £100,000, your Personal Allowance goes down by £1 for every £2 above that. It reaches zero at £125,140 in 2026/27. This creates an effective tax rate of 60% on income between £100,000 and £125,140.

Try it: income tax calculator

Average weekly earnings (AWE)

Your average gross pay per week, worked out over a set period before your sick leave or maternity leave starts. It decides how much Statutory Sick Pay or Statutory Maternity Pay you get. For SMP in 2026/27, your AWE must be at least £129 a week.

Try it: maternity pay calculator

B

Benefit in kind (BIK)

A perk from your employer that is not paid as cash, such as a company car or private medical insurance. It is taxed as if it were extra income. For a zero-emission company car, the taxable value is 4% of its list price in 2026/27.

Try it: salary sacrifice car calculator

C

Child Benefit charge (High Income Child Benefit Charge)

A tax charge that claws back Child Benefit if you or your partner has adjusted net income over £60,000. It is 1% of the Child Benefit for every £200 over £60,000, so at £80,000 it equals all the Child Benefit.

Try it: Child Benefit tax calculator

Class 4 National Insurance

The National Insurance self-employed people pay on their profits, through Self Assessment. In 2026/27 it is 6% on profits from £12,570 to £50,270 and 2% above £50,270.

Try it: self-employed tax calculator

CPI inflation

The Consumer Prices Index (CPI) measures how much the prices of everyday goods and services change over time. The Office for National Statistics (ONS) publishes it each month. When people talk about the inflation rate, they usually mean the CPI annual rate.

Try it: inflation calculator

D

Dividend allowance

The amount of dividend income you can get each year without paying tax on it: £500 in 2026/27. Dividends above that are taxed at 10.75% (basic rate), 35.75% (higher rate) or 39.35% (additional rate).

Try it: dividend tax calculator

E

Effective tax rate

The share of your whole gross pay that goes on tax and National Insurance. For example, on £35,000 in England in 2026/27 you pay £4,486 income tax and £1,794.40 National Insurance, which is about 17.9% of your pay. It is always lower than your marginal rate.

Try it: salary calculator

Emergency tax code

A temporary tax code used when your employer does not have the right details for you, for example when you start a new job. It ends in W1, M1 or X (or shows as NONCUM). Tax is worked out on each payslip on its own, not on your pay so far in the year, so you may pay too much for a while.

Try it: tax code checker

Employer National Insurance

National Insurance your employer pays on top of your salary. It does not come out of your pay. In 2026/27 it is 15% on earnings above £5,000 a year.

Try it: National Insurance calculator

G

Gross pay

Your pay before anything is taken off, such as income tax, National Insurance, pension contributions or student loan repayments. The salary in a job advert is usually gross pay.

Try it: salary calculator

L

Loan to value (LTV)

The size of your mortgage as a percentage of the property's value. For example, a £180,000 mortgage on a £200,000 home is 90% LTV. A lower LTV (a bigger deposit) usually gets you a better mortgage rate.

Try it: mortgage affordability calculator

Lower earnings limit (LEL)

The level of earnings at which you start building your National Insurance record: £6,708 a year (£129 a week) in 2026/27. You do not pay employee National Insurance until you earn more than £12,570, but earning above the LEL still counts towards your State Pension. To get Statutory Maternity Pay, your average weekly earnings must be at least £129.

Try it: maternity pay calculator

M

Marginal tax rate

The rate of tax and National Insurance you pay on your next £1 of pay. In 2026/27, a basic rate taxpayer in England pays 20% income tax plus 8% National Insurance, so 28%. Between £100,000 and £125,140 the income tax rate is effectively 60% because of the allowance taper.

Try it: tax band calculator

Marriage Allowance

Lets a lower earner transfer £1,260 of their Personal Allowance to their husband, wife or civil partner, cutting the couple's tax by up to £252 a year. The lower earner must earn less than the Personal Allowance and the higher earner must pay tax at the basic rate. Unmarried couples cannot claim it.

Try it: Marriage Allowance calculator

N

National Insurance

A tax on earnings that builds your entitlement to the State Pension and some benefits. Employees pay Class 1 National Insurance: in 2026/27 that is 8% on earnings from £12,570 to £50,270 a year and 2% above £50,270.

Try it: National Insurance calculator

Net pay

Your pay after deductions such as income tax, National Insurance, pension contributions and student loan repayments. It is the amount paid into your bank account, also called take-home pay.

Try it: take home pay calculator

Net pay arrangement

A way of paying into a workplace pension where your employer takes the contribution from your pay before income tax is worked out. You get tax relief straight away at your highest rate. You still pay National Insurance on the amount, unlike with salary sacrifice.

Try it: pension calculator

P

PAYE (Pay As You Earn)

The system employers use to take income tax and National Insurance from your pay before you receive it, and pass it to HMRC. Your tax code tells your employer how much to take.

Try it: take home pay calculator

Payments on account

Advance payments towards next year's tax bill for people in Self Assessment. There are two, each half of last year's bill (income tax plus Class 4 National Insurance), due on 31 January and 31 July. You do not need to make them if last year's bill was under £1,000, or if more than 80% of your tax was already taken at source, for example through PAYE.

Try it: self-employed tax calculator

Personal Allowance

The amount of income you can have each year before you pay income tax: £12,570 in 2026/27. It goes down if your income is over £100,000 (see allowance taper). Blind Person's Allowance adds £3,250 if you qualify.

Try it: income tax calculator

Pro rata

In proportion. A pro-rata salary is the full-time salary scaled down to the hours or days you work. For example, a £30,000 full-time salary worked 3 days out of 5 is £18,000 pro rata.

Try it: pro-rata salary calculator

R

Real terms

A figure adjusted for inflation, so it shows what money can actually buy. If your pay rises by 3% but prices rise by 4%, your pay has fallen in real terms.

Try it: pay rise calculator

Relief at source

A way of paying into a pension where you pay from your pay after tax, and your pension provider adds basic rate tax relief of 20%. If you pay higher rate tax, you can claim the extra relief from HMRC, for example through Self Assessment.

Try it: pension calculator

S

Salary sacrifice

An agreement to give up part of your salary in return for a benefit from your employer, such as extra pension contributions or an electric car. Because your salary is lower, you usually pay less income tax and National Insurance.

Try it: salary sacrifice car calculator

Self Assessment

The system for reporting income that has not already been taxed through PAYE, such as self-employed profits or large amounts of savings income. You fill in a tax return each year and pay any tax owed to HMRC.

Try it: self-employed tax calculator

Stamp Duty (SDLT)

Stamp Duty Land Tax is a tax on buying property or land in England and Northern Ireland. It is charged in slices of the price: for a main home, 0% up to £125,000, then 2%, 5%, 10% and 12% on higher slices. First-time buyers pay nothing up to £300,000. Scotland and Wales have their own property taxes.

Try it: stamp duty calculator

Student loan plans

The type of student loan you have decides when you start repaying. In 2026/27 you repay 9% of income above £26,900 (Plan 1), £29,385 (Plan 2), £33,795 (Plan 4) or £25,000 (Plan 5), and 6% above £21,000 for a postgraduate loan.

Try it: student loan calculator

T

Take-home pay

What you actually receive after income tax, National Insurance and any other deductions. For example, on a £35,000 salary in England in 2026/27, with no pension or student loan, take-home pay is £28,719.60 a year.

Try it: take home pay calculator

Tax bands

The slices of income that are taxed at different rates. In England, Wales and Northern Ireland in 2026/27, the first £37,700 of taxable income is taxed at 20%, the next slice up to £125,140 at 40%, and anything above at 45%. Scotland has six bands.

Try it: tax band calculator

Tax code

A code HMRC gives your employer so they take the right amount of income tax. The standard code for 2026/27 is 1257L: the number is your tax-free allowance divided by 10, and L means you get the standard Personal Allowance. Other letters mean something different, for example S for Scottish rates.

Try it: tax code checker

Tax year

The UK tax year runs from 6 April to 5 April. The 2026/27 tax year runs from 6 April 2026 to 5 April 2027. Allowances and rates usually change at the start of each tax year.

Taxable income

The part of your income that income tax is charged on, after your Personal Allowance and any deductions taken before tax. For example, on a £35,000 salary with the standard allowance, taxable income is £22,430.

Try it: income tax calculator

Trading allowance

Lets you earn up to £1,000 a year from self-employment or casual work without paying tax on it. If you use it, you cannot also deduct your business expenses.

Try it: self-employed tax calculator