UK tax glossary
Plain-English definitions of the UK tax terms used in SaveYourPay, with HMRC source links.
Annual Allowance (£60,000)
The maximum total pension contributions (employee + employer + tax relief) you can have in a tax year without an excess charge. £60,000 since 2023-24. Applies across all pension schemes you contribute to.
HMRC reference →Tapered Annual Allowance
If your threshold income is over £200,000 AND adjusted income over £260,000, the £60k annual allowance reduces by £1 for every £2 of adjusted income over £260,000, down to a £10,000 floor at adjusted income £360,000.
HMRC reference →Pension carry-forward
Unused annual allowance from the previous 3 tax years can be added to this year's £60k cap. You must have been a member of a UK registered pension scheme in those years and use this year's allowance fully first. Tapered allowances carry forward at the reduced amount.
HMRC reference →Personal Allowance taper
Your £12,570 Personal Allowance reduces by £1 for every £2 of adjusted net income over £100,000. Fully gone at £125,140. Creates a punitive ~60% effective marginal rate in the £100k–£125,140 band (40% income tax + 20% from lost PA).
HMRC reference →Adjusted Net Income (ANI)
Your total taxable income — including employment income, BIK, bonuses, rental, dividends — minus reliefs, gross gift aid, and gross relief-at-source pension contributions. Used to determine PA taper, HICBC, and tapered annual allowance gates.
HMRC reference →High Income Child Benefit Charge
If your adjusted net income exceeds £60,000 and you (or your partner) receive Child Benefit, you owe back 1% of the CB for every £200 of ANI over £60,000. Fully clawed back at ANI £80,000. Threshold raised from £50k in April 2024.
HMRC reference →Benefit-in-Kind (BIK)
Non-cash benefits from your employer that are taxable as income — company cars, medical insurance, gym memberships, etc. Taxed at your marginal rate. EVs attract very low BIK rates (3% in 2025-26 → 4% 2026-27 → 7% 2028-29).
HMRC reference →Salary sacrifice
An arrangement where you give up part of your gross salary in exchange for a non-cash benefit (pension contribution, EV, cycle, etc.). Reduces your taxable salary, saving income tax + employee NI. The employer also saves NI (15% above £5k) which they may add to your pension.
HMRC reference →Tax code
How HMRC tells your employer how much tax-free pay to give you. 1257L = standard £12,570 PA. T = individually reviewed (e.g., for taper or BIK). K = negative — additions to taxable pay. BR = flat 20%, D0 = flat 40%, D1 = flat 45%, NT = no tax.
HMRC reference →K tax codes
When deductions (BIK, HICBC, taper) exceed your Personal Allowance, HMRC issues a K-code. The number is the amount ADDED to your taxable pay each year. K1125 means £11,250 added — you're effectively taxed on £11,250 more than you earn.
HMRC reference →Business Asset Disposal Relief (BADR)
Reduced CGT rate when selling shares in a company you've held 5%+ for 2+ years and worked at as officer/employee. Lifetime limit £1m. Rate: 10% (pre-April 2025), 14% (2025-26), 18% (April 2026 onwards). Formerly called Entrepreneurs' Relief.
HMRC reference →EIS — Enterprise Investment Scheme
30% income tax relief on investments in qualifying UK trading companies. Up to £1m/year (£2m knowledge-intensive). Plus CGT deferral on reinvested gains, CGT-free growth on EIS shares held 3+ years, and loss relief if the company fails. High risk — illiquid, ~25-30% failure rate.
HMRC reference →SEIS — Seed Enterprise Investment Scheme
50% income tax relief on investments in earlier-stage UK trading companies (under £350k assets). Up to £200k/year. Plus 50% CGT exemption on reinvested gains (permanent, not deferred), CGT-free growth, and loss relief. Higher risk than EIS — ~30-50% failure rate.
HMRC reference →VCT — Venture Capital Trust
30% income tax relief on investments in HMRC-approved listed VCTs. Up to £200k/year. VCT shares are tax-free for dividends and CGT after 5-year hold. No deferral mechanism. Less risky than direct EIS/SEIS because VCTs hold a portfolio of small companies.
HMRC reference →PAYE — Pay As You Earn
How HMRC collects income tax and NI from employment income via your employer. The tax code determines how much tax-free pay you get each pay period; PAYE deducts the rest. Reconciled annually via SA return or P800.
HMRC reference →