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Glossary

UK Tax and Pay Glossary

Short, plain-English definitions of the terms that come up again and again across the calculators and guides. Each one links to the tool where it matters most.

Last updated: 30 August 2026

Terms

Personal Allowance
The amount of income you can receive each tax year before paying any Income Tax. It is £12,570 for 2026/27 for most people, given through your tax code and used against your income from the bottom up. Open the calculator.
Personal Allowance taper
The reduction of the Personal Allowance for higher earners: you lose £1 of allowance for every £2 of adjusted net income above £100,000, so it is gone entirely by £125,140. This creates an effective 60% marginal Income Tax rate between those two figures. Open the calculator.
Adjusted net income
Your total taxable income minus certain reliefs, mainly pension contributions paid from net pay (grossed up) and Gift Aid donations (grossed up). HMRC uses it to decide whether the Personal Allowance taper and the High Income Child Benefit Charge apply, not your salary. Open the calculator.
High Income Child Benefit Charge (HICBC)
A tax charge that claws back Child Benefit when the higher earner in a household has adjusted net income over £60,000. It rises gradually and cancels the benefit out entirely once income reaches £80,000. Open the calculator.
Dividend Allowance
The first £500 of dividend income each tax year, taxed at 0%. Unlike the Personal Allowance it still uses up room in your Income Tax bands, so it can push later dividends into a higher band. Open the calculator.
Annual Allowance (pensions)
The yearly limit on pension contributions that get tax relief, from you, your employer and anyone else combined. It is £60,000 for most people in 2026/27, tapering down for very high earners and reduced to the Money Purchase Annual Allowance once you flexibly access a pension. Open the calculator.
Money Purchase Annual Allowance (MPAA)
A reduced pension Annual Allowance of £10,000 that applies once you have flexibly accessed a defined contribution pension, for example by taking taxable income from drawdown. It stops you recycling withdrawn money back into a pension for extra relief. Open the calculator.
Optional Remuneration Arrangement (OpRA)
The rules, in force since 2017, that tax most salary-sacrificed benefits on the higher of the cash given up or the benefit's taxable value. Pension contributions, childcare, the Cycle to Work scheme and ultra-low-emission cars are the main exceptions that keep their full tax advantage. Open the calculator.
Marginal Relief (Corporation Tax)
A taper that smooths the jump between the 19% Small Profits Rate and the 25% Main Rate of Corporation Tax. Company profits between £50,000 and £250,000 are charged at the Main Rate less Marginal Relief, giving an effective rate that rises gradually across the band. Open the calculator.
Personal Savings Allowance
The amount of savings interest you can receive tax-free each year: £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers and £0 for additional-rate taxpayers. It is separate from the Dividend Allowance and the Personal Allowance.
Trading Allowance
A £1,000 tax-free allowance for casual or self-employed trading income. If your income from self-employment is £1,000 or less you usually do not need to report it; above that you can deduct £1,000 instead of your actual expenses. Open the calculator.
Student loan Plans 1, 2, 4 and 5
The repayment plans for UK undergraduate loans. Which one applies depends on where and when you studied, not where you live now. Each has its own income threshold above which you repay 9%; a Postgraduate Loan is a separate 6% deduction above a lower threshold. Open the calculator.
Class 2 and Class 4 National Insurance
The National Insurance the self-employed pay. Class 4 is 6% of profit between £12,570 and £50,270 and 2% above. Compulsory Class 2 ended in April 2024; you now get a qualifying year for the State Pension for free once profit passes a small threshold. Open the calculator.
Marginal rate
The rate of tax (and often National Insurance) you pay on your next pound of income, as opposed to the average rate across all of it. Thresholds such as £50,270, £100,000 and £125,140 are where the marginal rate jumps.
Emergency tax code
A temporary tax code (such as 1257L W1/M1, or BR/0T) used when HMRC does not yet have full details of your income, for example on a first pension withdrawal or a new job. It often over-taxes you at first; the difference is reconciled later or reclaimed. Open the calculator.