UK Finance & Tax Glossary

Off-payroll working rules introduced by HMRC to prevent contractors from reducing their tax liability by operating through a limited company when they are effectively employees. If a contract falls "inside IR35", the contractor must pay income tax and NI as if employed.

Compulsory contributions made by employees, employers, and the self-employed in the UK. Contributions go towards state benefits including the State Pension, Statutory Sick Pay, and NHS services. The rate depends on your employment status and earnings.

The system HMRC uses to collect income tax and National Insurance directly from employees' wages before they are paid. Employers deduct the correct amount each payday and send it to HMRC, meaning most employees never have to submit a tax return.

The amount of income you can earn each tax year before paying income tax. For 2025/26, the standard Personal Allowance is £12,570. It reduces by £1 for every £2 you earn above £100,000 and is completely withdrawn at £125,140.

The annual tax return process used by HMRC for individuals who earn income outside of PAYE — including the self-employed, company directors, landlords, and high earners. The deadline for online returns is 31 January each year. Penalties apply for late filing.

A consumption tax added to most goods and services sold in the UK. The standard rate is 20%, with a reduced rate of 5% on some items such as home energy and children's car seats. Businesses with a taxable turnover above £90,000 must register for VAT with HMRC.

The level of sales at which a business's total revenue equals its total costs — meaning no profit and no loss. Understanding your break-even point tells you the minimum volume you need to sell before you start making money. It is calculated by dividing fixed costs by the contribution margin per unit.

The percentage of revenue remaining after subtracting the direct cost of goods sold (COGS). For example, if you sell a product for £100 and it costs £60 to make, your gross profit margin is 40%. A higher margin means more money left over to cover operating expenses and generate profit.

The amount added to a product's cost price to arrive at its selling price, expressed as a percentage of cost. If a product costs £50 and you sell it for £75, the markup is 50%. Markup is calculated on cost; margin is calculated on revenue — the two are different and often confused.

The ratio of your mortgage loan compared to the value of the property, expressed as a percentage. A £180,000 mortgage on a £200,000 property is 90% LTV. The lower your LTV, the less risk the lender takes — and typically the better mortgage rate you'll be offered.

A measure of how much income a buy-to-let property generates relative to its purchase price, expressed as a percentage. Gross yield divides annual rent by property value; net yield subtracts costs such as maintenance, letting agent fees, and insurance before dividing.

A tax paid when you purchase residential or commercial property in England and Northern Ireland above a certain threshold. Rates are tiered — you pay different percentages on different portions of the purchase price. First-time buyers and investors in additional properties each have their own rate structure.

A measure of the profitability of an investment relative to its cost, expressed as a percentage. Calculated as (Net Profit ÷ Cost of Investment) × 100. A positive ROI means the investment returned more than it cost; a negative ROI means it made a loss. Widely used in business decisions and marketing.

The number of calories your body needs to perform basic life-sustaining functions at complete rest — breathing, circulation, cell production, and temperature regulation. BMR is the foundation of TDEE calculations and is estimated using formulas such as Mifflin-St Jeor, which takes into account your age, sex, height, and weight.

A screening measure that estimates whether a person's weight is healthy for their height. Calculated as weight in kilograms divided by height in metres squared. The NHS classifies adults into four categories: underweight (below 18.5), healthy weight (18.5–24.9), overweight (25–29.9), and obese (30 and above).

The total number of calories your body burns in a day, including your Basal Metabolic Rate (the calories burned at rest) plus calories burned through activity. Eating at your TDEE maintains weight; eating below it creates a deficit for fat loss; eating above it builds muscle mass when combined with resistance training.