Navigating the UK tax system can feel like deciphering a foreign language. 

That's why we've put together this ultimate tax jargon buster for 2025. Whether you're a small business owner, a self-employed professional, or simply trying to understand your tax obligations, this guide will break down the most important tax terms in plain English. 

If you're looking for expert guidance, Curve Accountancy, accountants in Crawley are here to help.

Income and Business Taxes

Income Tax

A tax on an individual’s earnings. For 2024-25, the personal allowance remains at £12,570. 

The basic rate (20%) applies to income between £12,571-£50,270, the higher rate (40%) from £50,271-£125,140, and the additional rate (45%) above £125,140.

Corporation Tax

A tax on company profits. From April 2023, the main rate is 25% for profits over £250,000, while small businesses with profits under £50,000 pay a reduced 19% small profits rate. 

Companies with profits between £50,000 and £250,000 may qualify for marginal relief.

National Insurance Contributions (NICs)

A tax on earnings paid by employees and employers. From April 2024, self-employed individuals no longer pay Class 2 NICs but can make voluntary contributions. 

Class 4 NICs remain mandatory for profits over £12,750.

Value Added Tax (VAT)

A tax on goods and services. The standard rate is 20%, with reduced rates of 5% and 0% for specific items. Businesses must register for VAT when their taxable turnover exceeds £90,000.

Pay As You Earn (PAYE)

A system where employers deduct income tax and NICs from wages before paying employees.

Self-Assessment

A system used by self-employed individuals and some employees to report income and calculate their tax liability.

Making Tax Digital (MTD)

HMRC’s initiative to digitise tax administration. From April 2026, businesses and landlords earning over £50,000 annually must comply with MTD for Income Tax Self-Assessment.

Deductions and Reliefs

Annual Investment Allowance (AIA)

A tax relief allowing businesses to deduct up to £1,000,000 of qualifying equipment purchases from taxable profits.

Capital Allowances

Tax relief for businesses on capital expenditure, such as equipment, machinery, and vehicles.

Research and Development (R&D) Tax Credits

A tax incentive for businesses investing in innovation, allowing SMEs to claim up to 33% of qualifying R&D costs.

Patent Box

A scheme allowing companies to apply a lower 10% Corporation Tax rate on profits from patented inventions.

Trading Allowance

A tax-free allowance of £1,000 for individuals earning from trading or miscellaneous income.

Investment and Capital Gains

Capital Gains Tax (CGT)

A tax on profits from selling assets. For 2024-25, the annual exempt amount is £6,000. 

Basic rate taxpayers pay 10% (18% for residential property), while higher and additional rate taxpayers pay 20% (28% for residential property).

Entrepreneurs’ Relief (Business Asset Disposal Relief - BADR)

A reduced 10% CGT rate on business sales up to a lifetime limit of £1 million.

Enterprise Investment Scheme (EIS) & Seed Enterprise Investment Scheme (SEIS)

Tax reliefs encouraging investment in small businesses. EIS offers 30% tax relief on investments up to £1 million per year, while SEIS offers 50% tax relief on investments up to £200,000.

Employment and Payroll Taxes

IR35 (Off-Payroll Working Rules)

Legislation to combat tax avoidance by contractors working through an intermediary, like a limited company.

Apprenticeship Levy

A tax on employers with a pay bill over £3 million, used to fund apprenticeship training.

Property and Estate Taxes

Stamp Duty Land Tax (SDLT)

A tax on property purchases in England and Northern Ireland.

Annual Tax on Enveloped Dwellings (ATED)

A tax on companies owning UK residential property valued above £500,000.

Inheritance Tax (IHT)

A tax on estates after death. The nil-rate band is £325,000, with an additional £175,000 residence nil-rate band for homes passed to direct descendants.

Industry-Specific Taxes

Construction Industry Scheme (CIS)

Contractors must deduct tax from subcontractor payments and pass it to HMRC.

Plastic Packaging Tax

A tax on plastic packaging that contains less than 30% recycled content.

Environmental and Other Taxes

Climate Change Levy

A tax on business energy use to encourage efficiency.

Landfill Tax

A tax on waste disposal to landfill sites.

Vehicle Excise Duty

An annual tax on vehicle ownership.

Air Passenger Duty

A tax on air travel.

Final Thoughts

Whether you're a business owner, investor, or employee, being familiar with these terms can help you manage your tax obligations more effectively. 

If you need professional support, Curve Accountancy’s experienced accountants in Crawley are here to guide you through the complexities of the UK tax system.

Need help with your taxes? Contact Curve Accountancy today for expert tax advice tailored to your needs!