Glossary

The words HMRC uses, in plain English

Every term below comes up on the phone every day. If a letter from HMRC uses a word that is not here, tell us and we will add it.

Adjusted net income: Your total taxable income minus the gross value of any personal pension contributions and Gift Aid donations. HMRC uses it to work out the High Income Child Benefit Charge and whether your Personal Allowance is reduced.
Balancing payment: The amount left to pay on 31 January after any payments on account have been taken off your bill for the year.
Basic, higher and additional rate: The three main income tax rates in England, Wales and Northern Ireland: 20%, 40% and 45%. Which one you pay depends on how much taxable income you have above your Personal Allowance. Scotland has its own rates.Income Tax rates (GOV.UK)
Coding notice (P2): The letter HMRC sends when your tax code changes. It lists everything added to and taken away from your Personal Allowance to arrive at your code.
Government Gateway: The login system for HMRC online services. Your user ID is 12 digits. You need one to register for Self Assessment, file a return, or use your Personal Tax Account.HMRC online services (GOV.UK)
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 is 1% of the Child Benefit for every £200 over the threshold, so all of it is repaid at £80,000.High Income Child Benefit Charge (GOV.UK)
K code: A tax code starting with K, used when the deductions in your code are bigger than your allowances. Instead of tax-free pay, an amount is added to your income before tax is worked out. Common when a State Pension is larger than the Personal Allowance.
Making Tax Digital (MTD): HMRC’s programme for keeping records digitally and sending quarterly updates through software. It applies to Income Tax from April 2026 for self-employed people and landlords with income over £50,000, with lower thresholds following.Making Tax Digital for Income Tax (GOV.UK)
Net pay arrangement: A workplace pension where contributions are taken from your salary before tax. You get full tax relief automatically and should not claim any more.
Notice to file: A letter or email from HMRC telling you to send a tax return for a particular year. If you receive one you must file, even if you think you have nothing to declare, unless HMRC agrees to withdraw it.
P45: The form you get when you leave a job, showing your pay and tax so far in the tax year. Give parts 2 and 3 to your new employer.
P60: The end-of-year certificate from each employer or pension provider, issued by 31 May, showing your total pay and the tax deducted for the tax year.
P87: The form for claiming tax relief on work expenses if you do not file a tax return and your claim is under £2,500 a year.Claim tax relief for job expenses (GOV.UK)
PAYE (Pay As You Earn): The system where your employer or pension provider takes tax off before paying you, using your tax code. Most employees never need to do anything else.
Payments on account: Advance payments towards next year’s tax bill, due on 31 January and 31 July, each half of this year’s bill. They apply when your bill is over £1,000 and less than 80% of it was collected at source.Payments on account (GOV.UK)
Personal Allowance: The amount of income you can have each year before paying income tax: £12,570. It shrinks by £1 for every £2 of adjusted net income over £100,000 and is gone at £125,140.
Personal Savings Allowance: Savings interest you can receive tax-free: £1,000 for basic rate taxpayers, £500 for higher rate, nothing for additional rate.
Personal Tax Account: HMRC’s online account for individuals. You can check your tax code, see what HMRC thinks you earn, tell them about changes, and claim refunds.Personal Tax Account (GOV.UK)
Relief at source: A personal pension arrangement where you pay contributions from taxed income and the provider adds 20% basic rate relief. Higher and additional rate taxpayers must claim the rest from HMRC themselves.
SA100, SA102, SA103, SA105: The names of the paper tax return forms. SA100 is the main return; SA102 is the employment page; SA103 the self-employment pages; SA105 the UK property pages. The online return uses the same sections.
SA302: Your tax calculation for a year, produced after you file. Mortgage lenders often ask for it as proof of income.
Self Assessment: The system for reporting income HMRC cannot tax through PAYE. You fill in a tax return once a year, HMRC works out the bill, and you pay it by 31 January.Self Assessment tax returns (GOV.UK)
Simple Assessment: A letter from HMRC with a tax calculation for people who owe tax but do not need a full return, most often pensioners whose State Pension is more than their Personal Allowance.Simple Assessment (GOV.UK)
Tax code: The letters and numbers your employer or pension provider uses to work out how much tax to take off. The number is usually your tax-free amount divided by 10; the letter explains your situation. 1257L is the standard code.Tax codes (GOV.UK)
Tax year: Runs from 6 April to 5 April. The 2025/26 tax year is 6 April 2025 to 5 April 2026, and its online return is due by 31 January 2027.
UTR (Unique Taxpayer Reference): Your 10-digit Self Assessment reference, posted to you when you register. It never changes. You need it to file, and HMRC will ask for it whenever you ring about Self Assessment.