Glossary
Accounting jargon, in plain English.
Understand the words behind your accounts — and why they matter. You don’t need to speak accountant to have a useful conversation with yours.
29 terms explained
Ask about your situationA
- Accruals
- Amounts included in accounts for income earned or costs incurred, even though the money has not yet been received or paid. This connects the figures to the period they relate to.
- Allowable expenses
- Costs incurred wholly and exclusively for your business, which can be deducted from income to reduce taxable profit.
B
- Bank reconciliation
- Matching the transactions in your bookkeeping to the bank statement, then checking and explaining differences. A bank feed imports transactions; reconciliation checks they have been accounted for.
- Bookkeeping
- Recording and organising sales, purchases, receipts and payments. It provides the underlying records for accounts and tax returns.
C
- Capital allowances
- Tax relief on items you keep and use in the business, such as equipment, vans and machinery.
- Capital Gains Tax
- Tax on the profit when you sell or dispose of an asset that has increased in value, such as shares or a second property.
- Cash flow
- Money coming into and going out of a business. A profitable business can still run short of cash if customers pay late or large bills fall together.
- CIS (Construction Industry Scheme)
- A scheme where contractors deduct tax from subcontractors' payments and pass it to HMRC. Subcontractors can often reclaim some of it.
- Confirmation statement
- An annual filing to Companies House confirming your company's details are correct, such as directors, shareholders and address.
- Corporation Tax
- Tax paid by a limited company on its profits.
D
- Director's loan account
- A record of money a director takes from, or lends to, their company that isn't salary, dividends or expenses.
- Dividends
- Payments to shareholders from a company's profits after Corporation Tax.
- Dormant company
- A company that isn't trading and has no significant transactions in its accounts.
M
- Making Tax Digital (MTD)
- HMRC's digital record-keeping programme. VAT returns use compatible software; qualifying sole traders and landlords also send quarterly Income Tax updates and complete an annual return. The rules differ between VAT and Income Tax.
- Management accounts
- Reports prepared during the year to help you understand trading performance and financial position. They support decisions rather than replace statutory year-end accounts.
P
- PAYE
- Pay As You Earn. The system employers use to deduct Income Tax and National Insurance from wages.
- Payments on account
- Advance payments towards your next tax bill, usually due on 31 January and 31 July, each half of the previous year's bill.
- Personal allowance
- The amount of income you can receive each year before paying Income Tax.
- Profit and loss
- A report showing income and costs over a period, with the resulting profit or loss. Profit is not necessarily the same as money available in the bank.
R
- RTI (Real Time Information)
- Employers report payroll details to HMRC each time staff are paid.
S
- Self Assessment
- The system HMRC uses to collect Income Tax from people whose tax isn't deducted automatically, through an annual tax return.
- Software management
- Support with the accounting software you already use, such as users, permissions and bank feeds. It is different from supplying a software subscription or doing the bookkeeping.
- Statutory accounts
- The annual accounts a limited company must prepare and file with Companies House.
T
- Tax code
- A code used by employers and pension providers to work out how much tax to deduct from your pay.
- Trading allowance
- £1,000 of tax-free trading income each tax year. Above this, you normally need to register and file.
U
- UTR (Unique Taxpayer Reference)
- A 10-digit number HMRC gives you when you register for Self Assessment or set up a company.
V
- VAT
- Value Added Tax, charged on most goods and services. Businesses must register once taxable turnover exceeds £90,000.
- Virtual CFO
- Senior financial support without employing a full-time chief financial officer. The scope can include management reporting, cash-flow conversations and insight for business decisions, agreed around your needs.
Y
- Year end
- The last day of your accounting period. For a company, it's set when it is incorporated and can be changed.
These are general explanations, not advice for your circumstances. Check the relevant tax-year rules with GOV.UK or discuss your position with an accountant.
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