Copy of `Yahoo! Finance UK & Ireland - Tax glossary`

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Yahoo! Finance UK & Ireland - Tax glossary
Category: Economy and Finance > Tax
Date & country: 17/01/2008, UK
Words: 492


Home
The place where you normally reside.

Home office
If you mainly work from home, you may have set aside a room which you normally use as an office.

ICTA
Acronym for the Income and Corporation Taxes Act 1988.

IFA
Acronym for Independent Financial Advisor. You may need to use an IFA to help with your general financial planning along with pension options.

Incapacity benefit
A government benefit paid if you are unable to work due to an accident or illness.

Income
Something you receive from working (past or present), from assets you own such as shares, or a government benefit paid to you.

Income bearing
An income bearing asset is one which gives you an income, such as shares which pay dividends, land which pays rent, and so on.

Income for tax purposes
Income which is liable to tax. Some forms of income are tax free such as winnings from gambling (providing you are not a professional gambler) or the National Lottery.

Income from employment
The earnings you receive from your office (directorships and so on) or employment. It includes salary, commissions as well as benefits provided by your employer (company car and so on).

Income limit
For some reliefs and allowances there is a limit to the amount of the relief or allowance that you can claim which is related to the amount of your taxable income. This applies, for example, if you are aged 65 or over. Your age related allowances will be restricted if your total income exceeded £16,800 in 1999/2000.

Income tax
A tax on the income you receive. For 1999/2000, there are five different rates of income tax (10%, 20%, 23%, 32.5% and 40%) based on how much income you earn and from what source.

independent financial advisor
An independent financial advisor is someone who can give you advice about a wide range of financial products. They must be authorised to give advice, and are regulated by the Personal Investment Authority. They must be distinguished from tied financial advisors, who can only give advice on investment products offered by a specific company.

Independent taxation
Since 6 April 1990, husbands and wives have been taxed separately.

Indexation allowance
An allowance to ensure that you are only taxed on capital gains made after adjusting for the rate of inflation. The indexation allowance has been frozen at 5 April 1998 and replaced by taper relief.

Indexed gain-loss
The profit and loss on the sale of an asset after adjusting for indexation. Since 30 November 1993, it is not possible for indexation to create, or enhance, a loss.

Individual savings account
A tax free investment vehicle available from 6 April 1999 which allows you to invest in stocks and shares and life assurance policies, or to hold cash. It replaces personal equity plans (PEPs) and TESSAs.

Inheritance
Something you receive from a deceased relative or friend. Inheritances are received free of income tax and capital gains tax and should not be entered on your Tax Return.

Inheritance tax
A tax payable on your assets when you die. No inheritance tax is payable if your total assets, including your home, are worth less than £223,000. This figure may change in the March 1999 Budget. If your assets are worth more than £223,000, 40% tax is payable on the excess over £223,000.

Inland Revenue
The government department which controls the collection of income tax, capital gains tax, inheritance tax and so on. From 6 April 1999 the Contributions Agency (which dealt with the collection of national insurance contributions) has become an Inland Revenue department, (the national insurance contributions Office).

Insurance payouts
Something you receive following the maturity of an insurance policy or a claim for theft, fire, or loss of profits and so on due to a catastrophe.

Insurance premiums
Something you pay to cover yourself against a negligence claim, loss of profits due to a catastrophe or damage (or destruction) to your assets.

Interest
Money you pay on a loan or receive if you have cash deposits. Note that personal overdraft interest or credit or charge card interest is not tax deductible.

Interest distribution
Payments by a company or unit trust in the form of interest rather than as a dividend distribution. Your tax voucher will specify the nature of the distribution.

Interest on other qualifying loans
You can receive tax relief on interest paid on certain loans. These include loans for buying shares in a close company, purchasing an interest or introducing capital in a partnership, paying inheritance tax and purchasing machinery or plant.

Intestacy
If a person dies without leaving a will, the assets of the deceased's estate pass under the intestacy rules. These vary according to whether or not there is a surviving spouse, or surviving children, parents, brothers and sisters and so on. If a person's will does not deal with all of the assets of the estate, there may be a partial intestacy.

Invalid care allowance
This allowance is paid if you spend at least 35 hours per week caring for a disabled person who receives certain state benefits. It will not be paid if you are also working and earning over £50 per week.

Investment income
Income generated from assets such as shares, land and property, cash deposits and so on.

Investment trust
An investment trust is a company which invests in a spread of equities or fixed interest securities. You can buy shares in the investment trust. The shares are publicly quoted, and their price will vary according to the value of the underlying investments owned by the investment trust.

Investments
Assets you buy either to profit from or to own for a long time. These can include shares, land and property, a pension or your home.

Jobseeker's allowance
A benefit paid by the Department of Social Security (DSS) if you are unemployed, but are available for and actively seeking employment. You will have entered into a 'Jobseeker's agreement' with the DSS.

Land
Ground which has been built on, is used for a purpose or is let out for such things as farming, forestry and so on.

Lease or rental expenses
Where property or land is let, you can set most expenses for the letting and upkeep of the land against the rental income. Expenses include some legal costs, accountancy fees, repairs and so on.

Leaving payments
Payments made to you when you leave your employment. They are generally taxable if made under the terms of your contract of employment, but there are tax reliefs for payments resulting from an accident at work, from foreign service and for the first £30,000 of compensation payments.

Legal expenses
Some legal costs qualify as allowable expenses for income tax or capital gains tax purposes. You should ask your solicitor or a Tax Advisor for help if you are not sure what legal costs qualify.

Legatees
A legatee is someone who receives assets from the estate of a deceased person, whether under the terms of the will, or under the intestacy rules. You may be a specific legatee, where the assets you are received are specified in the will, or a residuary legatee, where you receive a share of what is left after paying inheritance tax, expenses and spe …

Let property
Property that you allow someone else to use, usually in return for the payment of rent. You may own the property yourself, or you may lease it from a landlord, and sublet it to your tenant.

Lettings
Land or property leased to another person.

LIBOR
Acronym for London Inter Bank Offered Rate. This is the rate charged by banks on loans between themselves.

Life insurance
A life insurance policy will probably only pay out following your death. Some policies have a death and investment content. If the death benefits are written under trust, they are not included in your estate for Inheritance Tax purposes.

Life insurance policies
Policies which will pay a lump sum to a beneficiary or your executors on your death. Some policies also have an investment content which means that when the policy comes to an end, you will receive a payment whether or not you have died.

Literary income
Income received by an author.

Living accommodation
Any accommodation in which you can live. This includes not only houses, flats and so on, but also houseboats, holiday cottages and villas. It does not include hotels or bed and breakfast accommodation.

Living together
A man and woman living together in the same manner as a married couple would.

Loans
A sum of money lent to another party who agrees to repay the capital lent over a period of time and usually to pay interest on the outstanding balance.

Loans written off
A loan is written off where it is agreed that the debt will never be collected. If a company makes a loan to you and writes it off, a tax charge may arise. If you make a loan to a company and the company collapses, you might be able to claim a capital gains tax loss.

Loss
A loss arises when the income or proceeds received are less than the expenses or cost. There are detailed rules on how tax relief can be claimed on losses.

Magazines, books and references
If you are self employed, the cost of these is tax deductible provided they are used wholly and exclusively for business purposes. If you are employed by a third party, it is very difficult to get tax relief as they must be bought 'wholly, exclusively and necessarily' in the performance of the employment.

Main residence
The place where you normally live and consider to be your home. You can only have one main residence for capital gains tax purposes.

Maintenance
A payment made to a former spouse or child, following divorce or legal separation. Tax relief may be claimed by the payee while the amount may have to be included in the taxable income for the recipient.

Maintenance and alimony payments
Amounts you pay under a legally binding agreement to a former spouse who is no longer living with you, or to or for your child. You may be able to claim tax relief for these payments.

Maintenance and alimony received
Amounts you receive under a legally binding agreement from a former spouse who is no longer living with you, or from your parent if you are under the age of 21. You may have to pay tax on some or all of the amount you receive.

Market value
The price which you can obtain for an asset if you sold it freely on the open market.

Marriage
A man and woman legally living together as man and wife.

Married couple's allowance
An extra tax allowance you are entitled to if you are married.

Master-servant relationship
Means that you are told what your daily or weekly duties are. Often determines whether you are employed or self employed.

Medical insurance
In return for a premium, you will receive prompt private medical attention.

Mileage allowance
An allowance paid to you by your employer for travelling. It is based on the number of business miles you travel and is paid at a rate fixed by your employer.

Millennium gift aid
One off payments of £100 or more made to certain registered charities that are participating in this scheme. The funds must be used for education projects or for the relief of poverty in third world countries. The charity reclaims the basic rate of tax you have deducted and you receive higher rate tax relief if you have sufficient income. (When fir …

MIRAS
Acronym for Mortgage Interest Relief At Source. You receive 10% tax relief on the interest on loans up to £30,000. Payments made to the lender are net of this tax relief.

Mixed business asset
An asset that has been used for both business and non business purposes.

Mobile telephone
Any telephone not connected to a landline. It includes a car phone, whether or not it is fixed to the car, but does not include a cordless phone which is an extension of a landline.

Money payments
Payments that are made in cash or equivalent.

Money's worth
The cash value of something you receive the amount for which you would sell it, not the loss to the person providing it.

Mortgage
A longterm loan, which is secured on property, generally your main home. You receive 10% tax relief on the interest on loans used to purchase your home up to a value of £30,000.

Motoring costs the exact basis
The exact basis of calculating your motoring costs involves adding up the total motoring expenses incurred over the tax year (such as fuel, servicing repairs and so on), and apportioning the costs between business and private use on the basis of mileage.

Motoring costs the simpler basis
The simpler basis of calculating your motoring costs allows you to use mileage rates published by the Inland Revenue, the Fixed Profit Car Scheme rates. The rate varies according to the cylinder capacity of your car and a higher rate is used for the first 4,000 business miles.

National insurance
A scheme which provides pensions and other social security benefits. Some benefits are dependent on contributions you have paid, whilst other benefits are means tested. Employees pay higher contributions and have a greater entitlement to benefits than do the selfemployed. Contributions are also payable by employers.

National insurance number
A unique reference number which is used to identify your national insurance contribution record and entitlement to social security benefits.

National savings
A savings organisation backed by HM Treasury which offers a number of different savings products. Information on these is available from your local Post Office as well as from National Savings.

National savings ordinary account
An instant access account offered by national savings which is backed by HM Treasury. You can deposit and withdraw funds from post offices. The first £70 of interest earned is tax free, but the account pays a low rate of interest.

Net
The amount received after the deduction of tax. May also be used to refer to income after the deduction of expenses.

Net relevant earnings
Your taxable earnings from your selfemployment, or from an employment where you are not a member of your employer's pension scheme. You may make contributions to a retirement annuity contract or personal pension plan, up to a percentage of your net relevant earnings. The percentage limits are based on your age, and differ between retirement annuity …

Nominee
A person who holds assets for another person.

Nonqualifying distributions
A bonus issue by a company of securities or redeemable shares, or the paying on by a company of such a bonus that it has received. Nonqualifying distributions are taxable, but you are treated as if you had paid lower rate tax on the amount of the nonqualifying distribution.

Nonrepayable
Something which cannot be repaid under any circumstances, such as notional tax credits on foreign income dividends and scrip dividends.

Nonresident
Someone who is not resident in the UK.

Nonresident trusts
These are trusts that are controlled by trustees who are not UK residents.

Nontaxpayer
Someone who does not pay tax because their income is too low.

Not domiciled
Broadly, you will not be UK Domiciled if you were born outside the UK and/or you do not consider the UK to be your permanent home.

Not ordinarily resident
If you are not resident in the UK year after year, you are not ordinarily resident.

Not resident
You are not resident in the UK if you spend less than half the year in the UK, or if you spend less than 3 months of each year in the UK on average.

Notice of coding
The notification of your PAYE code that you receive from the Inland Revenue.

Notional tax
Notional tax is tax which is treated as having been paid, but which is not repayable under any circumstance. It applies to UK life insurance policy gains, scrip dividends, foreign income dividends and some other income sources.

Occupational pension
A pension you receive from a previous employer.

Office holder
Someone who occupies a particular position or office. Includes directors, judges, ministers of religion, members of parliament and so on.

Offset
To set one amount against another, such as a loss against a profit or a repayment against a liability.

Offshore funds
Investments which are made outside the UK.

Opening written down value
Cost of an asset at the start of the accounting period after deducting capital allowances given in earlier accounting periods. The closing written down value will be the opening written down value, less capital allowances given in the accounting period. This will be the opening written down value for the following accounting period. Where expenditu …

Option
The right to buy or sell something at a set price within a given time period. Employees for example, may be granted options to purchase shares in the company that employs them.

Ordinarily resident
If you are resident in the UK year after year, you are 'ordinarily resident'.

Ordinary commuting
Travel between home (or some other place you attend for private reasons) and a permanent workplace.

Other benefits (employment)
The more common other benefits which are received in an employment are:

Other income
This is a 'catch all' term to ensure that you declare all your taxable income which you have not already entered anywhere else on the Tax Return.

Other income from land and property
Any property income (other than rents) that you receive from any source, such as wayleaves, payments from sporting rights and so on.

Other pensions
Pensions paid by anyone apart from those paid by the Government.

Other qualifying loan interest
You can receive tax relief on interest paid on loans that you take out for certain specific purposes. These include loans for:

Outgoing
Monies you have to pay to someone else for things linked to your income.You may be able to deduct them from your income for tax purposes.

Overlap profit
Profit which has been taxed twice because part of an accounting period falls within the basis period for more than one year.

Overlap relief
Tax relief that is given for overlap profits brought forward. It is given on a change of accounting date if the basis period is longer than 12 months or on the cessation of trade.

Overseas
A country other than England, Northern Ireland, Scotland and Wales.