UK Tax Glossary — Plain-English Tax Definitions (2025/26)

A comprehensive reference to UK tax terms, thresholds, and concepts for the 2025/26 tax year. Each definition is written in plain English with official HMRC and OBR sources, so you can understand exactly how the UK tax system affects your income.

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£100k Tax Trap

The £100k tax trap means you lose £1 of personal allowance for every £2 earned above £100,000 — creating a hidden 60% tax rate. Learn how it works and how to avoid it.

30 Hours Free Childcare

Working parents in England can get 30 hours of funded childcare per week for children aged 9 months to 4. Learn the income thresholds and how to apply.

60% Effective Marginal Rate

UK earners between £100,000 and £125,140 face a hidden 60% effective marginal tax rate due to the personal allowance taper. Find out how and why.

A

Auto-enrolment requires UK employers to put eligible workers into a workplace pension with minimum 8% contributions. Learn the rules, thresholds, and opt-out process.

B

Blind Person's Allowance

Blind Person's Allowance adds £3,130 to your tax-free income for 2025/26. Learn who qualifies and how to claim this often-overlooked relief.

C

Capital Gains Tax Annual Exempt Amount

The UK CGT annual exempt amount is £3,000 for 2025/26. Gains above this are taxed at 18% or 24%. Learn how CGT works and how to reduce your liability.

Child Benefit High Income Charge

The HICBC claws back Child Benefit when either parent earns over £60,000. Full withdrawal at £80,000. Learn the rules, rates, and how to manage it.

D

Dividend Allowance

The UK dividend allowance lets you receive £500 in dividends tax-free for 2025/26. Above that, rates are 8.75%, 33.75%, or 39.35%. Learn the details.

E

Employer National Insurance

Employer NICs rose to 15% from April 2025 with a lower threshold of £96/week. Understand the cost to businesses and the impact on hiring decisions.

G

Gift Aid lets UK charities claim 25% extra on your donations at no cost to you. Higher-rate taxpayers can also claim additional relief. Learn how it works.

I

Inheritance Tax Nil-Rate Band

UK Inheritance Tax applies at 40% on estates above £325,000. A residence nil-rate band adds £175,000 for homes left to direct descendants. Learn the rules.

The UK ISA allowance is £20,000 for 2025/26. You can now split this across multiple ISAs of the same type. Learn how ISAs shelter income and gains from tax.

M

Marriage Allowance

Marriage Allowance lets you transfer £1,260 of unused personal allowance to your spouse, saving up to £252 a year. Check eligibility and how to claim.

N

National Insurance Classes

UK National Insurance has multiple classes — Class 1 for employees, Class 2 and 4 for self-employed. Learn the rates, thresholds, and what each class covers.

P

Your PAYE tax code tells your employer how much tax-free income you get. The standard code is 1257L. Learn what the letters and numbers mean.

Pension Annual Allowance

The pension annual allowance caps tax-relieved pension contributions at £60,000 for 2025/26. Learn about the taper, MPAA, and carry-forward rules.

Pension Tax Relief

UK pension tax relief means the government tops up your pension contributions. Basic-rate taxpayers get 20% added automatically; higher earners can claim back more.

Personal Allowance Taper

The UK personal allowance taper reduces your £12,570 tax-free income by £1 for every £2 earned over £100,000. Understand how it works and its impact on your tax bill.

Personal Savings Allowance

The UK Personal Savings Allowance lets basic-rate taxpayers earn £1,000 in savings interest tax-free, or £500 for higher-rate payers. Learn how it works.

R

Rent-a-Room Relief

Rent-a-Room Relief lets you earn up to £7,500 tax-free from letting a furnished room in your home. No need to report it to HMRC if you stay under the threshold.

S

Salary Sacrifice Pension

Salary sacrifice lets you swap gross salary for employer pension contributions, saving income tax and National Insurance. Learn how it works in 2025/26.

Scottish Income Tax Rates

Scotland has its own income tax bands with 6 rates from 19% to 48%. Learn how Scottish tax differs from the rest of the UK for 2025/26.

Student Loan Repayment Thresholds

UK student loan repayments depend on your plan type. Plan 1 starts at £24,990, Plan 2 at £27,295, Plan 5 at £25,000. Learn the rates and thresholds.

T

Tax-Free Childcare

Tax-Free Childcare gives working parents up to £2,000 per child per year. The government tops up every £8 you pay with £2. Learn eligibility and how to apply.

Trading Allowance

The UK trading allowance lets you earn up to £1,000 from self-employment or casual income tax-free, with no need to register for self-assessment.

See How These Terms Affect Your Tax

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