A Comprehensive Guide To UK Tax Definitions And Accounting Terms

What is UK Tax?

UK tax is a system of taxes that is levied on individuals and businesses in the United Kingdom and is used to fund government services and programs. It is based on the principle of "pay as you earn," and the amount of tax an individual or business must pay depends on their income, tax status, and applicable tax allowances or reliefs.

Important UK Accounting Terms

1. A

Accounts payable: It refers to the money owed to suppliers for services or goods that have been provided. It is also called trade creditors.

Accounts receivable: It refers to the amounts owed to a business by its customers, which are also known as trade debtors.

Accounts: This financial statement provides an overview of a company's accounts, including its profit or loss and financial position at the end of a certain period.

Accounting period: An accounting period is a timeframe, such as a month, quarter, or year, during which financial statements are created.

Amortization: It is the same as depreciation and is typically used to refer to intangible assets (fixed).

Articles of association: The articles of association are a legal document that outlines the rights and responsibilities of stakeholders in a finite liability organization.

2. B

Bad debt: It is when a credit customer (the debtor) cannot meet their financial obligation to pay the amount owed.

Balance sheet: A balance sheet is a record that shows an entity's financial position at a specific point in time, including its assets, liabilities, and ownership interests.

3. C

Called up (share capital): The company has requested that the initial shareholders who purchased the shares pay for their share capital.

Capital: The owners or shareholders providing a sum of money to enable a company to purchase assets and continue functioning is known as capital.

Capital items Expenditure: Money spent on long-term investments or assets that have a useful life of more than one year for a business.

Cash flow projections: Cash flow projections are estimates of the money that will enter and leave a business during a specific timeframe.

Credit sale: A credit sale is when a company sells services or products and permits the consumers to pay for them at an upcoming (later) date.

Creditor: A creditor is someone or an organization to which a business owes money.

Current asset: A Current asset is one that is anticipated to be exchanged for cash within the trading cycle, in contrast to a Fixed asset which is maintained for use in the business over a more extended period.

4. D

Debtor: A person or business that has an outstanding debt to some other person or business.

Deductibles: Business expenses that may be deducted from income to reduce taxes include purchases made for the business.

5. E

Expenses: These are the costs associated with running a business.

6. F

Financial company Statements: Formal documents that detail a company's financial activities or show its overall financial position.

Fiscal year: begins in April and concludes in March of the following year, spanning a total of twelve months.

7. G

Gains/Losses: Gains or Losses in the Foreign Exchange refer to the money gained or lost when converting one currency into another.

Gross Profit: The amount of money a company earns from its total revenue after taking into account the price of complete expenses.

8. H

HMRC: an acronym for Her Majesty's Revenue and Customs is a non-ministerial department of the UK Government. They are responsible for paying certain types of state support and taxes and administering other regimes such as the minimum wage (national) and the assigning of insurance numbers.

9. I

Income Tax: A tax imposed on a person's income, known as Income Tax, is a charge that must be paid to the government.

Interim Reports: Statements that are produced before the end of a given financial year, known as Interim Reports, provide an indication of the company's performance.

10. L

Ledger: A ledger is a book that contains a record of all financial accounts.

11. M

Management Accounts- These involve looking at financial data and developing reports that provide insight into a company's performance. This practice allows businesses to better measure and understands their operations.

12. N

Net Profit: The total amount earned after subtracting all business expenses from the profit (gross).

13. O

Overheads: refer to an expense or cost.

14. P

Payroll: This list contains the names of all employees who are receiving a salary, wage, and bonus from the payroll.

Profit- A gain (financial)

15. R

Remittance- A payment or gift of money sent from one person or party to another.

16. S

Self-Assessment: Calculating One's Own Tax Liability Through Self-Assessment

17. T

Tax Liability: The Tax Liability of an individual, corporation, or other entity is the total amount of tax that must be paid to a government taxing authority such as HMRC.

18. U

No answer currently.

19. V

VAT: It refers to the Value-Added Tax

20. Y

Year End: Last of the fiscal year

21. Z

Zzzzz: What do Accountants do at the time of February 1st?

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Our comprehensive guide to UK Tax Definitions and Accounting Terms is a great resource for businesses and individuals looking to better understand UK taxes and accounting terminology. We hope you found this guide useful in your journey to better understanding UK taxes and accounting.