Glossary
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What is accounting?
Accounting is how you keep track of your money. It covers the processes, procedures and framework of recording, measuring, sorting, and sharing financial information, helping businesses and individuals stay organised and make sense of their finances.
What is Auto Enrolment?
Auto-enrollment is a government scheme where your employer signs you up for a retirement savings plan without you having to do anything. They automatically deduct a portion of your salary and put it into the plan. You can choose to opt-out if you want, but it’s an easy way to start saving for retirement.
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What are bonds?
Bonds are like IOUs but on a bigger scale. When a company or government needs money, it can issue bonds as a way to borrow from investors. By buying a bond, you’re lending your money and becoming a “bondholder.” In return, you receive regular interest payments and get your money back when the bond “matures.” It’s a win-win, helping both parties meet their financial goals.
What is bankruptcy?
Bankruptcy is a legal lifeline for people and companies who can’t keep up with their debts. It involves a court, where you present your financial situation and a plan to repay what you can. You can either choose bankruptcy yourself or get pushed into it by creditors. Bankruptcy has serious consequences and should be your last-ditch effort when facing financial troubles. It’s a tough road, but it offers a chance for relief and a fresh start.
What is bookkeeping?
Bookkeeping is the process of regularly keeping track of all the money coming in and going out. It involves recording every transaction, like sales, expenses, and payments, in a special system called ledgers. By doing this, bookkeepers help businesses stay on top of their finances and make educated decisions based on financial facts.
What is international business?
International business refers to the exchange of goods, services, and ideas between companies and individuals from different countries. It’s like a global marketplace where businesses can buy, sell, and collaborate across borders. It involves understanding diverse cultures, navigating various laws and regulations, and dealing with different currencies.
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What does cloud accounting mean?
Cloud accounting means doing your accounting work on online applications instead of using software installed on your computer. It’s safer, you can access it from anywhere using just a web browser, and it usually has the latest information. So, you don’t have to worry about losing data, and you can work on your finances even when you’re not at your desk.
What is a high-growth company?
A high-growth company is like a rocket taking off—it grows really fast in a short time. The Organisation for Economic Co-operation and Development (OECD) definition is a company that grows more than 20% each year for three years in a row. But in simple terms, it’s a company that shoots up like a skyrocket.
What is capital gains tax?
When you sell certain assets and make a profit, you may have to pay capital gains tax (CGT). It’s a tax on the increase in value of those assets. You’re only taxed on the profit, not the full amount you receive. However, CGT applies only if your gains are higher than a certain limit called the ‘Annual Exempt Amount,’ which is currently £6,000. Starting April 2024, this limit will be reduced to £3,000.
What is corporate finance?
Corporate finance is all about the money in companies. It covers how businesses get and use money, make investments, and figure out how to structure their funds. It also includes helping businesses buy and sell other businesses. It’s like the financial backbone of a corporation, ensuring everything runs smoothly and profitably.
What is the difference between a charity and a not-for-profit?
A not-for-profit organisation is one where the money earned from its activities doesn’t go to any individual, owner, or leader. A charity is a specific type of not-for-profit that aims to improve the lives of a chosen group, be it people or animals. While all charities are not-for-profits, not all not-for-profits are charities. So, charities focus on doing good, while not-for-profits may have different objectives.
What is a Confirmation Statement?
A Confirmation Statement is a document that must be filed with Companies House every year to confirm that a company is still up and running.
What is a CGT Return?
A CGT Return is a Corporate Gains Tax Return. It’s a tax return that must be filed with HMRC if an individual sells an asset, such as property or investments that have increased in value since they bought it.
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What is meant by tax due diligence?
Tax due diligence is like investigating a company’s tax history to uncover any potential risks or problems. It’s a thorough check-up of their past and present tax behaviour. People usually do this before buying or selling a business. It helps ensure there are no surprises or hidden troubles lurking in the company’s tax records.
What are dormant accounts?
Dormant accounts aren’t active and haven’t been used for some time. Banks sometimes flag them to keep things tidy, but don’t worry, your money is safe.
What is Company Dissolution?
Company dissolution refers to the formal process of shutting down a company and removing it from the Companies House register. When a company dissolves, it ceases to exist legally, and its operations end. It involves settling debts, distributing assets, and cancelling any contracts or agreements.
What is Managed Dissolution
Managed dissolution is a process of dissolving a company that is overseen by a licensed insolvency practitioner. It’s the thoughtful process of winding down operations, settling debts, and ensuring a smooth transition for employees, customers, and stakeholders.
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How is an estate valued?
The value of an estate is the total worth of everything you own, minus any debts you have. This includes your property, physical belongings, investments, and anything else you own. To calculate it, add up the value of everything you own, and subtract any debts like mortgages, overdrafts or loans. It’s a way to figure out how much you’re worth financially.
What is an estate?
An estate is what a person owns. It’s their total worth when they pass away and it’s used to determine how much inheritance tax they might owe. This includes everything they own such as money, belongings, land, and investments, as well as any businesses they control. To find the actual worth, any debts are subtracted from the total value of the estate.
What is ESG investing?
ESG is a measure that rates a company’s sustainability practices. It stands for Environmental, Social, and Governance, and is an indicator for investments that prioritise responsible behaviour. It’s all about how well a company takes care of the environment, treats its employees, and operates with good governance.
What is exit planning?
Exit planning is all about crafting a smart strategy for leaving or passing on a business, ensuring the best possible outcome for the departing person and the business as a whole. It dives into the nitty-gritty of the legal, tax, and financial aspects involved in exiting a business, whether through selling it or handing it over to new owners. It’s a crucial step to make the transition smooth for everyone involved.
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What does financial planning mean?
Financial planning is like mapping out a path to reach your money goals, whether you’re a business or an individual. It involves figuring out the specific actions you need to take and the targets you need to hit along the way. It’s like creating a game plan for your finances, so you can stay on track and make your dreams a reality.
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What constitutes a gift?
A gift is simply giving something valuable to someone without expecting anything in return. It could be money, property, or any valuable item. Legally, it’s a voluntary transfer where you don’t have to give back or reciprocate.
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What does HR mean?
In a company, HR stands for Human Resources, which simply means the people who work there. The HR department takes care of everything related to employees, like hiring new people, dealing with any problems or complaints, ensuring they have good benefits, and handling when someone decides to leave. In a nutshell, HR keeps things running smoothly for everyone who works at the company.
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What is a capital investment?
When a company needs money to achieve its goals, like expanding the business or buying a new piece of equipment, it’s called a capital investment.
What is an investment bond?
An investment bond is like a long-term loan. You give money to a business or government, and they guarantee to return it with extra money (interest) after an agreed time. It’s a way to make your money grow over time.
What is inheritance tax?
When someone passes away, their estate is subject to inheritance tax (IHT). This includes their properties, savings, and belongings. If you give away assets while you’re alive, IHT can still apply if it’s within seven years of the gift. To lessen the burden, reliefs are available, such as the nil-rate band (£325,000 at present). However, as property values increase, more people are affected. It’s wise to seek estate planning guidance to ensure you and your loved ones are ready.
What is investing?
When it comes to money matters, investing means putting your hard-earned cash into things like stocks, real estate, businesses, or money-making plans. The goal? To make more money and watch your wealth grow.
What is passive investing?
Passive investing is a smart long-term strategy. Instead of constantly buying and selling, you simply buy and hold your investments. It’s a stress-free approach that works well in the stock market but can also be used for bonds or hedge funds. It’s like planting seeds and patiently waiting for them to grow rather than constantly tending to the garden.
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What does liquidation mean?
Liquidation is the process of selling a company’s assets, such as stocks or property, to generate funds that can be used to settle outstanding debts and distribute returns to creditors and shareholders. Typically, liquidation occurs when a company is financially insolvent, meaning it cannot meet its financial obligations as they become due. It serves as a formal procedure to wind down operations when a company faces significant financial challenges.
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What are national insurance contributions?
National insurance contributions (NIC) are like taxes on what you earn or make from self-employment. They’re paid by people aged 16 and above but below the state pension age. The type of income you have determines which class of NIC you pay. It’s a way to contribute to the system that supports things like healthcare and pensions.
Why do we pay National Insurance?
When you pay National Insurance, you’re not just contributing money, you’re securing important benefits like the State Pension or Maternity Allowance. It’s like an investment in your future and the well-being of others. Plus, the funds also help support crucial services like the NHS.
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What is an owner-managed business?
In an owner-managed business, the owners handle all the day-to-day management and operations. They’re fully involved in running the show, unlike businesses where ownership and management are separate. It’s like being the boss and taking care of everything yourself, giving you more control and a personal touch. It’s a hands-on approach that sets owner-managed businesses apart.
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Are pensions taxable?
Yes, even in retirement, pensions are taxed. If your income surpasses your Personal Allowance, you will have to pay Income Tax. Those fortunate to receive final salary pensions, providing a lifelong income, should be aware that these are taxed as earnings. As for defined contribution pensions, the taxation varies based on how you withdraw funds from your pension pot.
How much pension will you need?
Planning for your pension is all about securing a comfortable retirement. The amount you’ll need depends on factors like your lifestyle, finances, when you retire, and how long you’ll live. Our team can guide you through this process without the complicated jargon. We offer personalised pension planning services, helping you make the best decisions for your future.
How to avoid tax on your pension?
Pensions are taxed just like your regular income from work. Each person has a tax-free Annual Allowance. To reduce your overall tax burden, a smart strategy is to only withdraw the amount you need for the year. Taking out more than necessary means paying extra tax on the money you didn’t even need. The flexibility to do this varies depending on the kind of pension you hold.
What does not-for-profit mean?
A not-for-profit organisation or business is a special kind of legal entity where the owners don’t make money. Instead, any funds earned or given are reinvested back into the business. It’s like a cycle of giving and growing, focusing on making a positive impact rather than making a profit.
What does payroll involve?
Payroll is how employees get paid. It includes handling and organising their payment information, calculating taxes, and reporting them to HMRC. It’s also about keeping detailed records for both the company and tax purposes. It’s the behind-the-scenes work that ensures everyone gets their hard-earned money on time while staying on the right side of the taxman.
What is a final salary pension?
A final salary pension is a special type of retirement plan where your income is secure and based on your salary when you retire, how long you’ve worked, and the way your company calculates benefits. It guarantees you a specific amount of money each month, ensuring a comfortable retirement.
What is a pension?
A pension is essentially a savings plan, where you invest some of your income from work into a pot you can access to fund your retirement. There are many types of pensions, so it can be beneficial to seek pension planning advice.
What is a private pension?
A private pension is like a personal piggy bank for your future. You save a portion of your earnings during your working years, so you’ll have money to enjoy when you retire. You make regular contributions, and the government adds a bonus, called tax relief, to boost your savings. A private pension is separate from the State Pension and can be arranged by an individual or an employer.
What is a SIPP pension?
A SIPP pension, short for “self-invested personal pension,” puts you in the driver’s seat. You decide when and how much to contribute, with more investment choices at your fingertips. It’s perfect for those interested in shares and investments. Plus, if you’re a business owner, a SIPP can be a tax-efficient way to own business property.
What is a stakeholder pension?
A stakeholder pension is an individual personal pension plan that you can have. It works like this: You contribute money regularly, and the amount you get when you retire depends on how much you put in and how well your investments do. You can decide which investments to make, or your employer can help you choose. The government has set certain rules to protect your interests.
What is payroll?
Payroll is a term for the list of people who work for a company and how much money they get paid. It includes the whole process of giving out those salaries. You can also think of it as the total amount of wages a company hands out. It’s a way of keeping track of who’s getting paid and how much.
What types of pensions are available?
You’ll find three main types of pensions in the UK. State pensions are provided by the government and become accessible once you hit retirement age. Workplace pensions are organised by your employer, while private pensions are the ones you arrange yourself.
What is a partnership?
A partnership is when two or more people formally come together to run a business and share the responsibilities, risks, and rewards.
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How much do you need to retire?
The amount needed to retire comfortably varies for everyone. Generally, you’ll need about half to two-thirds of your yearly salary, but some experts suggest saving up to 80%. It’s a good idea to consult a financial planner who can calculate your personal retirement needs and guide you on how to reach your goals. They’ll ensure you’re on the right track for a worry-free retirement.
What is a registered office?
A registered office is like a home address for a company. It’s the official location, registered with Companies House where important mail and legal documents are sent. It doesn’t have to be where the business operates from, but it must be a real address in the UK.
What is a Reference Letter?
A reference letter is a down-to-earth way of endorsing someone, typically for a job application. It’s like a heartfelt thumbs-up that speaks volumes about a person’s skills and character and is a powerful tool in the professional world.
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What is self-assessment?
Every year, people and businesses in the UK need to complete a tax return and send it to HM Revenue and Customs (HMRC). It’s a way of telling the government how much money you’ve earned and making sure you’ve paid the right amount of tax.
How much is a state pension?
In the UK, the State Pension pays you a certain amount each week when you retire. For the year 2023/24, it’s around £203.85 per week, which adds up to about £10,600 per year. But the actual amount you get can vary. It depends on things like when you were born, when you hit retirement age, and how much National Insurance you’ve paid. Since the rules changed in 2016, it’s crucial to go online and check your State Pension and get advice on planning for your retirement.
How to value a startup?
When investors and stakeholders assess a startup’s value, they consider various approaches. These include estimating the cost of recreating the business using physical assets and past expenses, evaluating the prices of comparable businesses in the market, forecasting future cash flow and assessing risks, and determining a valuation based on the startup’s current stage of development. It’s all about finding out what the startup is truly worth in a practical and relatable way.
What are startup costs?
Starting a new business comes with its fair share of expenses known as startup costs. These include the money you’ll need to plan, find a location, promote your business, and cover employee-related expenses.
What does SME stand for?
SME is short for ‘Small to Medium Enterprise’, a term used in the UK to describe companies with less than 250 employees. But don’t get too caught up in the numbers! The definition can be quite flexible depending on what we’re talking about.
What is a startup?
A startup refers to a fledgling or recently established organisation, project, or entity that often introduces innovative products or services deemed to be in demand. Startups encompass a spectrum, ranging from individuals venturing into self-employment to small or medium-sized enterprises, to highly dynamic and fast-growing new companies.
What is a state pension?
The UK State Pension is a weekly payment provided by the government when you reach pension age and a reliable income to support you during retirement. The amount you receive is determined by various factors, like your date of birth and the National Insurance contributions you’ve made throughout your life.
When can I get my state pension?
The age at which you can start receiving your State Pension varies based on your birth date, ranging from 65 to 68 years. To find out your specific State Pension Age, simply visit the Government website and check it out.
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Are cash gifts taxed?
When you give someone cash as a gift, it usually doesn’t result in any taxes for either the giver or the receiver. However, if the recipient earns money from that gift, like interest on the gifted money in a savings account, they might have to pay taxes on that income. Gifts can be subject to inheritance tax if they’re given within seven years of the giver’s death. If you regularly give a lump sum from your income, it’s not taxable, but you should be able to show that it’s a consistent gift from your taxed income and doesn’t impact your standard of living.
Are trusts taxable?
Trusts are subject to taxation. The tax you owe is determined by the income and nature of the trust. Keep in mind that trusts are considered distinct legal entities for tax purposes. You can use the Government website to find out if a trust falls under the trust registration service (TRS) and self-assessment tax system.
Do charities pay tax?
When charities are officially recognised by HMRC, they can get tax relief and won’t have to pay taxes on the income they use for charitable activities. However, there are situations where they still need to pay taxes. For example, if they make a profit from a property or use money for non-charitable reasons.
Do you pay taxes on investments?
When it comes to making money from investments like bank accounts and share dividends, you’ll usually have to pay income tax on the income you earn. However, there are exceptions for tax-favoured investments like individual savings accounts (ISAs). The amount of tax you pay depends on how much you earn and the type of investments you’ve made. If you sell assets or investments and make a profit, you may have to pay capital gains tax (CGT). Different investments and personal situations have tax-free allowances, so planning your taxes can help you make the most of those benefits.
How much is the personal tax allowance?
In 2023/24, you can earn up to £12,570 without paying any tax. This is called your personal allowance, and it may vary based on your income and situation. The UK government usually adjusts the personal allowance every year, but it hasn’t changed since 2021/22.
How much tax do businesses pay?
When it comes to paying taxes in the UK, businesses have to consider a few things. Factors like their size, turnover, and type of business play a role in determining the amount of tax they owe. Whether you’re a sole trader, a limited company, a partnership, or a charity, each category has its own tax rates and potential relief options. It’s important to understand these differences to make the most of available incentives.
How much tax do we pay?
Taxes vary based on your income and situation. Your tax rate depends on how much you earn. In the UK, there are different types of taxes on goods, services, income, inheritance, and capital gains. A tax expert can help you understand how much direct tax you pay and provide guidance on tax planning. A qualified financial expert can advise you on the financial and tax effects of particular investments.
What is MTD and is it compulsory?
The MTD (Making Tax Digital) initiative by HMRC is compulsory for VAT-registered businesses with taxable turnovers over £85,000. From April 2022, it also became compulsory for businesses with taxable turnovers below £85,000 to register for MTD, keep their records digitally and submit their returns through MTD-compatible software. There are only a few reasons for exemption including being subject to an insolvency procedure or it not reasonable or practical to use computers.
Is startup capital taxable?
Startup capital is not just one thing. It’s a mix of different money sources, so as a whole, it might not be taxed. But some parts of a startup’s money could be taxed, like the income from investments. When you start a business and receive money to get things going, that money is considered income and subject to taxation. However, there are often tax allowances and deductions available for business expenses. It’s a good idea to consult with an accountant who can help you navigate the specifics and make sure you’re paying the right amount of tax.
What are investment tax credits?
Investment tax credits are a way to encourage companies to make smart investments in certain things, like new equipment or renewable energy projects that benefit the economy and environment. When businesses qualify, they get a special discount on their taxes, which means more money in their pockets to keep growing and innovating.
What are the types of tax?
In the UK, there are several common taxes that individuals encounter: income tax, national insurance, capital gains tax, inheritance tax, VAT, council tax, and stamp duty land tax. Companies registered or resident in the UK are subject to corporation tax on their profits. These taxes affect most people and businesses, ensuring funds for public services and government operations.
What does personal tax allowance mean?
Your personal tax allowance is the amount of money you can earn before you have to start paying taxes. Let’s say you make £25,000 a year, but your personal tax allowance is £12,500. In this case, you will only be taxed on £12,500 of your income. However, if you earn £10,000 a year and have the same tax allowance, you won’t have to pay any tax on that amount.
What is a tax audit?
A tax audit is like a thorough check-up of your taxes to ensure you’re paying the right amount to HMRC. It typically happens once every six years, but can also be prompted by unusual, inconsistent, or late tax returns. It’s a way for HMRC to make sure everything is in order and fair for everyone.
What is a trustee?
A trustee can be a person or a company trusted to manage money, assets, or property for someone else. They’re like guardians, taking care of valuable things for others. They ensure everything is handled responsibly and in the best interest of the owner.
What is international tax law?
International tax law is a complex web of regulations and agreements designed to figure out how businesses should pay taxes when they operate across different countries. It’s like a global tax playbook, helping nations navigate the intricate world of cross-border commerce.
What is MTD?
MTD, or Making Tax Digital, is an initiative by the UK government. It’s all about making taxes simpler and smoother for everyone. Instead of dealing with old-fashioned paper tax returns, it’s a modern way of digitally keeping records and handling taxes. This way, the government can make tax administration easier and more efficient.
What is pension tax relief?
Pension tax relief means that a portion of the tax you pay on your contributions goes directly into your pension fund, instead of going to the government. Thankfully, most of this relief is automatically applied when you make your contributions.
What is tax?
Tax is like a membership fee we pay to the government for the services they provide us. It’s a way to fund things like schools, hospitals, roads, and public safety. When we buy things, earn money, or own property, a small part goes to taxes. Just like being part of a club, taxes help make our community a better place for everyone.
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What is a VAT Return (Normal Rate)?
A VAT Return (Normal Rate) is a simple form that businesses fill out to report their sales and purchases for a specific period. It helps the government keep track of how much Value Added Tax (VAT) a business owes or is owed. If a business has collected more VAT than it has paid, it will get a refund. If it has paid more VAT than it has collected, it will need to pay the difference.
What is a VAT Return (Flat Rate)?
A VAT Return (Flat Rate) offers a simpler way for businesses to figure out how much VAT they owe. Instead of complex calculations, it uses a fixed percentage of its total sales. It’s a hassle-free method that saves time and effort.
What is a Virtual Secretary?
A virtual secretary is like having a personal assistant who helps you with your tax matters but in a digital form. Instead of having a physical person sitting next to you, the virtual secretary uses technology to assist you remotely with their admin relating to HMRC. It can help with tasks like answering tax-related questions, providing guidance, and even helping you fill out forms.
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What is a tax year-end?
Year-end is the day when the tax year wraps up. Once it’s over, a new tax year begins. We use this term because, in many places, the tax year doesn’t align with the regular calendar year.
When is the accounting year-end?
Each company sets its own accounting year-end, usually on the anniversary of the month it was incorporated. On this date, they prepare their annual financial statements. It’s like a personal milestone for businesses, allowing them to assess their financial health and plan for the future.