ICAEW Principles of Taxation (ICAEW) key terms

The twelve-month period used for personal income tax, running from 6 April in one calendar year to 5 April in the next. Individuals are assessed by reference to income arising in this period rather than the calendar year.

The twelve-month period for which government sets tax rates and allowances, running from 1 April to 31 March. Company profits are allocated to financial years on a time basis, regardless of the company's own accounting dates.

The period over which a business prepares and reports its financial results, typically twelve months. For tax it may differ from the tax year and fiscal year, and long or short periods are split for rate purposes.

The interval for which a business draws up its accounts. It can exceed twelve months or be shorter than a year, and profits are apportioned between tax years using day counts.

The period whose profits are charged to tax in a particular tax year. Rules determine how profits of a period of account are mapped onto tax years, including for opening, closing and changes of accounting date.

A tax structure in which the rate charged rises as the taxable amount increases, so those with higher income pay a larger proportion. UK income tax bands are a common illustration of this design.

A tax that takes a larger share of income from lower earners than from higher earners, often because it is charged at a flat amount or rate on spending or fixed items.

The percentage of tax charged on the next unit of income or gain. It differs from the average rate and matters where allowances or bands are withdrawn, creating unusually high effective marginal rates.

A range of taxable income to which a particular rate applies. Income is taxed band by band, so a taxpayer's total liability is the sum of amounts taxed at each successive rate.

An individual, company or other entity on whom a tax is legally imposed. Identifying the taxable person determines who must report and pay, and whose circumstances set the available reliefs.

The question of who ultimately bears the economic burden of a tax, as distinct from who legally pays it. For indirect taxes the burden may be shifted to consumers through higher prices.

A tax levied on income, profits or gains of a person, assessed on that person and generally not shiftable to someone else. Income tax and corporation tax are examples.

A tax charged on transactions, goods or services and collected by a business on behalf of the state. It is usually passed to the final consumer within the price paid.

The amount remaining after allowable deductions and reliefs have been subtracted from total income, on which tax is actually computed. It is not the same as gross earnings.

The sum of all income sources chargeable to a given tax before deductions and reliefs are applied. It is the starting point from which allowances and reliefs are then subtracted.

An amount of income an individual may receive free of income tax in a tax year. It is reduced for very high earners and is not available to certain non-residents or to most non-domiciled individuals claiming remittance basis.

A basis of UK tax for certain non-domiciled individuals under which foreign income and gains are taxed only when brought into the UK. Claiming it usually forfeits the personal allowance and may attract an annual charge.

A legal concept describing the country a person regards as their permanent home. It is distinct from residence and nationality, and it affects the availability of the remittance basis and inheritance tax exposure.

A status determined under statutory tests that establish whether a person is treated as UK resident for a tax year, which in turn determines how much of their worldwide income is charged.

A former UK concept describing habitual residence in a country, as opposed to occasional presence. It was largely abolished for income tax purposes but still appears in older material and some other contexts.

A fixed amount of income, gain or value that is exempt from a tax before the charge begins. Allowances are generally available only if claimed or automatically applied under specific rules.

A deduction, credit or special treatment that reduces the amount of tax payable, often to encourage particular behaviour or to prevent double taxation. Reliefs are usually conditional and may be capped.

A category of income, gain, transaction or person that is outside the charge to a tax altogether. Unlike a relief, an exemption removes the item from the charge rather than reducing the amount taxed.

An amount subtracted directly from the tax liability itself, rather than from income. Its value therefore does not depend on the taxpayer's marginal rate, and some credits are refundable.

Tax deducted at source by a payer, such as an employer or company, and passed to the tax authority on the recipient's behalf. It secures collection and may be credited against final liability.

The UK system under which employers deduct income tax and social security from wages as they are paid and remit them to the authority, spreading collection across the year.

A system in which taxpayers report their income and gains and compute their own liability on a return, with penalties for errors or late filing. Payments are made by fixed instalments and a balancing payment.

A consumption tax charged on supplies of goods and services by taxable businesses, collected at each stage of the supply chain with credit for tax already paid on inputs.

VAT a taxable business pays on purchases and expenses incurred for its business. It can normally be recovered from the tax authority, subject to rules on exempt and non-business use.

VAT a taxable business charges on its own sales and supplies. It is collected from customers and, after deducting recoverable input tax, paid over to the tax authority.

Tax relief for the cost of qualifying capital assets used in a business, given over time or through immediate write-off, instead of deducting the asset's full cost as an expense.

The accounting charge spreading the cost of a fixed asset over its useful life. It is usually not deductible for tax; capital allowances replace it in computing taxable profits.

The profit figure on which a business is charged after adjusting accounting profit for items that are not allowable or not taxable, and after capital allowances.

The profit of a trade computed under tax rules rather than accounting rules, adjusting for disallowable expenditure, income treated differently and capital items.

The imposition of tax by two jurisdictions on the same income or gain. Relief is commonly provided by a treaty, an exemption or a credit for foreign tax paid.

A mechanism that reduces or eliminates the burden of tax charged twice on the same profit, usually by crediting foreign tax against domestic tax or by exempting the foreign income.

Arranging affairs within the letter of the law to reduce tax, often through artificial steps lacking commercial substance. It is lawful but may be counteracted by specific anti-avoidance rules.

Deliberately concealing or misreporting information to pay less tax than is legally due. It is a criminal offence, unlike avoidance, and can lead to prosecution and substantial penalties.

A broad statutory rule allowing the tax authority to counteract arrangements whose main purpose is to obtain a tax advantage, even where specific rules do not apply.

A financial sanction imposed for breaches such as late filing, late payment, inaccuracy or failure to notify. Amounts are usually set by statute and may be reduced for cooperation.

The formal statement a taxpayer files showing income, gains, reliefs and the resulting liability. It must be submitted by a statutory deadline and is the basis for assessment.