Topic 12: Earnings Flashcards
Benefit
A government payment made to individuals who meet specific conditions to help them meet their living expenses. For example, people who are unemployed, unable to work because they care for a disabled person, or have a disability themselves may be entitled to benefits if they meet the criteria.
Budget
A plan of expected incomings and outgoings over a set time period such as a month. The Budget is also the term given to the
government’s spending plan, which the Chancellor sets out in the House of Commons.
Chancellor of the Exchequer
The British Cabinet minister responsible for financial and economic matters and in charge of the Treasury
Dividend
A payment of profits from a company to its shareholders, often at twice-yearly intervals, either as cash or (depending on the plan) as further shares or reacquisition of shares.
Gross interest
Interest paid without tax deducted
HM Revenues and Customs (HMRC)
The government department that collects various taxes. Formerly the Inland Revenue.
Income
Earnings, savings and interest payments received within a certain time frame.
Income tax
Tax paid on earnings from employment, self-employment and interest on savings.
Individual savings account (ISA)
An account that pays interest tax-free on savings up to a certain level. There are two types of ISA: cash ISAs and stocks and
shares ISAs. Junior ISAs are available for people under 18.
Interest
Money either paid to an account holder by the provider, or charged to the account holder by the provider. Interest is paid on savings accounts and some current accounts and charged on borrowing, eg an overdraft. Each provider decides the rate of interest it will pay or charge, depending on the type of account
and, in some cases, the credit history of the individual account holder.
Investments
Money paid into financial products; the aim is that the value of the product will grow over time and so the person will eventually
receive back more money than they paid in. Investments are a way of saving over the medium or long term.
Junior ISA
Junior ISAs are long-term savings accounts set up by a parent or guardian specifically for the child’s future. The child can only access the money once they turn 18 years old
Mortgage
A loan taken out to pay for a property, usually over a long term such as 25 years.
National Insurance contributions
Money deducted from the pay of people who are employed or self-employed and used by the government to fund state pensions and other benefits.
National living wage.
The minimum that people aged 23 and over must be paid per hour by law. The national minimum wage applies to workers aged under 23.
National minimum wage
The minimum pay per hour to which workers are entitled by law. The rate depends on a worker’s age and whether they are an
apprentice. It applies to workers aged under 23. Workers aged 23 and over are entitled to the national living wage
P45
A document legally required from an employer when an employee stops working for them. It summarises the employee’s Tax and National Insurance details for their next employer.
P60
A document prepared at the end of every tax year to show all the income tax and National Insurance contributions paid by an
individual during the preceding 12 months.
Pension
An income that people receive after retiring from work. In the UK people receive a pension from the state; some people also receive pension payments from schemes run by their former employers or arrangements that they have made for themselves.
Personal allowance
The amount of income you are allowed to earn before you become liable for income tax.
Personal savings allowance
The amount of savings interest that can be earned before the saver pays tax. The amount of the allowance varies according to how much other income the saver has earned in the tax year.
Self-assessment
A method used, often my self-employed people, to calculate the amount of tax and National Insurance they need to pay.
Self-employment
Earning an income by selling your goods or services directly to a consumer, rather than being employed by somebody else and
being paid a wage or salary.
Starting-rate band
An amount of savings that an individual can earn tax-free if their total income is less than the personal allowance.
Taxable income
Income on which tax must be paid – that is, after deducting allowances and any permitted expenses from the total income
earned.
Tax band
A category of income on which a specific rate of tax is payable.
Tax code
A code used by a person’s employer or pension provider to calculate the tax to deduct from pay or pension.
Tax paid at source
Tax deducted by the provider (on behalf of the government) from interest earned on savings. Since April 2016, providers no longer deduct income tax from savings interest at source.
Tax return
A tax form completed by people in certain situations (eg self-employed people or employed people who receive money in
addition to their salary). It sets out details of income and expenditure and allows the taxpayer or HMRC to calculate the
amount of tax and NI contributions owed.
Tax year
Also known as the financial year, the tax year runs from 6 April to 5 April in the following year. The tax people owe is calculated
according to how much they have earned April to April rather than January to December.
Zero-hour contract
A type of employment contract that does not set out a fixed number of hours that an employee must work and be paid for.
The employer is not obliged to provide work nor the employee to take work offered.
