UK Tax Glossary

Clear, plain-English definitions of 25 key UK tax terms. From PAYE and Personal Allowance to fiscal drag and inheritance tax — understand the language of UK taxation.

All figures are for the 2026/27 tax year unless otherwise stated.

All Tax Terms A–Z

A

Additional Rate (45%)

The 45% income tax rate applied to taxable income above £125,140.

The additional rate is the highest band of UK income tax, charged at 45% on all taxable income above £125,140 for the 2026/27 tax year. This threshold was reduced from £150,000 to £125,140 in April 2023, bringing more taxpayers into the top rate. At this income level, the Personal Allowance has been fully withdrawn (it tapers to zero between £100,000 and £125,140). The additional rate applies in England, Wales, and Northern Ireland. Scotland has its own top rate of 48% on income above £125,140. Additional rate taxpayers pay the highest rates on dividends (39.35%) and capital gains (20% or 24% for property). They also face restrictions on pension tax relief through the tapered annual allowance if their adjusted income exceeds £260,000.

Key facts and current rates

Rate: 45% on income above £125,140
Threshold reduced from £150,000 in April 2023
Personal Allowance is zero at this income level
Scotland equivalent: Top rate is 48%
Dividend tax rate: 39.35% at this level
Additional rate: 45%
Threshold: above £125,140

Full Tax Bands Reference →

B

Basic Rate (20%)

The 20% income tax rate applied to taxable income between £12,571 and £50,270.

The basic rate is the first band of UK income tax, charged at 20% on taxable income between £12,571 and £50,270 for the 2026/27 tax year. This means the basic rate band width is £37,700. The basic rate applies in England, Wales, and Northern Ireland. Scotland has its own basic rate band with different thresholds. Income tax is progressive, so you only pay 20% on the portion of income that falls within this band — not on your entire income. The basic rate band has been frozen at £37,700 since 2021/22 as part of the government's fiscal drag strategy. Most UK taxpayers are basic rate taxpayers. If you earn above £50,270, the portion above that threshold is taxed at the higher rate of 40%.

Key facts and current rates

Rate: 20% on income from £12,571 to £50,270
Band width: £37,700
Frozen since 2021/22
Applies in England, Wales, and Northern Ireland
Scotland has its own basic rate band (20%)
Basic rate: 20%
Band: £12,571 - £50,270
Band width: £37,700

Full Tax Bands Reference →

C

Capital Gains Tax (CGT)

A tax on the profit you make when you sell or dispose of an asset that has increased in value.

Capital Gains Tax (CGT) may be charged on the gain when you sell or dispose of an asset that has increased in value. Common examples include shares, cryptocurrency, second properties, and valuable possessions. Reliefs can apply to your main home, ISA investments are exempt, and transfers to a spouse or civil partner are normally on a no-gain/no-loss basis. For 2026/27, the annual exempt amount is £3,000. The main individual CGT rates are 18% and 24% for most assets, including residential property. UK residential property gains may need to be reported and paid within 60 days of completion.

Key facts and current rates

Annual exempt amount: £3,000 (2026/27)
Basic rate: 18% for most assets, including residential property
Higher/additional rate: 24% for most assets, including residential property
Main home is exempt (Principal Private Residence relief)
ISA investments are exempt
Property CGT must be reported within 60 days
Annual exempt amount: £3,000
Basic rate: 10% / 18% (property)
Higher rate: 20% / 24% (property)

Capital Gains Tax Calculator →

Class 2 National Insurance

A National Insurance credit for qualifying self-employed people; voluntary Class 2 costs £3.65 per week in 2026/27.

Compulsory Class 2 National Insurance charges were abolished from 2024/25. In 2026/27, self-employed people with profits at or above the £7,105 Small Profits Threshold are normally treated as having paid Class 2 for benefit-record purposes. Those with lower profits may choose voluntary Class 2 at £3.65 per week to help protect entitlement to the State Pension and contributory benefits. Class 2 is separate from Class 4, which remains a profit-based charge.

Key facts and current rates

No compulsory Class 2 charge
Voluntary rate: £3.65 per week (£189.80 per 52 weeks) in 2026/27
Treated as paid at profits of £7,105 or more
Counts towards state pension qualifying years
Voluntary payment below threshold to protect pension
Separate from Class 4 NI (profit-based)
Voluntary rate: £3.65 per week
Voluntary annual amount: £189.80 for 52 weeks
Small Profits Threshold: £7,105

Self-Employed Tax Calculator →

Class 4 National Insurance

A profit-based NI contribution paid by self-employed people — 6% on profits between £12,570 and £50,270.

Class 4 National Insurance is a profit-based contribution paid by self-employed people on their annual trading profits. For 2026/27, the rates are 6% on profits between £12,570 (the Lower Profits Limit) and £50,270 (the Upper Profits Limit), and 2% on any profits above £50,270. Unlike Class 2 NI, Class 4 contributions do not count towards your state pension or benefit entitlement — they are purely a tax. Class 4 NI is calculated and paid as part of your annual Self Assessment tax return. If you are both employed and self-employed, you pay Class 1 NI on your employment income and Class 4 NI on your self-employment profits, though there are maximum contribution caps to prevent double-charging. The Lower Profits Limit for Class 4 is aligned with the Personal Allowance for income tax, simplifying the calculation.

Key facts and current rates

6% on profits between £12,570 and £50,270
2% on profits above £50,270
Does not count towards state pension entitlement
Paid through Self Assessment
Applies to annual trading profits
Maximum contribution caps if also employed
Lower rate: 6% (£12,570-£50,270)
Upper rate: 2% (above £50,270)
Lower Profits Limit: £12,570
Upper Profits Limit: £50,270

Self-Employed Tax Calculator →

D

Dividend Allowance

The first £500 of dividend income each year is tax-free, regardless of your tax band.

The dividend allowance is an annual tax-free amount for dividend income. For 2026/27, the allowance is £500. This means the first £500 of dividends you receive in a tax year are not subject to dividend tax, regardless of which tax band you fall into. The allowance has been significantly reduced in recent years: it was £2,000 in 2022/23, £1,000 in 2023/24, and £500 from 2024/25 onwards. Dividends above the allowance are taxed at special rates that are lower than income tax rates: 10.75% for basic rate taxpayers, 35.75% for higher rate taxpayers, and 39.35% for additional rate taxpayers. Dividends received within an ISA or pension wrapper do not count towards your dividend allowance and are not taxed. The dividend allowance does use up part of your tax band but does not reduce your Personal Allowance.

Key facts and current rates

Tax-free dividend allowance: £500 (2026/27)
Reduced from £2,000 in 2022/23
Applies to all taxpayers regardless of band
Dividends in ISAs and pensions are not taxed
Uses up part of your tax band
Dividend allowance: £500
Basic rate: 10.75%
Higher rate: 35.75%
Additional rate: 39.35%

Dividend Tax Calculator →

F

Fiscal Drag

The effect of frozen tax thresholds pushing more people into higher tax bands as wages rise with inflation.

Fiscal drag, sometimes called bracket creep, occurs when tax thresholds are frozen or rise more slowly than inflation and wage growth. As people receive pay rises that keep pace with inflation, more of their income crosses into higher tax bands — even though their real purchasing power may not have increased. In the UK, fiscal drag has become a major policy tool since 2021/22, when the government froze the Personal Allowance at £12,570 and the basic rate band at £37,700. Budget 2025 extended these thresholds through 2030/31. With wages rising, this freeze steadily pulls more workers into the basic rate and more basic rate taxpayers into the higher rate. The Office for Budget Responsibility estimates that the freeze will bring millions of additional people into the higher rate bracket by 2028. It is sometimes described as a stealth tax because it raises revenue without any headline tax rate increase.

Key facts and current rates

Tax thresholds frozen since 2021/22
Personal Allowance frozen at £12,570
Basic rate band frozen at £37,700
Freeze confirmed through 2030/31
Effectively a stealth tax — no rate increase needed
Millions of additional higher rate taxpayers expected by 2028

UK Tax Bands Reference →

H

Higher Rate (40%)

The 40% income tax rate applied to taxable income between £50,271 and £125,140.

The higher rate is the second main band of UK income tax, charged at 40% on taxable income between £50,271 and £125,140 for the 2026/27 tax year. In England, Wales, and Northern Ireland, you become a higher rate taxpayer once your total income exceeds £50,270. Tax is only charged at 40% on income within this band — income below £50,270 is still taxed at the basic rate (20%) or covered by your Personal Allowance (0%). The number of higher rate taxpayers has grown significantly due to fiscal drag — frozen thresholds combined with rising wages. In 2021/22 the higher rate started at £50,271, and since the threshold has not moved, wage growth alone has pushed more people into this band. Higher rate taxpayers can claim additional pension tax relief and receive reduced rates on certain allowances.

Key facts and current rates

Rate: 40% on income from £50,271 to £125,140
Applies in England, Wales, and Northern Ireland
Scotland equivalent: Higher rate is 42%
Higher rate taxpayers can claim extra pension tax relief
Growing number of taxpayers due to frozen thresholds
Higher rate: 40%
Band: £50,271 - £125,140

Full Tax Bands Reference →

I

Inheritance Tax (IHT)

A tax charged at 40% on the value of an estate above the nil rate band when someone dies.

Inheritance Tax (IHT) is a tax on the estate (property, money, and possessions) of someone who has died. It is charged at 40% on the value of the estate above the nil rate band of £325,000. If the deceased leaves their home to direct descendants (children or grandchildren), an additional residence nil rate band of £175,000 may apply, giving an effective threshold of £500,000. Married couples and civil partners can transfer any unused nil rate band to the surviving spouse, potentially doubling the threshold to £1 million for a couple. The rate is reduced to 36% if the deceased leaves at least 10% of the taxable estate to charity. Most gifts made more than seven years before death are exempt. IHT is paid by the executor of the estate, usually before probate is granted.

Key facts and current rates

Standard rate: 40% on estate above threshold
Nil rate band: £325,000 (frozen since 2009)
Residence nil rate band: £175,000 (for main home to descendants)
Married couples can combine allowances: up to £1 million
Reduced rate of 36% if 10%+ left to charity
Gifts made 7+ years before death are usually exempt
Rate: 40% (36% with 10% charity gift)
Nil rate band: £325,000
Residence nil rate band: £175,000
Combined couple threshold: up to £1,000,000

Inheritance Tax Calculator →

L

Land and Buildings Transaction Tax (LBTT)

The Scottish equivalent of stamp duty, charged on property and land purchases.

Land and Buildings Transaction Tax (LBTT) is the Scottish equivalent of Stamp Duty Land Tax (SDLT). It replaced SDLT in Scotland from 1 April 2015 when the power to set property transaction taxes was devolved to the Scottish Parliament. Like SDLT, LBTT is a progressive tax with different rates applying to different portions of the purchase price. The rates and thresholds differ from SDLT. For residential property, the first £145,000 is tax-free. Rates then increase: 2% on £145,001 to £250,000, 5% on £250,001 to £325,000, 10% on £325,001 to £750,000, and 12% above £750,000. Scotland also applies an Additional Dwelling Supplement (ADS) of 8% on second homes and buy-to-let purchases. LBTT is collected by Revenue Scotland.

Key facts and current rates

Applies in Scotland only (replaced SDLT in 2015)
Collected by Revenue Scotland
First £145,000 is tax-free
8% Additional Dwelling Supplement on second homes
Different rates and bands compared to SDLT
0% on first £145,000
2% on £145,001-£250,000
5% on £250,001-£325,000
10% on £325,001-£750,000
12% above £750,000

Stamp Duty Calculator →

Land Transaction Tax (LTT)

The Welsh equivalent of stamp duty, charged on property and land purchases.

Land Transaction Tax (LTT) is the Welsh equivalent of Stamp Duty Land Tax (SDLT). It replaced SDLT in Wales from 1 April 2018 when the power to set property transaction taxes was devolved to the Welsh Parliament (Senedd Cymru). LTT is a progressive tax with its own rates and thresholds that differ from both SDLT (England) and LBTT (Scotland). For residential property, the first £225,000 is tax-free — a higher starting threshold than England. Rates then increase: 6% on £225,001 to £400,000, 7.5% on £400,001 to £750,000, 10% on £750,001 to £1.5 million, and 12% above that. A higher rates surcharge applies to additional properties. LTT is collected by the Welsh Revenue Authority (WRA).

Key facts and current rates

Applies in Wales only (replaced SDLT in 2018)
Collected by Welsh Revenue Authority (WRA)
First £225,000 is tax-free — highest nil-rate band in the UK
Higher rates surcharge on additional properties
Different rates and bands compared to SDLT and LBTT
0% on first £225,000
6% on £225,001-£400,000
7.5% on £400,001-£750,000
10% on £750,001-£1,500,000
12% above £1,500,000

Stamp Duty Calculator →

M

Marriage Allowance

Transfer £1,260 of your Personal Allowance to your spouse or civil partner to save up to £252 per year.

Marriage Allowance allows one spouse or civil partner to transfer £1,260 of their Personal Allowance to the other, reducing the recipient's tax bill by up to £252 per year (20% of £1,260). To be eligible, the person transferring must earn less than £12,570 (i.e. they do not use their full Personal Allowance), and the recipient must be a basic rate taxpayer earning no more than £50,270 (or £43,662 in Scotland). The transferor's Personal Allowance is reduced to £11,310, while the recipient gains a tax reduction of £252. Marriage Allowance is not available if either partner pays higher or additional rate tax. You can claim online through HMRC and backdate your claim by up to four tax years, potentially receiving a lump sum of over £1,000 in backdated savings. The claim continues automatically each year until you cancel it or circumstances change (e.g. divorce, death, or a change in income).

Key facts and current rates

Transfer £1,260 of Personal Allowance to spouse/civil partner
Saves up to £252 per year in tax
Transferor must earn less than £12,570
Recipient must be a basic rate taxpayer
Can backdate up to 4 tax years
Not available to higher or additional rate taxpayers
Transfer amount: £1,260
Maximum saving: £252 per year
Backdatable: up to 4 years

Marriage Allowance Calculator →

N

National Insurance

A UK tax on earnings and self-employed profits that funds the state pension, NHS, and benefits.

National Insurance (NI) is a system of contributions paid by employees, employers, and the self-employed in the UK. It funds the state pension, NHS, and other social security benefits. There are several classes of NI: Class 1 is paid by employees (8% on earnings between the Primary Threshold and Upper Earnings Limit, 2% above that) and employers (15% above the Secondary Threshold). Class 2 is a flat-rate contribution for the self-employed. Class 4 is a profit-based contribution for the self-employed. Class 3 is voluntary, allowing you to fill gaps in your NI record. You need 35 qualifying years of NI contributions to receive the full new state pension. Your NI contributions are tracked by HMRC and you can check your record online.

Key facts and current rates

Employees pay Class 1: 8% (£12,570-£50,270) + 2% above
Employers pay 15% above £5,000
Self-employed people may pay Class 4; qualifying Class 2 is treated as paid or can be voluntary
35 qualifying years needed for full state pension
No NI payable after state pension age
Employee: 8% between £12,570-£50,270, 2% above £50,270
Employer: 15% above £5,000
Class 2: no compulsory charge; voluntary £3.65/week
Class 4: 6% on £12,570-£50,270, 2% above

National Insurance Calculator →

Nil Rate Band

The £325,000 threshold below which no inheritance tax is charged on an estate.

The nil rate band (NRB) is the inheritance tax threshold — the amount of an estate that can be passed on free of IHT. For 2026/27 it is £325,000, and it has been frozen at this level since 2009. Any value above the NRB is taxed at 40% (or 36% if qualifying charitable donations are made). The NRB is one of the longest-frozen tax thresholds in the UK. If the deceased was married or in a civil partnership and did not use their full NRB, the unused portion can be transferred to the surviving spouse's estate. This means a married couple could have a combined NRB of up to £650,000. The NRB applies to the total taxable estate, which includes property, savings, investments, and some gifts made within seven years of death.

Key facts and current rates

Current threshold: £325,000
Frozen since 2009 — the longest-frozen threshold
Unused NRB can transfer to surviving spouse (up to £650,000 combined)
Applies to total estate including property and investments
40% tax charged on value above the NRB
Nil rate band: £325,000
Transferable: up to £650,000 for couples

Inheritance Tax Calculator →

P

P45

A certificate issued by your employer when you leave a job, showing your pay and tax to date.

A P45 is a document your employer gives you when you leave a job. It has four parts: Part 1 is sent to HMRC, Part 1A is for your records, and Parts 2 and 3 are given to your new employer. The P45 shows your tax code, total pay, and total tax deducted in the current tax year up to your leaving date. Your new employer uses the P45 to put you on the correct tax code and ensure continuity of your tax record. Without a P45, your new employer may put you on an emergency tax code, which could mean you overpay tax temporarily. If you do not have a P45 (for example, it is your first job), your new employer will ask you to complete a starter checklist instead. Your employer must provide a P45 when you leave — there is no option to decline it. If you are made redundant, the P45 also helps calculate any tax refund due.

Key facts and current rates

Issued when you leave a job
Shows pay and tax deducted in current tax year to date
Give Parts 2 and 3 to your new employer
Ensures correct tax code at your new job
Without a P45, you may be put on emergency tax
Employer must provide it — it is a legal requirement

Salary Calculator →

P60

An end-of-year certificate from your employer showing your total pay and tax deducted.

A P60 is an official document your employer must give you at the end of each tax year (by 31 May) if you are still employed by them on 5 April. It summarises your total pay and the total income tax and National Insurance deducted during the tax year. Your P60 also shows your tax code and National Insurance number. You need your P60 for filing a Self Assessment tax return, applying for a mortgage or loan, claiming tax refunds, and proving your income. Your employer can provide it on paper or electronically. If you lose your P60, your employer can give you a replacement or you can find the same information on your HMRC Personal Tax Account. If you have multiple jobs, you will receive a P60 from each employer. The P60 only covers PAYE income — it does not include self-employment or other untaxed income.

Key facts and current rates

Issued by employer after end of tax year (by 31 May)
Shows total pay, income tax, and NI deducted
Needed for tax returns, mortgage applications, refund claims
One P60 per employer if you have multiple jobs
Also available via HMRC Personal Tax Account

Salary Calculator →

PAYE (Pay As You Earn)

The system HMRC uses to collect income tax and National Insurance directly from employee wages.

Pay As You Earn (PAYE) is the method by which HM Revenue & Customs collects income tax and National Insurance contributions from employees in the United Kingdom. Under PAYE, your employer deducts tax and NI from your wages or salary before paying you, so you receive your net (after-tax) pay directly. The amount deducted is determined by your tax code, which HMRC issues to your employer. Most employees in the UK are taxed through PAYE and never need to file a self-assessment tax return. PAYE also covers statutory payments such as Statutory Sick Pay and Statutory Maternity Pay. Employers must report payroll information to HMRC in real time through the Real Time Information (RTI) system each time they pay their employees.

Key facts and current rates

Tax and NI are deducted at source by your employer
Based on your HMRC-issued tax code
Employers report via Real Time Information (RTI)
Most employees do not need to file a tax return

Salary Calculator →

Pension Annual Allowance

The maximum amount you can contribute to pensions each year with tax relief — currently £60,000.

The pension annual allowance is the maximum amount of pension savings you can make each year while still receiving tax relief. For 2026/27, the standard annual allowance is £60,000 or 100% of your UK earnings (whichever is lower). Contributions exceeding the annual allowance trigger an annual allowance charge at your marginal tax rate. However, you can carry forward unused allowance from the previous three tax years if you were a member of a registered pension scheme. For high earners with adjusted income above £260,000, the annual allowance is reduced (tapered) by £1 for every £2 of income above that threshold, down to a minimum of £10,000. The money purchase annual allowance (MPAA) of £10,000 applies if you have flexibly accessed your pension. Both employer and employee contributions count towards the annual allowance.

Key facts and current rates

Standard annual allowance: £60,000 (2026/27)
Or 100% of UK earnings, whichever is lower
Can carry forward unused allowance from previous 3 years
Tapered for high earners: reduced from £260,000 adjusted income
Minimum tapered allowance: £10,000
Money Purchase Annual Allowance: £10,000
Both employer and employee contributions count
Annual allowance: £60,000
Taper starts: £260,000 adjusted income
Minimum: £10,000
MPAA: £10,000

Pension Tax Relief Calculator →

Personal Allowance

The amount of income you can earn each year before paying income tax — currently £12,570.

The Personal Allowance is the amount of income you can earn in a tax year without paying any income tax. For the 2026/27 tax year it is set at £12,570. This allowance has been frozen at this level since 2021/22, with the freeze confirmed through 2030/31 — a policy known as fiscal drag. The Personal Allowance applies to all UK taxpayers regardless of whether they live in England, Wales, Scotland, or Northern Ireland. However, it is reduced by £1 for every £2 of income above £100,000, meaning it is completely withdrawn once income reaches £125,140. This taper creates an effective marginal tax rate of around 60% in the £100,000 to £125,140 income range. Your Personal Allowance is reflected in your tax code — the standard code 1257L represents a £12,570 allowance.

Key facts and current rates

£12,570 for 2026/27 (frozen since 2021/22)
Reduced by £1 for every £2 earned above £100,000
Fully withdrawn at £125,140 income
Standard tax code: 1257L
Freeze confirmed through 2030/31
Personal Allowance: £12,570
Taper starts: £100,000
Fully withdrawn: £125,140

Salary Calculator →

R

Residence Nil Rate Band (RNRB)

An additional £175,000 IHT allowance when you leave your home to direct descendants.

The Residence Nil Rate Band (RNRB) is an additional inheritance tax allowance introduced in April 2017. It provides an extra £175,000 of IHT-free threshold when the deceased's main home is left to direct descendants — children, grandchildren, stepchildren, adopted children, or foster children. Combined with the standard nil rate band of £325,000, the total IHT-free threshold becomes £500,000 per person, or up to £1 million for a married couple. However, the RNRB tapers away for estates worth more than £2 million — it is reduced by £1 for every £2 the estate exceeds £2 million, meaning it is fully lost at estates of £2.35 million. The RNRB was introduced to help families pass on the family home without a large IHT bill, but the taper means wealthier estates may not benefit.

Key facts and current rates

Additional £175,000 IHT-free allowance
Only applies when main home is left to direct descendants
Combined with NRB: £500,000 per person tax-free
Couples can combine: up to £1 million tax-free
Tapers for estates over £2 million (lost completely at £2.35 million)
Introduced April 2017
RNRB: £175,000
Taper starts: £2,000,000 estate value
Fully withdrawn: £2,350,000

Inheritance Tax Calculator →

S

Salary Sacrifice

An arrangement where you give up part of your salary in exchange for a non-cash benefit, saving tax and NI.

Salary sacrifice is an arrangement between you and your employer where you agree to reduce your contractual gross salary in exchange for a non-cash benefit — most commonly additional employer pension contributions, but also childcare vouchers, Cycle to Work schemes, or ultra-low emission company cars. Because the salary reduction happens before income tax and National Insurance are calculated, you save both taxes on the sacrificed amount. Your employer also saves on employer NI (15%). For example, if a higher rate taxpayer sacrifices £500/month into their pension, they save £200 in income tax and £40 in NI that they would otherwise have paid. The trade-off is that your reported salary is lower, which can affect mortgage applications, statutory pay calculations, and any benefits linked to salary. Your employer must ensure your remaining salary does not fall below National Minimum Wage.

Key facts and current rates

Reduces gross salary before tax and NI are calculated
Saves income tax and employee NI on the sacrificed amount
Employer also saves on employer NI (15%)
Most common for pension contributions
Also available for Cycle to Work, childcare, electric cars
Lower reported salary may affect mortgage applications

Salary Sacrifice Calculator →

Self Assessment

The process of filing your own tax return with HMRC, typically required for self-employed people and those with complex tax affairs.

Self Assessment is the system HMRC uses to collect tax from people whose liability is not fully handled through PAYE. You must file a return if, for example, you are a sole trader with gross trading income over £1,000, are a business partner, owe Capital Gains Tax, or have untaxed income that must be reported. PAYE-only income no longer triggers a return solely because it exceeds £150,000. People who owe the High Income Child Benefit Charge can usually choose PAYE unless they need to file for another reason. The tax return covers the tax year from 6 April to 5 April. The deadline for paper returns is normally 31 October; online returns and payment are normally due by 31 January following the tax year. Use HMRC's online checker because the exact filing requirement depends on your circumstances.

Key facts and current rates

Required for self-employed, high earners, and those with untaxed income
Online filing deadline: 31 January
Paper filing deadline: 31 October
Tax payment deadline: 31 January
Late filing penalty: automatic £100 fine
Payments on account if bill exceeds £1,000

Self-Employed Tax Calculator →

Stamp Duty Land Tax (SDLT)

A tax paid when buying property or land in England and Northern Ireland.

Stamp Duty Land Tax (SDLT) is a tax charged on property and land purchases in England and Northern Ireland. It is a progressive tax, meaning different rates apply to different portions of the purchase price. For residential property in 2026/27, the first £125,000 is tax-free (£300,000 for first-time buyers on properties up to £500,000). Rates then increase in bands: 2% on £125,001 to £250,000, 5% on £250,001 to £925,000, 10% on £925,001 to £1.5 million, and 12% above that. An additional 5% surcharge applies to second homes and buy-to-let properties. SDLT must be paid within 14 days of completion. Scotland and Wales have their own equivalents: LBTT and LTT respectively.

Key facts and current rates

Applies in England and Northern Ireland
Progressive rates from 0% to 12%
First £125,000 is tax-free (standard buyers)
First-time buyers: £300,000 tax-free on properties up to £500,000
5% surcharge on additional properties
Must be paid within 14 days of completion
0% on first £125,000
2% on £125,001-£250,000
5% on £250,001-£925,000
10% on £925,001-£1,500,000
12% above £1,500,000

Stamp Duty Calculator →

Student Loan Plan 2

The repayment plan for post-2012 English and Welsh student loans, with 2026/27 repayments at 9% above £29,385.

Student Loan Plan 2 applies to many people who started an undergraduate course in England or Wales from September 2012. In 2026/27, repayments are collected through PAYE or Self Assessment at 9% of income above £29,385. On annual income of £30,000, the simple annual equivalent is 9% of £615, or £55.35; actual payroll deductions are assessed by pay period. Interest varies with income and Plan 2 loans are generally written off 30 years after the April in which repayment first became due.

Key facts and current rates

For courses starting September 2012 onwards (England/Wales)
Repayment rate: 9% of income above threshold
Repayment threshold: £29,385 (2026/27)
Interest: RPI + up to 3% based on income
Written off after 30 years
Collected through PAYE or Self Assessment
Repayment rate: 9%
Threshold: £29,385
Write-off: 30 years after graduation

Student Loan Repayment Calculator →

T

Tax Code

An HMRC code (e.g. 1257L) that tells your employer how much tax-free income you are entitled to.

Your tax code is a series of numbers and letters used by your employer (or pension provider) to calculate how much income tax to deduct from your pay. The most common tax code for 2026/27 is 1257L, which represents a Personal Allowance of £12,570. The number in the code is your tax-free allowance divided by 10, and the letter indicates your situation. Common letters include: L (standard allowance), M (Marriage Allowance received), N (Marriage Allowance transferred), T (HMRC needs to review), BR (all income taxed at basic rate, no allowance), and D0 (all taxed at higher rate). Scottish taxpayers have an 'S' prefix (e.g. S1257L) and Welsh taxpayers have a 'C' prefix. If your code includes K, it means your deductions exceed your allowance and tax is owed on the difference. You can check your tax code on your payslip, P60, or via your HMRC Personal Tax Account online.

Key facts and current rates

Most common code: 1257L (£12,570 allowance)
Number = tax-free allowance divided by 10
Scottish prefix: S (e.g. S1257L)
Welsh prefix: C (e.g. C1257L)
Emergency codes: 1257L W1/M1 (non-cumulative)
Check via HMRC Personal Tax Account or payslip

Salary Calculator →

About This Glossary

This glossary covers the most important UK tax terms you are likely to encounter on payslips, tax returns, and HMRC correspondence. Each entry includes a plain-English explanation, key facts, current rates where relevant, and a link to the appropriate calculator. All figures are for the 2026/27 tax year (6 April 2026 to 5 April 2027) and are updated each year when HMRC publishes new rates.