Accruals

Accruals record income and expenses that relate to the current period but have not yet been paid or invoiced. This gives a more accurate picture of your business performance. It is a key part of proper financial reporting.

Allowable Expenses

Allowable expenses are costs you can deduct from your income to reduce your tax bill. Common examples include travel, home office costs and professional fees. Claiming correctly can make a big difference to your profit.

Balance Sheet

A balance sheet shows what your business owns and owes at a particular moment. It includes assets, liabilities and equity. It gives a snapshot of the financial health of your business.

Bank Feeds

Bank feeds import your bank transactions directly into your accounting software. They save time and reduce errors by avoiding manual entry. Most cloud accounting systems offer this feature.

Cash Accounting VAT Scheme

With cash accounting, you only pay VAT when your customers pay you, and you reclaim VAT when you pay suppliers. It helps with cash flow if clients take time to pay. It can be especially helpful for service-based businesses.

Cash Basis

Cash basis records money only when it actually moves in or out of your bank. It is simple and easy for small businesses to understand. HMRC allows many sole traders to use this method.

Cash Flow

Cash flow is the movement of money in and out of your business. Positive cash flow means you can cover your bills and grow. Poor cash flow is one of the biggest causes of stress for small business owners.

Chart of Accounts

A chart of accounts is a list of all categories your accounting software uses to record income, expenses, assets and liabilities. It keeps everything organised and consistent. A clear chart of accounts makes bookkeeping much easier.

CIS

The Construction Industry Scheme sets out how contractors must pay subcontractors in the building and construction trades. Payments are made with tax deducted at source unless the subcontractor is registered for gross status. It helps HMRC make sure tax is paid correctly in the construction sector.

Cloud Accounting

Cloud accounting stores your financial records online rather than on your computer. It lets you access your accounts anywhere and keeps your data safe and backed up. It also works well with MTD requirements.

COGS (Cost of goods sold)

These are the direct costs of producing or buying the items you sell. COGS affects your gross profit and shows how much it costs to deliver your product. Keeping COGS accurate helps with pricing decisions.

Corporation Tax

Corporation Tax is the tax that limited companies pay on their profit. It is separate from personal tax and has its own rates and deadlines. Companies must file a Company Tax Return once a year.

Creditors

Creditors are suppliers or businesses you owe money to. Keeping track of creditors helps avoid missed payments and keeps your accounts accurate. It also supports better budgeting.

Debtors

Debtors are customers who owe you money for goods or services. Tracking debtors helps you stay on top of late payments and manage cash flow. It’s an important part of running a healthy business.

Director’s Loan Account

A DLA tracks any money taken out of or put into a company by its directors. It is important to keep this accurate to avoid unexpected tax charges. Your accountant will help you manage it correctly.

Dividend

A dividend is money paid to company shareholders from company profits. They are taxed differently to salary and can be more tax efficient. Directors often use dividends alongside a small salary.

EOM Stock Check

An end-of-month stock check helps you record what inventory you have on hand. It improves accuracy in your accounts and prevents losses. It also highlights items that sell well or need restocking.

EPS

An Employer Payment Summary is used when you need to report adjustments such as statutory payments or when no employees were paid in a tax month. It helps HMRC calculate the correct amount of tax you owe. You normally send an EPS after your FPS.

Flat Rate Scheme

This scheme allows small businesses to pay a fixed percentage of their turnover as VAT. It simplifies record keeping because you do not track every individual purchase. Some businesses save money using this scheme, while others do not.

FPS

A Full Payment Submission is sent to HMRC every time you run payroll. It reports employee pay, tax, National Insurance and other deductions. Submitting it on time keeps your payroll records accurate and avoids penalties.

HMRC

HM Revenue and Customs is the UK government department responsible for collecting taxes, National Insurance, VAT and running the Self Assessment system. They also handle compliance checks, tax refunds and employer payroll submissions. You will deal with HMRC for almost every part of your business finances.

Home Office Claim

If you work from home, you can claim a portion of your household costs. This might include electricity, broadband or a fixed weekly rate. It helps reduce your tax bill fairly.

Hubdoc

Hubdoc is a tool that lets you scan or email receipts and invoices into your accounting system. It reads and stores each document for easy reference. It removes paper clutter and speeds up bookkeeping.

Input VAT

Input VAT is the VAT you pay on items bought for your business. When you submit a VAT return, you can reclaim this amount. It reduces how much VAT you owe overall.

Making Tax Digital (MTD)

MTD is a government initiative that requires individuals and businesses to keep digital records and submit tax returns using approved software. The aim is to reduce errors and make the tax system simpler. Many businesses will eventually have to follow these rules.

Mileage Claim

A mileage claim lets you deduct business travel in your personal vehicle using HMRC’s approved rates. You only claim for business trips, not personal journeys. Good records keep your claim safe if HMRC checks.

MTD for ITSA

MTD for Income Tax Self Assessment is the part of Making Tax Digital that affects people with self employed or property income. From April 2026, anyone earning above £50,000 from these sources must keep digital records and send quarterly updates. It is a major change to the UK tax system.

MTD Software

MTD-approved software lets you send digital updates to HMRC as part of Making Tax Digital. It connects your records directly to HMRC’s systems. Popular examples include Xero, QuickBooks and FreeAgent.

OCR

Optical Character Recognition reads receipts and invoices and turns them into digital data. It saves you typing everything by hand. Tools like Hubdoc and Dext use OCR.

Output VAT

Output VAT is the VAT you add to the goods or services you sell. This money belongs to HMRC and must be reported on your VAT return. The difference between input and output VAT decides what you pay or reclaim.

P11D

A P11D reports any taxable benefits employees receive, such as medical insurance, company cars or interest-free loans. It must be submitted to HMRC each year. Employers may also have to pay Class 1A National Insurance on the value of these benefits.

P45

A P45 is given to an employee when they leave a job. It shows their taxable earnings and tax paid so far in the tax year. New employers use it to apply the correct tax code.

P60

A P60 is a summary of an employee’s earnings and deductions for the entire tax year. Employers must issue a P60 to every employee still working for them at year end. It is an important document used for loan applications and tax checks.

PAYE

Pay As You Earn is the system employers use to collect income tax and National Insurance from employees. The tax is taken from wages before they are paid. PAYE also covers items such as student loan repayments and certain benefits.

Payment on Account

Payments on account are advance payments towards your next Self Assessment tax bill. They are based on your previous year’s tax and are paid in January and July. Many new self employed people find this confusing at first, so it helps to plan ahead.

Profit and Loss

A profit and loss report shows your income, expenses and profit for a chosen period. It helps you understand whether your business is making money. Many business decisions rely on accurate profit and loss figures.

Reconciliation

Reconciliation means checking your accounts match your bank statements. It helps you find missing entries, duplicates or errors. Most software offers automatic reconciliation tools.

RTI

Real Time Information is the system used to send payroll data to HMRC every time you pay employees. It replaces the old annual filing system. RTI makes sure tax codes and employee records stay up to date.

Standard VAT Scheme

Under the standard scheme, VAT is based on invoice dates rather than payment dates. This means you may owe VAT before a customer has paid you. It works well for businesses with predictable cash flow.

Statutory Payments

These include payments like statutory maternity pay, paternity pay and sick pay. Employers pay them through payroll and then recover some or all of the cost from HMRC. The rules vary depending on the type of payment.

Tax Code

A tax code tells employers how much tax should be taken from an employee’s wages. It reflects personal allowances, adjustments and any benefits that affect taxable income. Getting the wrong tax code can lead to overpayments or underpayments.

UTR Number

Your Unique Taxpayer Reference is a ten digit code that identifies you within HMRC’s systems. You receive it when you register for Self Assessment. You need it for filing tax returns, contacting HMRC and opening certain business accounts.

VAT

Value Added Tax is charged on most goods and services in the UK. Businesses collect VAT on behalf of HMRC and can reclaim VAT on their own purchases. You must register for VAT when your turnover reaches a certain threshold.

VAT Threshold

This is the point where your business must legally register for VAT. Once registered, you must charge VAT on your sales and submit VAT returns. Many businesses choose to register voluntarily if it benefits them.

Year End

Your year end is the point when your accounts close for the year. It is the date your accountant uses to prepare your financial statements and any tax returns. A smooth year end relies on tidy bookkeeping.