Here at Atkinson Accounts we pride ourselves in making the accounting process as simple as possible for you. However, finance is so full of jargon sometimes it is impossible to avoid. With this in mind we have compiled the below jargon buster to ensure you’re never confused again!
|Auto enrolment||Under auto enrolment legislation, employers and employees must both automatically contribute to their employees private pension – currently 3% of salary contributed by the employer and 5% by the employee.|
|Capital||Money in the business which is owed to the business owner.|
|Corporation tax||This is the tax companies pay on their profits. The rate of corporation tax is set by the government and is currently 19%.|
|Current assets||An asset which is likely to be converted to cash within 12 months e.g. cash, stock.|
|Cost of sales||The money that is costs to produce goods or deliver a service. These are costs that are directly concerned with the product or service and do not include overheads.|
|Director||Every limited company must have at least one director. They are responsible for running the company, ensuring all company accounts are completed sufficiently and filed in a timely manner.|
|Director’s loan account (DLA)||A record of transactions between a company and its director, not including salary or dividends.|
|Dividends||A payment per share made to each of the company’s shareholders. The amount can be based on the profits (or reserves) After you have paid your salaries and any expenses and put aside any money you need to pay your taxes what left is the profit. From your profit, and dependent upon your future business plans, you can pay dividends – the money that is left in the company|
|Fixed assets||An owned asset that has a long-term benefit to the company and is therefore expected to be in the company for at least 12 months, e.g. vehicles or machinery.|
|Gross profit||A business’ total revenue less any cost of sales.|
|Input tax||VAT payable on purchases.
“If your input tax exceeds your output tax you will be due a refund from HMRC”.
|IR35||This is legislation designed to identify “disguised employment” and usually affects contractors. It is important to be clear on your status.|
|Long-term liabilities||Any amount your company needs to pay that will become due after the current financial year end.|
|Net profit||A business’ total revenue less any cost of sales and overheads.|
|NI||National Insurance is paid by the majority of the workforce and builds up your entitlement to state benefits such as pensions. The rates of NI are split into 4 classes: https://www.gov.uk/national-insurance/national-insurance-classes|
|Output tax||VAT charged on sales.
“If your output tax exceeds your input tax you will owe money to HMRC”.
|Overheads||This refers to ongoing business expenses that help the company operate on a day to day basis e.g. rent, wages, phone bills etc|
|PAYE||This stands for Pay As You Earn, and is the name given to the tax system whereby an employees income tax and NI contributions are deducted from their gross salary before being paid.|
|P45||A P45 is a document employers must give their employees upon them leaving employment with them. It details the employees gross pay and any tax that has been deducted up to their leaving date|
|P60||A P60 is a document employers must give to their employees by 31st May of each year (relating to the previous tax year). It details the employees gross pay and any tax that has been deducted.|
|RTI||“Real Time Information” was introduced in 2013 and means employers are obliged to report PAYE information to HMRC on a monthly basis.|
|Short-term liabilities||Any amounts your company needs to pay within it’s current financial year e.g. money owed to suppliers, short term loans.|
|SME’s||“Small and Medium Enterprises” are businesses with fewer than 250 employees.|
|Tax year||The tax year runs from 6th April to 5th April the following year.|
|Trade creditors||Money owed by the business to another business that has provided goods or services.|
|Trade debtors||Money owed to your business by a customer for products or services.|
|UTR||UTR stands for Unique Taxpayer Reference. When you register as self-employed (or for corporation tax as a company) HMRC will send you your 10-digit UTR. You will need this to file your tax returns.|
|VAT||Value Added Tax is a spending tax. Businesses will need to register for VAT once their annual taxable turnover exceeds £85,000. Take a look at our guide to VAT for businesses here: https://atkinsonaccounts.co.uk/vat-the-small-business-owners-basic-guide/|
|Year end||The closing date of a business’ account year. This usually falls on the anniversary of the end of the month in which the business began. Companies can check their year end here: https://beta.companieshouse.gov.uk/|