Plain-English glossary

Your accounts profit, adjusted for tax: add back disallowed costs like depreciation and client entertaining, then subtract capital allowances. This is BEFORE any losses brought forward.

Box 155 minus Box 160 (losses brought forward). If you have no losses to bring forward, this is the same number as Box 155.

Interest your company received or paid that isn\u2019t part of its normal trade \u2014 bank interest is the most common example.

Profit on selling a business asset (proceeds minus cost), separate from trading profit. Reported net of any allowable losses.

Net trading profit plus non-trading interest, property income, and chargeable gains \u2014 your income from everywhere, before donations.

Donations to UK charities, deducted from total profits before tax is calculated.

HMRC\u2019s official name is "Profits chargeable to Corporation Tax." Total profits minus qualifying donations \u2014 the actual figure your tax bill is calculated on.

Taxable total profits plus dividends received from companies outside your group. This figure has no box of its own \u2014 it exists only to test which marginal relief band you\u2019re in.

Other companies under common control with yours. Each one shrinks your marginal relief thresholds: the \u00a350,000/\u00a3250,000 limits are divided by (1 + number of associated companies).

A tapered discount that smooths the jump from the 19% small profits rate to the 25% main rate, for profits between \u00a350,000 and \u00a3250,000 (lower if you have associated companies).

19% \u2014 applies in full when augmented profits are \u00a350,000 or below.

25% \u2014 applies in full when augmented profits are \u00a3250,000 or above.

VAT you charge customers on your sales.

VAT you\u2019ve paid on purchases, which you can usually reclaim from HMRC.

20% \u2014 the default rate for most goods and services.

5% \u2014 a smaller list of goods and services, e.g. domestic fuel and power.

0% \u2014 still VAT-taxable in principle (so it counts toward your sales totals) but charged at nil. Most food and children\u2019s clothes fall here.

\u00a390,000 of taxable turnover in any rolling 12 months \u2014 cross it and you must register for VAT.

An alternative to standard VAT accounting for businesses with turnover under \u00a3150,000: pay a fixed percentage of your gross turnover instead of tracking input and output VAT separately. You generally can\u2019t reclaim input VAT under this scheme.

A Flat Rate Scheme business that spends very little on goods (under 2% of turnover, or under \u00a31,000/year). Forces the flat rate up to 16.5% regardless of sector, since the scheme assumes some goods spending in its normal sector rates.

For certain purchases (some overseas services, some construction work), the buyer \u2014 not the seller \u2014 accounts for the VAT. It\u2019s added to both your output VAT and your input VAT in the same return, so it\u2019s usually net-nil, but it does move your box totals.

Applies if your business makes both VAT-taxable and VAT-exempt supplies. Input VAT linked to exempt supplies generally can\u2019t be reclaimed, unless you fall under the de minimis limit.

The threshold below which exempt input VAT can still be reclaimed in full despite partial exemption: \u00a31,875 per quarter (\u00a3625/month, \u00a37,500/year) and no more than half your total input VAT.

The first \u00a312,570 of income that\u2019s tax-free, used against your income before any rate band applies.

The allowance shrinks by \u00a31 for every \u00a32 of income over \u00a3100,000, reaching zero at \u00a3125,140.

20% \u2014 on taxable income up to \u00a337,700 (England, Wales & Northern Ireland).

40% \u2014 on taxable income from \u00a337,701 to \u00a3125,140.

45% \u2014 on taxable income above \u00a3125,140.

Scotland sets its own bands for salary/profit/property income: 19/20/21/42/45/48% across six bands. Savings and dividend income still use the UK-wide rates even for Scottish taxpayers.

Interest you can earn tax-free: \u00a31,000 for basic-rate taxpayers, \u00a3500 for higher-rate, \u00a30 for additional-rate.

An extra 0% band of up to \u00a35,000 for savings income specifically, available only if your other income doesn\u2019t already fill it.

The first \u00a3500 of dividend income is tax-free, regardless of which rate band you\u2019re in.

8.75% (basic), 33.75% (higher), 39.35% (additional) \u2014 dividends are always taxed as the top slice of your income, after salary/profits and savings.