Money Glossary

Money Glossary

These are additional contributions by an employee to their employer’s approved pension scheme or to a separate pension provider of the employee’s choosing (free-standing AVC).

A term used in official financial documents to describe bad credit, i.e. someone who is considered to be a high risk to lenders because they have experienced financial difficulties in the past, has missed payments or had debt recovery proceedings started against them.

This is a Stock Exchange market whereby investors can deal in shares in unquoted companies. It was previously called the ‘Unlisted Securities Market’.

An annual payment to an individual, usually resulting from a capital investment. The regular annual sums cease on death. Due to the payment mainly consisting of a return of capital, only a small part of the annuity usually bears tax at the basic rate.

A term used to describe when a borrower has missed one or more payments on their mortgage or loan, but hasn't yet defaulted on their loan.

Anything owned with monetary value. This includes both real and personal property.

A court order obtained by a creditor to make a debtor's employer deduct and hand over to the creditor a proportion of the debtor's earnings to pay off the debt.

Until the Spring Budget in 1998 it was common practice to take advantage of the annual tax-free Capital Gains Tax exemption by selling sufficient numbers of shares on one day (to realise a modest tax-free gain) only to buy them back the following day at more or less the same price. The 1998 Budget made bed & breakfasting ineffective for tax purposes.

This is a loan by an employer to an employee at less than the commercial rate of interest.

Otherwise known as ‘perks’ received by a director or an employee which are nearly always taxed as employment income.

Bonds are investments provided by insurance companies with apparently favourable tax treatment on both annual payment and final maturity. The annual payments and maturities are called ‘chargeable events’ by the taxman.

These allowances are given to businesses for the purchase of capital assets (usually industrial buildings, plant, machinery and motor vehicles) whereby the cost of the assets can be written down against tax over a period of years.

These are special National Insurance Contributions payable by employers on employees’ benefits.

The law that governs personal loans and other types of credit agreements, such as hire purchase and credit cards.

Tax levied on profits of limited companies.

An order issued by a court to a person who hasn't satisfied payment to their creditors. The order is for an amount agreed between the debtor and creditor, or for an amount stipulated by the court. Unless the full amount of the judgment is paid within one month, the CCJ will be recorded on the Register of County Court Judgments for six years. This information is then used by lenders to decide whether someone should be given a loan or other credit. Incorrect information can be removed from the Register and once a debt has been paid, the entry can be marked ‘satisfied’. The Scottish equivalent of a CCJ is a ‘decree’.

There are three credit reference agencies that collect and collate information about the borrowing habits of adults in the UK. The information is used by lenders to check people’s identity, their credit history and ongoing credit commitment, so that they can decide whether or not to lend them money or offer credit. Information is obtained from various sources, such as local authorities, banks, building societies and other lenders. By law, credit reference agencies must provide you with your statutory credit file, when asked, although they will request a payment for doing so.

A dividend is a cash sum paid out of profits to shareholders of a company based on the number of shares they hold.

The country or state which is your natural home. Professional advice should be sought over this, but someone who has a foreign domicile doesn’t regard the UK as their real home.

Earned income is the income of an individual which is derived from their physical, personal or mental labours. It also includes most pensions.

Emolument is a formal name given to salary, remuneration, bonuses and other income deriving from an employment of a director or employee.

The Enterprise Investment Scheme is a scheme under which individuals receive favourable Income Tax and Capital Gains Tax treatment when investing in qualifying unquoted trading companies.

31 January, being the date following the end of the tax year by which your Self-Assessment Tax Return must have been submitted electronically to HM Revenue & Customs if you are to avoid an automatic £100 penalty. The filing date is 31 October if you send in a paper return.

Term given to a lump sum payment made by an employer to an employee on the cessation of their employment. This can usually attract favourable tax treatment.

Income from which no tax is deducted at source, even though tax may still have to be paid.

An undertaking to be responsible for the performance of another person's legal obligations. A bank may ask the directors to guarantee a company's overdraft. A landlord may ask a tenant to find a guarantor that the rent will be paid and the tenant's covenants performed.

This is tax relief given to a donor, or other transferor of business assets, whereby the gain is not charged to tax but deducted from the cost of the asset in the hands of the recipient.

See Pledge.

Occurs when a borrower has experienced credit problems and is disqualified from using the products of mainstream lenders. An impaired credit mortgage is a specialist loan available for people with a history of credit problems. These can also be known as ‘adverse credit loans’.

Now available only to companies. This allowance provides for that element of a capital gain which is attributable to inflation.

An IVA enables a person who is in debt to come to an agreement with their creditors by paying off a percentage of the debt over a specific period of time, thus avoiding bankruptcy or repossession. A regular payment plan is drawn up by a specialist practitioner who decides how much an individual can realistically afford to pay each month.

The inability of a company to meet its debts as they become due.

Individual Savings Account. Provided that certain rules are observed, these accounts enjoy tax benefits.

Anyone receiving less than £8,500 per year including benefits in kind.

A decision made by a judge that enables creditors to recover the total sum due, including arrears and all other costs. A money judgment can be attached to a possession order, which means that someone loses their home and has to pay arrears.

This is a levy applied to employment income and self-employment income, the contributions going towards the state pension on retirement and other contributory benefits.

The pay received by an employee after all employer's deductions, such as tax and National Insurance, have been subtracted.

Where a self-employed person suffers tax more than once on a particular year’s profits, a figure of overlap relief should be calculated so that, in due course, usually on the cessation of the business, this overpayment of tax may be taken into account.

The compulsory system for employers to use whereby tax is deducted more or less evenly over the year resulting in the correct amount of tax being paid by the end of the tax year on an individual’s earnings.

Payment of a regular sum, like rent or salary, at the beginning of the period to which it relates.

Payment of a regular sum, like rent or salary, at the end of the period to which it relates.

Payment for services.

This is a Capital Gains Tax relief that is available to an individual, partnership or company which disposes of one business asset and uses the proceeds to acquire a replacement business asset during a specified qualifying period.

Any obligation guaranteed by collateral of either real estate or personal property.

This is an option granted to directors or employees whereby they may buy shares in the company for which they work.

Stamp Duty is the duty payable on transfers of shares and properties.

Income from investments and property as opposed to income earned.

Partnerships and sole traders are unincorporated businesses. Limited liability partnerships and limited companies are incorporated businesses.

An investment fund investing the combined contributions from individual investors and paying them dividends in proportion to their holding.

An obligation not guaranteed by any form of collateral.

A type of investment trust for investing in unquoted trading companies with significant tax advantages for the investor.

An asset that has an anticipated useful life of less than 50 years.

Generally, any period of 12 months commencing on the relevant start date but it can be: 

  1. Accounting (or financial) year - the period covered by the accounts of a company or other body
  2. Calendar year - 12 months ending on 31 December
  3. Fiscal year - the tax year ending on 5 April

However, rates and Council Tax are based on a year ending 31 March.

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