Welcome to the Vivid Accountancy Accounting & Tax Glossary. We’ve created this resource to help businesses, contractors, and individuals better understand financial and tax-related terms. Whether you’re a small business owner, a startup founder, or simply managing your own finances, this glossary gives you clear, simple definitions to guide you.

A

Accounts Preparation – The process of preparing financial statements that show the performance and position of a business over a given period.
Annual Return – A yearly filing that contains essential company information submitted to Companies House.
Assets – Items owned by a business that have value, such as cash, equipment, or property.

B

Bookkeeping – The recording of day-to-day financial transactions such as sales, purchases, receipts, and payments.
Business Plan – A formal strategy outlining a company’s goals, financial forecasts, and growth objectives.
Balance Sheet – A financial statement showing a company’s assets, liabilities, and equity at a given point in time.

C

CIS (Construction Industry Scheme) – A UK scheme where contractors deduct tax from subcontractors’ payments and pass it to HMRC.
Compliance – Ensuring all financial and tax obligations are met according to HMRC and Companies House rules.
Corporation Tax – The tax a limited company pays on its profits.
Company Formation – The process of legally incorporating a new company with Companies House.

D

Dividends – Payments made by a company to its shareholders from profits.
Directors – Individuals responsible for running a company and making decisions on its behalf.
Deductible Expenses – Business costs that can be subtracted from taxable income to reduce tax liability.

E

Equity – The value of ownership in a business after liabilities are deducted from assets.
Employer’s PAYE – A system for collecting income tax and National Insurance from employees’ wages.
Expenditure – Money a business spends on its operations, such as salaries, rent, or supplies.

F

Fixed Assets – Long-term assets such as machinery, vehicles, or property used in running a business.
Forecasting – Estimating future financial performance based on past data and market trends.
Freelancer – A self-employed individual offering services without being permanently employed by one company.

L

Liabilities – Debts or obligations a business owes, such as loans, bills, or supplier payments.
Limited by Shares – A type of company structure where liability of shareholders is limited to the value of their shares.
Limited by Guarantee – A company structure often used by non-profits and charities where liability is limited to a nominal guarantee amount.

M

Management Accounts – Regular (monthly or quarterly) financial reports used to monitor business performance.
Mortgage Guidance – Professional advice on choosing and applying for a suitable mortgage.
Marginal Tax Rate – The rate of tax applied to the next pound of income earned.

P

PAYE (Pay As You Earn) – A UK system where employers deduct tax and National Insurance from employees’ wages.
Pension Auto-Enrolment – A legal requirement for employers to automatically enroll eligible employees into a workplace pension scheme.
Profit & Loss Statement – A financial report showing a company’s revenues, costs, and profits over a set period.

S

Self-Assessment Tax Return – A system for individuals to declare income and calculate tax owed directly to HMRC.
Shareholders – Individuals or entities that own shares in a company.
Statutory Accounts – Annual financial statements that companies are legally required to file with Companies House.

T

Tax Return – A form submitted to HMRC reporting income, expenses, and other financial details to calculate tax liability.
Turnover – The total income a business generates before expenses are deducted.
Tax Relief – Reductions that lower the amount of tax owed, such as for certain expenses or investments.

V

VAT (Value Added Tax) – A tax charged on most goods and services in the UK.
VAT Return – A form submitted to HMRC to report the VAT collected and paid by a business.
Variable Costs – Business costs that change depending on production levels, e.g., raw materials.

How This Glossary Helps You

This glossary is designed to:

• 📌 Improve your understanding of financial and tax terms

• 📌 Support small businesses, contractors, and startups with clear explanations

• 📌 Boost financial literacy so you can make informed business decisions

👉 Need more than just definitions? Contact Vivid Accountancy for personalised financial advice tailored to your business or personal needs.