Glossary of banking

Allowable expenses are essential business costs that reduce your taxable profit. This means you will not have to pay tax on these items.

A business loss happens when expenses are greater than your business' income.

If your business is a limited company, you will need to pay Corporation Tax on the profits up to 25%.

Direct Debits give companies permission to take money from your agreed bank account on a set date.

National Insurance is a tax on earnings paid by employers and employees to fund various benefits like state pension, statutory sick pay and maternity leave.

Employee pay after tax, or take-home tax, is the amount an employee will be paid after tax, NI, any pensions or student loan contributions have been taken off their gross salary.

Employers have to pay the deducted income tax and National Insurance (NI) from employees to HMRC.

This is the tax you pay on money you make in a tax year. You'll be able to earn a certain amount each year before any tax is due, which is called your personal allowance.

A limited company, according to the gov.uk website, is a company that is legally separate from the people who run it. It has separate finances from your personal ones.

National Insurance payments are used to pay for benefits and your State Pension.

The new tax year is when new tax rates and allowances go into effect. In the UK, the tax year starts April 6 of each calendar year and ends April 5 of the following year. The current tax year runs from 6 April 2023 to 5 April 2024.

Operating loss happens when operating expenses are greater than your company's income.

A P45 form is a statement that shows how much tax you've paid on income so far in the tax year. It is given to you when you no longer receive an income from that company.

A P60 form is a statement showing how much you've earned and the amount of tax you've paid in the last tax year.

When a payment is made after a transaction has completed, it’s said to be paid in arrears. Often this is intentional due to the terms of a contract, and sometimes it’s unintentional when a customer makes a late payment.

PAYE is the system an employer or pension provider uses to take Income Tax and National Insurance contributions before they pay your wages or pension.

A payee is anyone who receives funds from a payer. The payment can be a bank transfer, cheque, cash, etc. The payee could be an individual, business, or trust.

In economics, business, or statistics, per capita is used to report average figures per person. For example if 1,000 apples are owned by 10 people, there are 100 apples per capita.

Per diem often is a fixed daily allowance an organisation provides to employees or contract workers to cover business travel expenses.

The standard personal allowance that you won't pay tax on is £12,570. This may be different if you claim Marriage Allowance or Blind Person’s Allowance. It will be smaller if your income is over £100,000.

Postal orders work the same way as a cheque, but you don't need a bank account to send them. They are slips that transfer money without any specific financial information.

The private sector is a part of the economy that is not run by the government. Instead, it's run by companies and individuals.

A provisional bill sent to your customer before delivery of goods or services. It includes the date of issue, a description and the value of the sale, as well as taxes or fees. Pro forma invoices avoid your customer having unanticipated charges.

Pro rata refers to the need to make an allowance in proportion to the whole. For example, if you're paid a pro rata wage, it’s calculated using what you’d earn working full time. Part time wages, paid pro rata, are proportional to full time wages.

Profit is the money left after paying for business expenses. Gross profit shows what’s left after paying for the goods sold. Operating shows what's left after also paying operating costs. Net shows what you made after deducting costs and tax.

A public limited company is a company structure for businesses in the UK. The business exists as a separate entity to the owners, offering protection from liabilities and debt, unlike the other structures such as sole trader and partnerships.

A quote is a document from a business to a customer stating the price of a sale before the customer has committed to the purchase. It lets a customer know how much the products or services will cost them to help them to decide if they will continue.

VAT on purchases is the total amount of VAT included on your purchases.

VAT on sales is the total amount of VAT your customers have paid on sales.

There are 12 months in a VAT accounting period. Most businesses send a VAT return every three months. Even if you have no VAT to pay or reclaim you must submit a VAT return for every accounting period.

There are three different rates of VAT – 20%, 5% and 0%.

The VAT threshold is the volume of annual turnover at which businesses are required to register for. The current UK VAT registration threshold stands at £85,000. This is due to change in 2024.

VAT (Value Added Tax) is a tax added to most products and services sold by VAT-registered businesses.

A wire transfer, also known as a bank transfer, or credit transfer, is a way of sending electronic funds from one person or entity to another without using physical cash.

Year-to-date covers the time from January 1 to the current date.