Jargon buster

ACCOUNTING METHOD: CASH VS ACCRUALS

There are two methods of calculating taxable profits for self-employed people and landlords. This system is set up to use the easier method, known as the ‘cash basis’.

Under the ‘cash basis’, you record income when the money is received and expenses when the payment is made. You will not need to calculate debtors and creditors at the year-end, perform a stock-take, or estimate accruals and prepayments.

Some people are excluded from using the cash basis or choose not to use it. The alternative is an ‘accruals basis’, where you record income when you raise an invoice and expenses when you get a bill. Our system does not support this method.

SELF ASSESSMENT TAX RETURN (‘SA100’)

This is the annual tax return, which determines how much income tax and capital gains tax you need to pay. For the self-employed, this is also how you pay your National Insurance contributions. ‘SA100’ is HMRC’s reference number for the main tax return form - but it’s more convenient to write than ‘Self Assessment Tax Return’.

HMRC ONLINE ACCOUNT

Similar to how banks offer online banking, HMRC has tax services that you can access online. You may see it referred to as a Business Tax Account or Personal Tax Account.  

Evelyn digital tax users need it to:

• register for Self Assessment;
• update contact details held by HMRC;
• make tax payments.

After you’ve filed your tax return using our software, your HMRC Online Account will show that you’re up to date and confirm what you need to pay and when. 

COMMA-SEPARATED VALUES (‘CSV’)

This is a convenient bit of technology jargon that we use on the platform.re.

A CSV file is a way of saving data in a table-structured format.

They’re really useful when importing or exporting transactions. Most people use spreadsheet software (e.g. MS Excel) to view and create CSV files.

For example, to import a spreadsheet of transactions x, first, save the spreadsheet as a CSV file, and the platform will be able to make sense of it.

EMPLOYER REFERENCE NUMBER / EMPLOYER PAYE TAX REFERENCE (‘ERN’/ PAYE ref)

An Employer Reference Number (ERN) is given to every business registered as an employer with HMRC.
It’s a unique set of letters and numbers used to identify employers for income tax and national insurance purposes. It is sometimes referred to as an ‘employer PAYE reference’.

LANDLORD

It’s often convenient to refer to someone that gets rental income from a property as a ‘landlord’. We know the name doesn’t always fit that well, for example, if it’s only a small part of your income.

HMRC considers rental income to be a ‘business’.

MAKING TAX DIGITAL (‘MTD’)

Making Tax Digital (MTD) is a Government initiative to transform the UK tax return process.

The primary aim of Making Tax Digital is to make tax administration more effective, efficient, and easier for taxpayers through the implementation of a fully digitalised tax system whilst also reducing HMRC’s overheads for managing tax affairs.

Our platform is ready for MTD for income tax and will ensure that you are compliant with MTD requirements from the start.

PAY AS YOU EARN (‘PAYE’)

The Pay As You Earn (PAYE) system is a method of paying income tax and national insurance contributions. Your employer or pension provider deducts tax and national insurance contributions from your wages or occupational pension before paying your wages or pension.

PAYMENT ON ACCOUNT

Payments on Account are advance payments towards your income tax bill, including Class 4 National Insurance if you are self-employed.

Each payment is half your previous year’s income tax bill.

Payments are due by midnight on 31 January and 31 July.

RENT A ROOM

The Rent a Room Scheme allows you to earn tax-free income from letting out furnished accommodation in your home.

The current allowance is £7,500 per year, which is halved if you share the income with your partner or someone else.

SELF-EMPLOYED / SOLE TRADER

You’re self-employed if you run your own business as an individual and work for yourself. This is also known as being a ‘sole trader’.

You can keep all your business's profits after you have paid taxes on them. You are personally responsible for any losses your business makes.

If you operate through a limited company, you’re not a sole trader.

TAXABLE INCOME

This is the amount of income that will be taxable after any personal allowances have been deducted.

Information on this page does not constitute specific tax advice. For more information please see our full terms and conditions. If you wish to consult with Evelyn Partners on your specific tax affairs please contact your Evelyn Partners contact or digitaltax@evelyn.com