Word list

Accruals accounting

A way of doing your books where you record money on the date you send or get a bill — even if the cash has not moved yet. The other way is cash basis. Limited companies must use this method.

Allowable expense

A business cost you are allowed to take off your income before your tax is worked out. It must be spent only for the business. It lowers your tax — it is not money you get back.

Articles of association

The rulebook for how a limited company is run. Most small companies just use the standard set, called 'model articles'.

Auto-enrolment

The law that says you must put staff into a workplace pension and pay into it too. It starts the day your first worker begins — even if you think nobody will join.

Benefit in kind

A perk from a company that is not cash — like a company car or private health cover. HMRC taxes it almost as if it were pay.

Business Gateway

Scotland's free business help service, paid for by the Scottish Government and run through councils. Free advisers, workshops and templates. It is the best first place to go.

Capital allowances

A way to take the cost of long-life kit — like machines, vans or computers — off your profits over time. Cars always go through capital allowances.

Capital cost and running cost

A capital cost buys something that lasts, like a machine or a van. A running cost is a day-to-day cost, like fuel, stock or rent. Tax treats them differently.

Cash basis

The simple way of doing your books: you record money only when it actually comes in or goes out. It is the normal method for sole traders. You do not pay tax on bills that have not been paid yet.

Class 2 and Class 4 National Insurance

The National Insurance the self-employed deal with. Class 4 is the bit you pay on profits. Class 2 no longer has to be paid once profits are about £7,100, but you still get the credit that protects your State Pension.

Confirmation statement

A short yearly form to Companies House that says your company's details (like directors and address) are still correct. It is separate from your accounts.

Consumer Rights Act 2015

The main law that protects shoppers. Goods must be good quality, fit for purpose and as described, and there is a clear ladder of refunds, repairs and replacements.

Cooling-off period

The 14 days a customer gets to change their mind and get a refund when they buy online, by phone or away from your shop. Some items, like fresh food or made-to-order goods, are not included.

Corporation Tax

The tax a limited company pays on its profits. You must pay it 9 months and 1 day after your company's year-end — that is before the tax return itself is due.

COSHH

Rules about controlling substances that can harm health at work. Even everyday cleaning sprays count, so most shops and workshops need a simple COSHH check.

Data protection fee

A yearly fee most businesses that handle personal data must pay to the ICO (the UK's data watchdog). For small businesses it is usually £52 a year.

Designated Premises Manager

The named person in charge of alcohol sales at a licensed place in Scotland. They must hold a personal licence.

Diligence

The Scottish word for making someone pay a court debt — for example taking money from their wages or bank. It is done by sheriff officers. It is Scotland's version of English bailiffs.

Director's loan

Any money a director takes from their company that is not pay, a dividend or a paid-back expense. If you still owe it more than 9 months and 1 day after year-end, the company pays an extra 33.75% tax charge until you pay it back.

Distributable profits

The after-tax profit a company has built up and is allowed to pay out as dividends. Paying a dividend without enough of this is against the law and must be paid back.

Dividend

A share of company profit paid to the owners. You need a short written note each time, even in a one-person company. Dividends use UK-wide tax rates, not Scottish ones, and pay no National Insurance.

DMCC Act 2024

A newer law that lets the competition regulator (the CMA) fine businesses directly for unfair selling — like fake reviews, hidden fees and false discounts.

Drawings

Money a sole trader takes out for themselves. It is not an expense and is not taxed on its own — a sole trader is taxed on profit, not on what they take out.

Duties start date

The day your first worker starts. This is the day your pension duties begin, even if nobody actually needs to be put into a pension yet.

Employers' liability insurance

Insurance that covers claims from staff who get hurt or ill because of work. You must have it from your very first employee — at least £5 million of cover — or face a daily fine.

Employment Allowance

A discount (up to £10,500) that cuts a small employer's National Insurance bill. A company whose only paid person is a single director cannot claim it.

EORI number

A free number from HMRC that you need to move goods into or out of the UK.

EPR (packaging rules)

Rules that make bigger businesses pay for the packaging waste they create. They only bite if your sales top £1 million and you handle over 25 tonnes of packaging a year.

Flat Rate Scheme

A simpler way to work out VAT for smaller businesses: you pay HMRC a set percentage of your sales instead of adding up every bit of VAT.

HMRC

His Majesty's Revenue and Customs — the UK tax office. It collects Income Tax, National Insurance, VAT, Corporation Tax and PAYE.

Input tax and output tax

VAT you pay on things you buy (input) and VAT you charge on things you sell (output). If you are VAT-registered, you pay HMRC the difference.

Land and Buildings Transaction Tax

Scotland's tax on buying property or land, and on some leases. It replaces the English 'stamp duty'.

Limited liability

The safety wall a company gives its owners. If the business fails, owners usually lose only the money they put in. A personal guarantee can break this wall.

Making Tax Digital

HMRC's plan to make businesses keep records on a computer and file through software. It already covers VAT, and is spreading to sole traders with bigger incomes.

Memorandum of association

A short founding paper where the first owners agree to set up the company. It is made for you when you register online.

National Insurance

A second tax on money you earn. It also builds up your right to the State Pension and some benefits. It is the same across the whole UK.

Non-domestic rates

Scotland's tax on business premises, based on a 'rateable value' and billed by your council. Scotland's system is separate from England's, with its own discounts.

Partnership

A business run by two or more people who share the work, the profit and the debts. In Scotland a partnership is its own legal 'person', unlike in England.

PAYE

The system employers use to take Income Tax and National Insurance out of wages and send it to HMRC. Becoming an employer means setting up a PAYE scheme.

Payments on account

Advance payments towards next year's tax, asked for once your bill passes £1,000. You pay half on 31 January and half on 31 July. This is why your first January bill can feel huge.

PECR

The rules on marketing emails and texts, and on website cookies. The ICO looks after them alongside data protection law.

Person with Significant Control

Anyone who really owns or controls a company — usually someone with more than 25% of the shares or votes. They must be listed at Companies House and prove who they are.

Personal Allowance

The £12,570 of income everyone can earn each year before paying any Income Tax. It is set for the whole UK, even for Scottish taxpayers.

Personal guarantee

A director's own promise to pay back a company debt if the company cannot. Banks and landlords often ask for one — and it removes your limited liability for that debt.

Personal licence

The licence a person needs (after training) to allow alcohol to be sold in Scotland.

Premises licence

The licence a venue needs to sell alcohol or put on certain entertainment, granted by the council licensing board.

Private limited company

A business that is its own legal 'person', separate from its owners. It gives limited liability, but has more paperwork and its details are public.

Professional indemnity insurance

Insurance that covers you if advice or work you gave causes a client to lose money. Many client contracts and some professions require it.

Public liability insurance

Insurance that covers claims if a customer or member of the public is hurt, or their property is damaged, because of your business. Not required by law, but often essential.

PVG scheme

Scotland's criminal-record checking scheme for people who work with children or protected adults. It is run by Disclosure Scotland — Scotland's version of the English DBS.

Rateable value

The Scottish Assessors' guess at a property's yearly rent, used to work out your business rates. It decides if you get the Small Business Bonus Scheme.

RIDDOR

The rule to report serious injuries, some illnesses and dangerous events at work to the Health and Safety Executive (HSE).

RTI (Real Time Information)

The PAYE rule that you must tell HMRC about pay and deductions on or before every payday — not once a year.

Self Assessment

HMRC's system for tax on income that is not taxed automatically. Sole traders sign up, file one return a year, and pay by 31 January.

SEPA

The Scottish Environment Protection Agency — Scotland's environment regulator. It handles things like waste-carrier registration. It is Scotland's version of England's Environment Agency.

SIC code

A short code you pick when you register a company that says what your business does.

Simple procedure

The Scottish sheriff court way to claim money up to £5,000. It is Scotland's version of England's small claims.

Simplified expenses

Optional flat rates from HMRC that save you working out fiddly shares — a set rate per mile, and a set monthly rate for working from home 25+ hours a month.

Small Business Bonus Scheme

Scotland's main rates discount — up to 100% off your business rates bill for premises with a low enough rateable value. You apply free through your council.

Sole trader

The simplest way to run a business: you and the business are the same in law. You keep the profit after tax, but you are personally responsible for all its debts.

Start Up Loan

A government-backed personal loan of £500 to £25,000 at a fixed 6% a year for people starting a business. It comes with free mentoring.

Statutory rights

The rights the law gives shoppers — goods must be good quality, fit for purpose and as described. No shop sign or contract can take these away. Saying 'no refunds' is now a crime.

Tax year

6 April to 5 April. It is not the same as the calendar year, and not always the same as your company's own year. That mix-up confuses almost everyone.

Taxable profit

Your sales minus your allowable expenses. This is the figure your tax is actually worked out on — not your total sales, and not what you take out.

Trading allowance

The first £1,000 of self-employed income each year that is tax-free and needs no registration. Above it, you must sign up for Self Assessment. You can claim it instead of real expenses, but not both.

Turnover

All the money coming in from sales, before any costs are taken off. It is not profit. VAT registration is triggered by turnover, not profit.

Unlimited liability

The sole trader's position: your own things — savings, car, even your home — can be used to pay business debts.

UTR

The 10-digit number HMRC posts you when you register for tax. It is your name-tag in the tax system. It takes about 10 working days to arrive.

VAT

A tax (usually 20%) added to most sales once your business is VAT-registered. You must register once your taxable turnover passes £90,000 over any rolling 12 months.

VAT taxable turnover

The sales that count towards the £90,000 VAT limit. It includes zero-rated sales like most cold food — a trap for food businesses who think those do not count.

Wholly and exclusively

HMRC's test for a business cost: it must be spent only for the business. If something is part-business and part-personal, you can claim just the business share.

Wrongful trading

Carrying on running a company when you knew, or should have known, it could not avoid going bust. It can make a director pay debts out of their own pocket.

Zero-rated and exempt (VAT)

Zero-rated sales (like books and most cold food) are taxed at 0% and still count towards the VAT limit. Exempt sales (like insurance) do not count and block VAT reclaims. People mix these up.