GLOSSARY OF TERMS

This page gives the explanation of various terms used in the UK. We hope this will be helpful to clients from overseas or those unfamiliar with UK practice.

BACS

NI or NIC

PAYE

P11DS

P14

P45

P46

TAX YEAR

BACS
BACS is the UK banks' automated clearing system which processes debit and credit transactions on a three day cycle:

Business day 1:                File submitted electronically to BACS

Business day 2:                Transactions processed by BACS

Business day 3:                Debits and credits cleared by the start of business

NI or NIC (National Insurance Contributions)
National Insurance is the UK social security system. Contributions are withheld by the employer each month and are paid to the HM Revenue & Customs by the 19th of the following month. There is also an employer's contribution.

P11D
P11D forms are annual returns of expenses payments and benefits in kind provided to certain employees which are filed with the HM Revenue & Customs by 6^th July after the end of each tax year.

P14
P14 forms are annual statements of earnings and deductions for each employee which are filed with HM Revenue & Customs by the 19^th of May after the end of each tax year.

P45

P45 is a statement of earnings and tax deductions issued by an employer when an employee leaves the company. The P45 form is given to the new employer in order to track the individual's employment, earnings and tax for the current tax year.

P46
If no P45 form is available, the employee and the new employer complete a P46 form in order to notify HM Revenue & Customs of the new employment.

P60
P60 is the employee's copy of the P14. P60s are not given to employees who left before the end of the tax year.

PAYE (Pay As You Earn)
PAYE, or 'Pay As You Earn', is the UK system of collecting personal tax. Tax is withheld by the employer on a weekly or monthly basis and is paid to HM Revenue & Customs by 19th of the following month.

Tax Year
The UK tax year runs from 6 April to 5 April. So, for a monthly payroll, April will be Month 1 and March is Month 12. Cumulative figures on payroll reports always relate to the tax year rather than the calendar year. A businesss financial year end does not have to coincide with the tax year end.

VAT (Value Added Tax)
Value Added Tax is the UK sales tax. The current standard rate is 17.5%.