Lean Ledger
00 / Learn
Plain-English definitions of the accounting, tax, and company terms UK founders run into most often.
01 / Quick Reference
This glossary is for quick orientation. It keeps definitions short, practical and founder-friendly, so you can understand the conversation without needing to become an accountant.
42 terms
01 / Category
7 terms
The internal rulebook for your company, covering how decisions get made, how shares can be issued, and what directors can and can't do. Most companies use the standard "model articles" provided by Companies House, but you can adopt bespoke articles if you need something different (for example, multiple share classes).
The UK government registry of companies. Every limited company is registered here, and you'll file your confirmation statement and annual accounts with them. Public-facing, so anything you file is searchable by anyone.
A person legally responsible for running the company. Directors have statutory duties under the Companies Act 2006, including acting in the company's best interests and keeping proper records. You can be a director without owning shares, and a shareholder without being a director.
A company that's a separate legal entity from its owners, meaning the company itself owns assets, owes debts, and pays tax. Shareholders' liability is limited to what they've paid (or agreed to pay) for their shares.
Anyone who owns more than 25% of the shares or voting rights, or who otherwise exercises significant influence over the company. PSCs must be disclosed to Companies House.
Your company's official address for receiving legal correspondence from HMRC, Companies House, and the courts. It's public, so many founders use their accountant's address rather than their home address.
Someone who owns shares in the company. Shareholders are the company's owners, but they don't run it day to day, that's the directors' job (though for most small companies the same people wear both hats).
02 / Category
15 terms
Tax paid by the company on its profits. As of April 2026, the main rate is 25% for profits over £250,000, the small profits rate is 19% for profits under £50,000, and there's a sliding scale (marginal relief) in between. Due nine months and one day after your accounting period ends.
A distribution of post-tax profits to shareholders. Dividends can only be paid out of distributable profits, must be properly documented (board minutes plus dividend voucher), and are taxed in the shareholder's hands at dividend tax rates.
The amount of dividend income you can receive each tax year before paying any dividend tax. For 2026/27 it's £500.
Personal tax paid by the shareholder on dividends received above the dividend allowance. Rates depend on your income tax band, basic, higher, or additional.
The UK tax authority. They collect Corporation Tax, VAT, PAYE, Self Assessment, and pretty much everything else. Where Companies House handles your company's existence, HMRC handles its taxes.
Personal tax on your earnings, including salary, dividends, rental income, and self-employment profits. Charged in bands (basic, higher, additional) above your personal allowance.
HMRC's programme to move tax filing online and into compatible software. MTD for VAT is already in force, MTD for Income Tax Self Assessment is being phased in from April 2026 for higher-income sole traders and landlords.
A separate tax from Income Tax, funding state pensions and benefits. Employees, employers, and the self-employed each pay different classes (Class 1, Class 2, Class 4) at different rates.
A form reporting taxable benefits and expenses given to directors and employees (company cars, private medical, interest-free loans over £10,000, and so on). Filed annually with HMRC.
The system for collecting Income Tax and National Insurance from salaries before they're paid. If you pay yourself or anyone else a salary, you need to run PAYE.
The amount of income you can earn each tax year before paying any Income Tax. For 2026/27 it's £12,570, though it tapers away once you earn over £100,000.
The system for declaring personal income to HMRC where it isn't fully captured by PAYE. Directors of limited companies often need to file one because of dividend income.
A 10-digit number HMRC assigns to you (personally) and to your company (separately). You'll need both, and they'll appear on most HMRC correspondence.
A tax on most goods and services in the UK. The standard rate is 20%, with reduced (5%) and zero (0%) rates for specific categories. You must register if your taxable turnover exceeds £90,000 in any rolling 12-month period.
The turnover level at which VAT registration becomes mandatory, currently £90,000 over any rolling 12 months. You can register voluntarily below this if it suits your business (for example, if you sell mainly to other VAT-registered businesses).
03 / Category
5 terms
A running record of money moved between the director and the company that isn't salary, dividend, or expense reimbursement. If you owe the company money (overdrawn DLA), there can be tax consequences, particularly the Section 455 charge.
National Insurance the employer pays on top of employee salaries. Often forgotten when budgeting for hiring, since it adds roughly 15% to salary cost above the secondary threshold.
A statutory document showing an employee's gross pay, deductions (tax, NI, pension), and net pay. Must be provided every pay period.
The legal requirement to enrol eligible employees into a workplace pension scheme and contribute on their behalf. Applies even if you only have one employee who isn't a director.
The PAYE reporting system where you tell HMRC about salaries on or before each payday, rather than once a year. Done through payroll software.
04 / Category
10 terms
The 12-month period your accounts cover. For Corporation Tax it's set by HMRC based on your company's start date, though you can change it (within limits).
Recognising income or expenses when they're earned or incurred, not when cash actually moves. The opposite of cash accounting, and the standard for limited company accounts.
A snapshot of what the company owns (assets), owes (liabilities), and what's left for the shareholders (equity) at a specific date. One of the two main statements in your annual accounts.
The list of categories you use to record transactions (sales, rent, software, travel, and so on). A clean chart of accounts makes everything else easier.
The main piece of legislation governing UK companies. It sets out directors' duties, accounting requirements, share capital rules, and much more.
Spreading the cost of a long-lived asset (laptop, machinery, vehicle) across its useful life rather than expensing it all in year one. Doesn't affect cash, but does affect reported profit.
The UK accounting standards that govern how small and micro companies prepare their accounts. FRS 105 is for micro-entities, FRS 102 (Section 1A) for small companies.
A summary of income and expenses over a period, showing whether the company made a profit or loss. Also called the income statement.
Cumulative post-tax profits the company has kept rather than paid out as dividends. This is what determines whether you've got distributable reserves available to pay dividends.
A list of every account balance in the bookkeeping system, used to check the books are mathematically in balance before producing the accounts. Mostly a behind-the-scenes document.
05 / Category
5 terms
The formal year-end accounts filed with Companies House and HMRC. For most small companies these are abridged or filleted, meaning a reduced version is filed publicly.
An annual filing to Companies House confirming your company's basic information is up to date (registered office, directors, shareholders, share capital). Filing fee is £34 online. Easy to forget, costly to ignore, since failure to file can lead to your company being struck off.
The Corporation Tax return filed with HMRC. Submitted alongside your accounts and any computations, due 12 months after your accounting period ends (though tax itself is due nine months and a day after).
A digital tagging format used when filing accounts and Corporation Tax computations electronically. Your accounting software handles this in the background, but it's why you can't just upload a PDF.
The official registers a company must keep, including the register of members, directors, and PSCs. Usually kept at the registered office or at Companies House (if you've elected to do so).
If you want a term added or explained differently, drop me a line.