A–F
Allowable expenses — Costs you may be able to deduct against profits if rules allow. Ask an accountant when unsure.
Billable — Time or outcomes you can invoice.
Confirmation Statement — Companies House filing to confirm company details.
Corporation Tax — Tax on company profits (limited companies).
Day rate — Price per day of work; define hours. See pricing.
Dividends — Shareholder distributions from company profits after rules/taxes — not free money.
Freelancer / contractor — Labels people use; tax treatment depends on facts and structure.
G–M
HMRC — UK tax authority.
IR35 / off-payroll — Rules about employment-like engagements. See IR35 survival.
Invoice — Payment request with legal/trading details.
Limited company — Separate legal entity; directors/shareholders. See sole vs limited.
Mutuality of obligation — Concept in status tests about ongoing work expectations.
N–S
National Insurance — Contributions alongside income tax frameworks for many workers.
Net terms — Payment due in X days (net 14, net 30).
PAYE — Pay As You Earn payroll system.
Personal service company (PSC) — Common label for a limited company providing the worker's services.
Scope creep — Extra work without extra pay or time.
Self Assessment — How many sole traders (and others) report to HMRC.
Sole trader — You are the business for most legal purposes.
SOW — Statement of work; defines deliverables.
T–Z
Target rate — The rate a good week should average — pricing.
Umbrella company — Intermediate employment structure some contractors use; understand fees and rights.
VAT — Value Added Tax; registration thresholds and schemes change — verify current rules.
Working capital — Cash to run operations between invoices.
How to use this glossary
When an article links here mentally, return to the deep guide for process. Glossary ≠ advice.
Terms that change each tax year
Some definitions above include a number that HMRC or the government resets. For quick reference, these are the 2026/27 figures (tax year 6 April 2026 to 5 April 2027), from GOV.UK:
| Term | 2026/27 figure | What it means for a freelancer |
|---|---|---|
| Trading allowance | £1,000 | Gross trading income up to this is tax-free and needn't be reported |
| Personal allowance | £12,570 | Income you can earn before income tax starts (it tapers away above £100,000) |
| VAT registration threshold | £90,000 | Taxable turnover in any rolling 12 months that makes VAT registration compulsory |
| ISA allowance | £20,000 | Total you can pay into ISAs in the year |
| Personal Savings Allowance | £1,000 basic rate / £500 higher rate | Savings interest you can earn tax-free |
| Dividend allowance | £500 | Dividends you can receive tax-free, relevant to limited company directors |
| Making Tax Digital for Income Tax | over £50,000 qualifying income | Sole traders and landlords above this must keep digital records and file quarterly updates |
| FSCS deposit protection | £120,000 | Savings protected per person, per banking licence, since 1 December 2025 |
Scottish taxpayers pay income tax at different rates and bands from the rest of the UK, though the personal allowance, National Insurance and the other thresholds above are UK-wide.
A few terms that are often confused
- Turnover vs profit. Turnover is everything you invoice; profit is what's left after allowable expenses. The VAT threshold and Making Tax Digital use turnover. Income tax is charged on profit.
- Tax year vs accounting year. The tax year always runs 6 April to 5 April. Since basis period reform in 2024, sole traders are taxed on profits for the tax year itself, whatever date their accounts end.
- Registered vs incorporated. You register as self-employed with HMRC; you incorporate a limited company at Companies House. See sole trader vs limited.