Topic 12: Earnings

Question 1

Benefit

Answer 1

A government payment made to individuals who meet specific conditions to help them meet their living expenses. For example, people who are unemployed, unable to work because they care for a disabled person, or have a disability themselves may be entitled to benefits if they meet the criteria.

Question 2

Budget

Answer 2

A plan of expected incomings and outgoings over a set time period such as a month. The Budget is also the term given to the
government’s spending plan, which the Chancellor sets out in the House of Commons.

Question 3

Chancellor of the Exchequer

Answer 3

The British Cabinet minister responsible for financial and economic matters and in charge of the Treasury

Question 4

Dividend

Answer 4

A payment of profits from a company to its shareholders, often at twice-yearly intervals, either as cash or (depending on the plan) as further shares or reacquisition of shares.

Question 5

Gross interest

Answer 5

Interest paid without tax deducted

Question 6

HM Revenues and Customs (HMRC)

Answer 6

The government department that collects various taxes. Formerly the Inland Revenue.

Question 7

Income

Answer 7

Earnings, savings and interest payments received within a certain time frame.

Question 8

Income tax

Answer 8

Tax paid on earnings from employment, self-employment and interest on savings.

Question 9

Individual savings account (ISA)

Answer 9

An account that pays interest tax-free on savings up to a certain level. There are two types of ISA: cash ISAs and stocks and
shares ISAs. Junior ISAs are available for people under 18.

Question 10

Interest

Answer 10

Money either paid to an account holder by the provider, or charged to the account holder by the provider. Interest is paid on savings accounts and some current accounts and charged on borrowing, eg an overdraft. Each provider decides the rate of interest it will pay or charge, depending on the type of account
and, in some cases, the credit history of the individual account holder.

Question 11

Investments

Answer 11

Money paid into financial products; the aim is that the value of the product will grow over time and so the person will eventually
receive back more money than they paid in. Investments are a way of saving over the medium or long term.

Question 12

Junior ISA

Answer 12

Junior ISAs are long-term savings accounts set up by a parent or guardian specifically for the child’s future. The child can only access the money once they turn 18 years old

Question 13

Mortgage

Answer 13

A loan taken out to pay for a property, usually over a long term such as 25 years.

Question 14

National Insurance contributions

Answer 14

Money deducted from the pay of people who are employed or self-employed and used by the government to fund state pensions and other benefits.

Question 15

National living wage.

Answer 15

The minimum that people aged 23 and over must be paid per hour by law. The national minimum wage applies to workers aged under 23.

Question 16

National minimum wage

Answer 16

The minimum pay per hour to which workers are entitled by law. The rate depends on a worker’s age and whether they are an
apprentice. It applies to workers aged under 23. Workers aged 23 and over are entitled to the national living wage

Question 17

P45

Answer 17

A document legally required from an employer when an employee stops working for them. It summarises the employee’s Tax and National Insurance details for their next employer.

Question 18

P60

Answer 18

A document prepared at the end of every tax year to show all the income tax and National Insurance contributions paid by an
individual during the preceding 12 months.

Question 19

Pension

Answer 19

An income that people receive after retiring from work. In the UK people receive a pension from the state; some people also receive pension payments from schemes run by their former employers or arrangements that they have made for themselves.

Question 20

Personal allowance

Answer 20

The amount of income you are allowed to earn before you become liable for income tax.

Question 21

Personal savings allowance

Answer 21

The amount of savings interest that can be earned before the saver pays tax. The amount of the allowance varies according to how much other income the saver has earned in the tax year.

Question 22

Self-assessment

Answer 22

A method used, often my self-employed people, to calculate the amount of tax and National Insurance they need to pay.

Question 23

Self-employment

Answer 23

Earning an income by selling your goods or services directly to a consumer, rather than being employed by somebody else and
being paid a wage or salary.

Question 24

Starting-rate band

Answer 24

An amount of savings that an individual can earn tax-free if their total income is less than the personal allowance.

Question 25

Taxable income

Answer 25

Income on which tax must be paid – that is, after deducting allowances and any permitted expenses from the total income earned.

Question 26

Tax band

Answer 26

A category of income on which a specific rate of tax is payable.

Question 27

Tax code

Answer 27

A code used by a person's employer or pension provider to calculate the tax to deduct from pay or pension.

Question 28

Tax paid at source

Answer 28

Tax deducted by the provider (on behalf of the government) from interest earned on savings. Since April 2016, providers no longer deduct income tax from savings interest at source.

Question 29

Tax return

Answer 29

A tax form completed by people in certain situations (eg self-employed people or employed people who receive money in addition to their salary). It sets out details of income and expenditure and allows the taxpayer or HMRC to calculate the amount of tax and NI contributions owed.

Question 30

Tax year

Answer 30

Also known as the financial year, the tax year runs from 6 April to 5 April in the following year. The tax people owe is calculated according to how much they have earned April to April rather than January to December.

Question 31

Zero-hour contract

Answer 31

A type of employment contract that does not set out a fixed number of hours that an employee must work and be paid for. The employer is not obliged to provide work nor the employee to take work offered.