Tax Literacy – Communications Best Practice Guide
A guide to improving communications on tax and tax policy. It sets out a systematic approach to designing, implementing and evaluating tax communications.
Annex C - Glossary – tax terms
Budget: A document prepared by the government. It sets out how much they expect to get from tax and what they plan to spend in the coming financial year.
Block Grant: The grant received by the Scottish Government, from the UK Government. This is calculated using the Barnett Formula, based on how much the UK Government spends on things like health or education.
Block Grant Adjustment (BGA): Deductions or additions to the Scottish Government's total Block Grant to reflect devolved tax receipts or social security spend.
Council Tax: This is a tax you pay to your local authority. It is based on the value of the property (house/flat) you live in. It helps to pay for local services.
Devolved tax: a tax which is set and managed by the Scottish Parliament
Fiscal: This means government finances, including what is taxed and what is spent.
Fiscal drag: If tax thresholds stay the same, inflation increases, you will pay more tax. You are being “dragged” into a tax band with a higher tax rate.
Fiscal Framework: The Fiscal Framework agreement was published alongside the Scotland Act 2016. It sets out how the Scottish Government is funded, the fiscal rules and how Scotland can borrow money.
Income tax: a tax paid on what you earn. This could be your salary, your pension or money you have invested. In Scotland, this is partially devolved.
Land and Buildings Transaction Tax (LBTT): This is a fully devolved tax. You have to pay it if you buy property or land in Scotland above a certain value. You may pay when it buying a house, but it also applies to non-residential purchases and leases.
Marginal rate: The marginal tax rate is the rate of tax you pay on your next £1 of income.
National Insurance Contributions (NICS): These are payments you and your employer make on what you earn. It is only payable on income from working. It can earn you the right to receive certain benefits such as state pension.
Non-Domestic Rates (NDR): These are sometimes called “business rates”. These are charged on non-domestic property owned held by the private, public and third sectors (charities).
Reserved tax: a tax which is set and managed by the UK Parliament
Tax administration: organisations like HMRC and Revenue Scotland which manage the tax collection process
Tax band: A range of income taxed at a certain tax rate. For example, a band could be £15,398 - £27,491. If you earn income in this range, you will pay a certain tax rate on the income in that range.
Tax threshold: The level of income above which you have to pay tax or pay tax at a particular rate.
Tax rate: The percentage you have to pay for a tax. For example, the VAT tax rate is 20%. If a new car costs £20,000, the VAT on the car is £4000. So the total you pay is £24,000.
Value Added Tax (VAT): This is a tax on things you buy or services you pay for.