Payroll & Tax Glossary
Plain-English answers to what UK and Ireland payroll, tax, and contracting terms actually mean, from IR35 to USC to SIPP. Every entry links to the full guide and a calculator so you can go from definition to your own number in one click.
Tax & Payroll
IR35
UKIR35 is UK tax legislation that decides whether a contractor working through a limited company is taxed as a genuine business (outside IR35) or as a disguised employee (inside IR35).
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PAYE
UKPAYE (Pay As You Earn) is HMRC's system for collecting Income Tax and National Insurance directly from your salary before you're paid, so most employees never file a tax return.
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P60
UKA P60 is the annual summary your employer gives you at the end of each UK tax year showing your total pay and the tax and National Insurance deducted from it.
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P45
UKA P45 is the document your employer must give you when you leave a job, showing your pay and tax deducted for that employment in the current tax year.
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Personal Allowance Taper
UKThe Personal Allowance taper withdraws £1 of your tax-free allowance for every £2 you earn above £100,000, creating an effective 60% tax rate on income between £100,000 and £125,140.
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Dividend Tax
UKDividend tax is the Income Tax charged on dividends you receive from a company, including your own limited company, at rates of 10.75% (basic), 35.75% (higher), and 39.35% (additional) for 2026/27.
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Student Loan Repayment Plans
UKUK student loans are repaid automatically through your salary once you earn above a plan-specific threshold, with Plan 1, 2, 4, and 5 (plus Postgraduate Loan) each using different thresholds and rates.
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National Insurance
UKNational Insurance (NI) is a UK payroll tax that funds state benefits and pensions, charged at 8% on earnings between £12,570 and £50,270, and 2% above that, for employees in 2026/27.
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Marginal Tax Rate
IE & UKYour marginal tax rate is the percentage taken from the next pound you earn, as opposed to your effective rate, which is the average rate across all of your income.
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USC
IrelandUSC (Universal Social Charge) is an Irish tax charged on gross income in bands of 0.5%, 2%, 3%, and 8% for 2026, applied on top of Income Tax and PRSI.
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PRSI
IrelandPRSI (Pay Related Social Insurance) is Ireland's social insurance contribution, charged at 4.2% on employee earnings in 2026, funding state benefits like the State Pension and jobseeker's payments.
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Emergency Tax (Ireland)
IrelandEmergency tax is a temporary, higher rate of Income Tax Revenue applies when your employer doesn't have your correct tax details, typically when starting a new job without a Revenue Payroll Notification set up.
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Benefit in Kind (BIK)
IE & UKA Benefit in Kind (BIK) is a non-cash perk from your employer, like health insurance or a company car, that's typically taxed as if it were extra salary.
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Contracting & Structures
Inside IR35 vs Outside IR35
UK"Inside IR35" means you're taxed like an employee on that contract; "outside IR35" means you're taxed as a genuine limited company business with access to salary-plus-dividend extraction.
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Umbrella Company
IE & UKAn umbrella company employs contractors on a PAYE basis, handling payroll and tax on your behalf, in exchange for a fee, trading simplicity for a typically higher effective tax rate than operating your own limited company.
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Day Rate
IE & UKA day rate is the gross daily fee a contractor charges for their services, paid to the contractor's business (not to them personally) before any tax is deducted.
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Sole Trader
IE & UKA sole trader is the simplest self-employment structure: you register directly with the tax authority, invoice clients under your own name, and pay tax on net profit through an annual self-assessment return.
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Limited Company Director
IE & UKOperating as a limited company director means running your own registered company, paying yourself a mix of salary and dividends, and taking on more accounting and compliance responsibility in exchange for greater tax planning flexibility.
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Pensions & Wealth
SIPP
UKA SIPP (Self-Invested Personal Pension) is a UK pension wrapper that lets you choose your own investments, and for limited company contractors, receive employer contributions directly from the company with no Income Tax or National Insurance.
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PRSA
IrelandA PRSA (Personal Retirement Savings Account) is a flexible Irish pension product, and for company directors, employer PRSA contributions can be paid entirely free of Benefit-in-Kind tax.
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Salary Sacrifice
IE & UKSalary sacrifice is an arrangement where you give up part of your gross salary in exchange for a non-cash benefit, most commonly pension contributions, reducing both Income Tax and National Insurance.
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Auto-Enrolment Pension
IE & UKAuto-enrolment is a legal requirement for employers to automatically place eligible employees into a workplace pension and contribute to it, unless the employee actively opts out.
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Hiring & Employment
Critical Skills Employment Permit
IrelandThe Critical Skills Employment Permit (CSEP) is Ireland's main work permit route for non-EEA tech professionals, requiring a minimum gross base salary of €40,904 (with a relevant degree) or €68,911 (without one) in 2026.
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Total Cost of Employment (TCE)
IE & UKTotal Cost of Employment (TCE) is what an employee actually costs a company, salary plus employer taxes, pension contributions, and benefits, typically 15-30% above the headline salary figure.
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