What does that
actually mean?

Your pay before anything is taken off. The number in your job offer.

Example: £25,000 a year is about £2,083 a month gross.

Connects to: Net pay (take-home), National Insurance

What actually lands in your account after tax, National Insurance, student loan and pension.

Example: £25,000 gross is about £1,793 a month net, with no student loan or pension.

Connects to: Gross pay, Tax code

A code on your payslip telling your employer how much you can earn tax-free.

Example: 1257L is the most common. It means £12,570 tax-free a year.

Connects to: Personal allowance

The amount you can earn each year before paying income tax. It shrinks once you earn over £100,000.

Example: £12,570 in 2026/27. On £25,000, tax is only charged on £12,430.

Connects to: Tax code, Gross pay

A deduction that builds your right to the State Pension and some benefits. Employees pay 8% on earnings between £12,570 and £50,270, then 2% above that.

Example: On £25,000 you pay about £994 a year.

Connects to: Gross pay, Net pay (take-home)

You repay 9% of what you earn above your plan’s threshold — not 9% of your whole pay, and not based on how much you owe.

Example: Plan 5’s threshold is £25,000, so on £30,000 you repay 9% of £5,000: £450 a year.

Connects to: Net pay (take-home)

Under auto-enrolment, you and your employer pay into a pension. The legal minimum is 8% of qualifying earnings, with at least 3% from your employer.

Example: Opting out means losing your employer’s contribution too.

Connects to: Compound interest, Net pay (take-home)

The legal minimum hourly pay for workers aged 21 and over. Lower rates apply at 18–20, 16–17 and for apprentices.

Example: £12.71 an hour from April 2026; £10.85 at 18–20.

Connects to: Gross pay

Earning interest on your interest. It works for you when saving and against you when borrowing.

Example: £1,000 at 4% becomes £1,040, then £1,081.60 the year after.

Connects to: AER, APR

Annual Equivalent Rate: the yearly return on savings including compounding, so accounts can be compared fairly.

Example: A 4% AER pays about £40 a year on £1,000 left untouched.

Connects to: Compound interest, Inflation (CPI), Bank Rate (base rate)

How fast prices are rising. The Bank of England’s target is 2%.

Example: CPI was 3.5% in the year to September 2026. Savings earning less than that lose spending power.

Connects to: Real terms, AER

A number adjusted for inflation, showing what money can actually buy.

Example: A 4% pay rise with 3.5% inflation is about a 0.5% real-terms rise.

Connects to: Inflation (CPI)

The Bank of England’s interest rate. When it moves, savings and borrowing rates usually follow.

Example: Bank Rate was 4% after the November 2026 decision.

Connects to: AER, APR

A savings or investment account where you pay no tax on the interest or growth. You can put in up to £20,000 a year (2026/27).

Example: Interest earned in a cash ISA never counts towards your tax bill.

Connects to: Lifetime ISA (LISA), AER

Open it aged 18–39, save up to £4,000 a year and the government adds 25% (up to £1,000). It’s for a first home costing up to £450,000, or for age 60.

Example: Taking money out for anything else costs 25% of the amount — more than the bonus.

Connects to: ISA

Money kept aside for surprises like a broken phone or a gap between jobs. A common rule of thumb is three months of essential costs.

Example: Essentials of £1,000 a month means a £3,000 target.

Connects to: Overdraft

Annual Percentage Rate: the yearly cost of borrowing, including interest and fees. A representative APR is the rate at least 51% of accepted applicants get.

Example: £1,000 at 20% APR costs about £200 in interest over a year if none is repaid.

Connects to: Credit file, Compound interest

The record of how you borrow and repay, held by credit reference agencies such as Experian, Equifax and TransUnion. Lenders check it.

Example: Checking your own file is a soft search and never affects it.

Connects to: Buy now, pay later (BNPL), APR

Borrowing from your current account below £0. Banks charge a single simple annual interest rate rather than daily or monthly fees.

Example: A £500 overdraft at 39.9% costs about £17 a month if you stay in it.

Connects to: APR, Credit file

Splitting a purchase into instalments. Since 15 July 2026 it’s regulated by the FCA, with affordability checks and access to the Financial Ombudsman.

Example: £120 in three payments of £40. Missing one can mean a fee and can show on your credit file.

Connects to: Credit file, APR

With a direct debit, a company takes a set or varying amount and you’re covered by the Direct Debit Guarantee. With a standing order, you send a fixed amount you control.

Example: Rent paid to a person is usually a standing order; a phone bill is a direct debit.

Connects to: Energy price cap

Ofgem’s limit on the unit rate and standing charge suppliers can charge on standard tariffs. It caps the rates, not your total bill, and changes every quarter.

Example: From 1 October 2026: electricity 26.32p per kWh, typical household £1,723 a year.

Connects to: Standing charge, Direct debit vs. standing order

A fixed daily fee for being connected to energy, paid even if you use nothing.

Example: Electricity’s 54.83p a day is about £200 a year before you switch anything on.

Connects to: Energy price cap