Plain-English definitions
Tax and payroll glossary
The terms you will meet in our calculators, defined without jargon. For how the numbers are combined, read our methodology.
- ACC earners levy
- A New Zealand charge on earnings, up to an annual cap, that funds the Accident Compensation Corporation. For employees it is included in PAYE.
- CPP and QPP
- The Canada Pension Plan and the Quebec Pension Plan: mandatory pension contributions taken from employment income in Canada.
- Deduction
- An amount subtracted from income before tax is calculated, which lowers your taxable income.
- Effective tax rate
- Your total tax and contributions divided by your gross income. It is always lower than your top bracket rate because lower slices of income are taxed at lower rates.
- EI and QPIP
- Employment Insurance, and in Quebec the Quebec Parental Insurance Plan: mandatory premiums on employment earnings in Canada.
- FICA
- The Federal Insurance Contributions Act taxes: the Social Security and Medicare payroll taxes withheld from United States pay.
- Gross pay
- Your pay before any tax or deductions are taken out.
- KiwiSaver
- New Zealand retirement savings scheme. Employee contributions are a percentage of pay and are deducted after PAYE, so they do not reduce income tax.
- Low Income Tax Offset
- An Australian tax offset that reduces the tax owed by lower-income earners and phases out as income rises.
- Marginal tax rate
- The share of your next unit of income that goes to tax and payroll contributions at your current income level.
- Medicare levy
- An Australian levy of 2% of taxable income that helps fund the public health system. It is reduced for low incomes. It is separate from United States Medicare.
- National Insurance
- A United Kingdom payroll contribution that builds entitlement to benefits such as the state pension. It is separate from Income Tax.
- Net pay
- Also called take-home pay: what you keep after income tax, payroll contributions and deductions.
- PAYE
- Pay As You Earn: the system in the United Kingdom, Ireland and New Zealand where an employer withholds income tax from each payment and passes it to the tax authority.
- PAYG withholding
- Pay As You Go withholding: the Australian system where an employer withholds income tax from each payment.
- Personal Allowance
- The amount of income a United Kingdom taxpayer can earn before paying Income Tax. It is reduced for higher incomes.
- Pre-tax contribution
- A contribution taken from pay before income tax is calculated, so it lowers taxable income. Treatment differs by country: for example KiwiSaver in New Zealand is taken after PAYE.
- PRSI
- Pay Related Social Insurance: the Irish social insurance contribution on employee earnings.
- RRSP
- Registered Retirement Savings Plan: a Canadian retirement account whose contributions can be deducted from taxable income.
- Superannuation
- The Australian retirement savings system. Employers pay contributions on top of salary.
- Tax bracket
- A slice of income taxed at one rate. Only the income inside each slice is taxed at that rate, not your whole income. Also called a tax band.
- Tax credit
- An amount that directly reduces the tax you owe. Australia calls these tax offsets.
- Tax year
- The 12-month period used to calculate tax. It is the calendar year in the United States, Canada and Ireland, 6 April to 5 April in the United Kingdom, 1 July to 30 June in Australia and 1 April to 31 March in New Zealand.
- USC
- Universal Social Charge: an Irish charge on gross income above a small exemption limit, with rates that rise in steps.