A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Income tax:

Tax payable on all income, from employment or investment, above a tax-free personal allowance. The current personal allowance for those aged under 65 is £5,225 a year. Earnings of between £5,225 and £7,455 are taxed at 10 per cent; between £7,455 and £42,055 are taxed at the basic rate of 22 per cent. All earnings above this are taxed at the higher rate of 40 per cent.

Index linking:

Usually means linking something to the rate of inflation, measured by the Retail Price Index (RPI) or, less often, the Consumer Price Index (CPI). Holders of an index-lined savings account might be paid RPI rate of inflation plus 3 per cent, for example

Inflation:

The rate at which the cost of living rises, measured by the Retail Price Index (RPI) or Consumer Price Index (CPI). If inflation is 5 per cent, a shirt costing £100 will cost £105 in a year’s time

Interest-only mortgage:

A mortgage whereby you repay the interest on the capital borrowed in monthly instalments. You must repay the capital at or before the end of the mortgage term.

Independent Financial Advisor (IFA):

A person qualified to advise on financial products who is not tied to any one provider. An IFA is paid fees or takes commission on products sold.

Inheritance Tax (IHT):

A tax of 40 per cent levied on estates worth more than a set threshold paid from the estate when the owner dies. The current threshold above which IHT is levied is £300,000, rising to £350,000 by 2010. From April 2008, married couples and civil partners will be able to combine their allowances, effectively extending the threshold to £600,000 on the death of the second spouse.

Individual Saving Account (Isa):

A plan that lets savers invest up to £7,000 per year tax-free in stocks and shares or £3,000 in cash. Alternatively investors can place £3,000 in cash and the remainder in stocks and shares.