The short version
- Plain-English definitions of 58 terms, from "accumulating" to "yield", in alphabetical order.
- Each entry links to the guide that explains it in more depth, where there is one.
- Where a definition includes a tax figure or limit, it's for the 2026/27 tax year (6 April 2026 to 5 April 2027), and the source is listed at the end.
Part of ETF basics. New to ETFs? Start with what an ETF is and how it works.
A
- Accumulating (Acc)
- A share class that keeps the income its investments earn and reinvests it, so it shows up in a higher unit price rather than as cash paid to you. See accumulating vs distributing ETFs.
- Active fund
- A fund whose manager picks investments to try to beat a market. A passive fund simply tracks an index. See active vs passive funds.
- Ask (or offer)
- The price at which you can buy an ETF on the exchange, usually quoted by a market maker. It sits a little above the bid. See how ETFs work.
- Authorised participant (AP)
- A large firm with a contract that lets it create new ETF units, or hand units back, directly with the fund. Its trading helps keep the ETF’s price close to the value of its holdings. See how ETFs work.
B
- Basis point (bp)
- One hundredth of a percentage point. A rise in a yield from 4.00% to 4.25% is 25 basis points.
- Bid
- The price at which you can sell an ETF on the exchange: the most a buyer, usually a market maker, will pay right now. See how ETFs work.
- Bond
- A loan to a government or company that pays interest, called the coupon, and is repaid on a set date. See bond ETFs for beginners.
C
- Capital gains tax (CGT)
- Tax on the profit when you sell an investment for more than you paid, outside an ISA or pension. In 2026/27 the first £3,000 of gains each year is tax-free. See investing outside an ISA.
- CCI (Consumer Composite Investments)
- The FCA’s new rules for investment product information, which replace KIDs and KIIDs with a product summary. They started on 6 April 2026 and apply in full from 8 June 2027. See why can’t I buy US ETFs in the UK?
- Creation unit
- The large block of ETF units an authorised participant creates or redeems in one go, in exchange for a basket of the fund’s investments or cash. See how ETFs work.
- Credit risk
- The chance that a borrower fails to pay interest or repay a loan on time. Corporate bonds usually pay more than government bonds to make up for it. See bond ETFs.
D
- Depositary
- An independent firm that keeps a fund’s investments in safekeeping, separate from the fund manager. The KID for one large ETF says its assets held by the depositary wouldn’t be affected if the manager went bust. See are ETFs safe?
- Discount
- When an ETF’s market price is below the value of its holdings (its NAV). The opposite is a premium. See how ETFs work.
- Distributing (Dist or Inc)
- A share class that pays out the income its investments earn, as cash, at set intervals. See accumulating vs distributing ETFs.
- Dividend
- A share of a company’s profits paid to its shareholders. Outside an ISA or pension, the first £500 of dividends is tax-free in 2026/27. See investing outside an ISA.
- Domicile
- The country where a fund is legally set up and regulated. Many ETFs sold in the UK are domiciled in Ireland or Luxembourg. See why can’t I buy US ETFs in the UK?
- Duration
- A measure, in years, of how sensitive a bond or bond fund is to interest rates. As a rule of thumb, a five-year duration means a fall of about 5% if rates rise by one percentage point. See bond ETFs.
E
- ETC (exchange-traded commodity)
- A product that tracks a commodity such as gold or oil. In the UK it usually has a different legal structure from an ETF. See what is an ETF?
- ETF (exchange-traded fund)
- A fund that holds many investments and trades on a stock exchange like a share. Most track an index. See what is an ETF?
- ETP (exchange-traded product)
- The umbrella term for anything of this kind that trades on an exchange, including ETFs and ETCs.
F
- FCA (Financial Conduct Authority)
- The UK regulator for investment firms, platforms and advisers. You can check whether a firm is authorised on its register.
- FSCS (Financial Services Compensation Scheme)
- The UK’s compensation scheme. If an investment firm fails and your money or investments are missing, it can pay up to £85,000 per person, per firm. It doesn’t cover falls in the value of investments. See are ETFs safe?
G
- Gilt
- A bond issued in pounds by the UK government through HM Treasury and listed on the London Stock Exchange. Conventional gilts pay a fixed coupon every six months. See bond ETFs.
H
- Hedged
- A share class that uses currency contracts to reduce the effect of exchange-rate moves, such as a “GBP hedged” fund of US bonds. Hedging may not completely remove currency risk. See bond ETFs.
I
- Index
- A list of investments, with rules for what’s in it and in what proportions, such as the FTSE 100. The index an ETF follows is also called its benchmark. See global, FTSE 100 or S&P 500?
- Index-linked gilt
- A gilt whose coupons and final repayment are adjusted in line with the Retail Prices Index. See bond ETFs.
- iNAV (indicative net asset value)
- An estimate of an ETF’s net asset value, published during the trading day to help traders judge its price. See how ETFs work.
- Investment trust
- A company listed on the stock exchange that invests in other assets. Its share price can sit above or below the value of what it owns. See ETF vs index fund vs investment trust.
- ISA (individual savings account)
- A tax-free wrapper for savings and investments. In 2026/27 you can put in up to £20,000 across all your ISAs. See stocks and shares ISAs explained.
- ISIN
- A 12-character code that identifies one security or share class worldwide. The first two letters show the country, such as IE for Ireland.
K
- KID and KIID
- Short, standard documents that set out what a fund is, its risks and its costs. The KID’s risk indicator runs from 1 to 7. From 8 June 2027 both are replaced by a product summary. See how to read an ETF factsheet.
L
- Lifetime ISA (LISA)
- An ISA for a first home or later life. In 2026/27 you can pay in up to £4,000, part of your £20,000 ISA allowance, and the government adds a 25% bonus of up to £1,000 a year. Your first payment must be made before you’re 40. See ETFs in a Lifetime ISA or Junior ISA.
M
- Market maker
- A trading firm that quotes prices to buy and sell an ETF throughout the day. The gap between its two prices is the spread. See how ETFs work.
N
- NAV (net asset value)
- The value of everything a fund owns, after costs, per unit. It’s calculated once a day from closing prices. See how ETFs work.
O
- OCF (ongoing charges figure)
- The yearly cost of running a fund, as a percentage of your investment, taken from the fund automatically. It leaves out the cost of trading the fund’s own investments. See what does an ETF really cost?
- OEIC (open-ended investment company)
- A fund set up as a company that can issue and cancel shares as money comes in and goes out. Buying OEIC shares from the fund manager carries no stamp duty. See ETF vs index fund vs investment trust.
P
- Physical replication
- Tracking an index by owning the actual investments in it: all of them, or a representative selection (called “optimised” or “sampled”). See physical vs synthetic ETFs.
- Platform
- A website or app where you buy and hold investments, often inside an ISA or SIPP. Also called a broker or investment platform. See do I need a broker?
- Premium
- When an ETF’s market price is above the value of its holdings (its NAV). See how ETFs work.
- Price-to-earnings (P/E) and price-to-book (P/B)
- Valuation ratios. P/E divides a share price by the company’s earnings per share; P/B compares the price with the company’s net assets per share. Factsheets often show figures for the whole fund.
- PRIIPs
- Short for packaged retail and insurance-based investment products: the rules that required KIDs. The UK’s version was repealed from 6 April 2026, with a transition to the CCI rules. See why can’t I buy US ETFs in the UK?
- Product summary
- The document that replaces the KID and KIID under the FCA’s CCI rules, compulsory from 8 June 2027. Its risk and return score runs from 1 to 10. See how to read an ETF factsheet.
R
- Rebalancing
- Resetting weights back to a target. An index is rebalanced when its provider updates what’s in it, and an ETF tracking it follows suit. You might also rebalance your own mix of funds. See how many ETFs do you need?
- Replication
- How an ETF tracks its index: physically, by owning the investments, or synthetically, through a swap. See physical vs synthetic ETFs.
- Reporting fund
- An offshore fund approved under HMRC’s reporting regime. Outside an ISA or pension, gains on a reporting fund are taxed as capital gains, while gains on a non-reporting fund are normally taxed as income. See investing outside an ISA.
S
- Securities lending
- Lending a fund’s investments to other institutions for a fee. The fund in our factsheet example keeps 62.5% of that income. See how to read an ETF factsheet.
- SIPP (self-invested personal pension)
- A personal pension where you choose the investments, which can include ETFs. See ETFs in a SIPP.
- Spread (bid-offer spread)
- The gap between the price you can buy at (the ask) and the price you can sell at (the bid). You pay it each time you trade. See how ETFs work.
- Stamp duty
- Tax on buying UK shares, usually 0.5% when bought electronically. Transfers of ETF units are exempt. See what is an ETF?
- Swap
- A contract in which two parties exchange returns, for example a bank paying a fund the return of an index. See physical vs synthetic ETFs.
- Synthetic ETF
- An ETF that gets its index’s return through a swap with a bank, rather than by owning all the investments in the index. See physical vs synthetic ETFs.
T
- TER (total expense ratio)
- A measure of a fund’s yearly running costs, as a percentage. For the fund in our factsheet example, the factsheet’s TER and the KIID’s OCF were both 0.20%. See what does an ETF really cost?
- Ticker
- A short code for one listing of a fund on one exchange, such as SWDA. The same fund can have different tickers in different currencies. See how to read an ETF factsheet.
- Tracking difference
- A fund’s return minus its index’s return over a period. Fees are the most common reason it’s negative. See how to read an ETF factsheet.
- Tracking error
- How much the tracking difference varies over time; formally, its annualised standard deviation. A low figure means the fund follows its index consistently.
U
- UCITS
- Short for undertakings for collective investment in transferable securities: the European rulebook for funds sold to the public. Many ETFs sold in the UK are UCITS funds based in Ireland or Luxembourg, which can be recognised for UK sale. See why can’t I buy US ETFs in the UK?
W
- W-8BEN
- A US tax form confirming you’re not a US person. Giving it to your platform lets you claim the UK–US treaty rate of 15% on US dividends, instead of the default 30%. See why can’t I buy US ETFs in the UK?
Y
- Yield
- The income from an investment as a percentage of its price. For bonds, the yield to maturity estimates the return if you held them to the end at today’s prices. See bond ETFs.
This glossary explains terms. It isn't advice about what you should buy. Tax rules depend on your circumstances and can change. Investments can fall as well as rise, and you may get back less than you put in. Read the full disclaimer.
Sources
Sources are listed for the definitions that state facts, figures or limits.
- Individual Savings Accounts (ISAs), GOV.UK
- Lifetime ISA, GOV.UK
- Capital Gains Tax: rates and annual tax-free allowances, HMRC, GOV.UK
- Tax on dividends, GOV.UK
- Tax when you buy shares, GOV.UK
- The Stamp Duty and Stamp Duty Reserve Tax (Exchange Traded Funds) (Exemption) Regulations 2014, legislation.gov.uk
- HS265 Offshore funds, HMRC, GOV.UK
- Investments, Financial Services Compensation Scheme
- PS25/20: Final rules for Consumer Composite Investments and the full policy statement (PDF), Financial Conduct Authority
- Explanatory Memorandum to the Consumer Composite Investments (Designated Activities) (Amendment) Order 2025, HM Treasury, legislation.gov.uk
- Overseas Funds Regime: update for firms, Financial Conduct Authority
- About gilts, UK Debt Management Office
- Bonds 102: the importance of duration in bond investing, PIMCO
- DT19852: United States of America treaty summary, HMRC Double Taxation Relief Manual
- Instructions for Form W-8BEN, Internal Revenue Service
- iShares Core MSCI World UCITS ETF USD (Acc): Key Information Document, BlackRock, September 2026
- iShares Core MSCI World UCITS ETF USD (Acc): Key Investor Information, BlackRock, February 2026
- iShares $ TIPS UCITS ETF GBP Hedged (Acc): Key Investor Information, BlackRock
- What affects index tracking?, Vanguard UK
Facts checked 13 October 2026.