How to create a taxonomy

my_module.install

/**
 * Insert terms for School Level vocabulary.
 */
function bracknell_deploy_update_7018() {
  // Create the new school level vocab.
  $vocabulary = new stdClass();
  $vocabulary->name = 'School Level';
  $vocabulary->machine_name = "school_level";
  $vocabulary->description = t('List of school levels weighted by order preference.');
  $vocabulary->module = 'taxonomy';
  taxonomy_vocabulary_save($vocabulary);

  // List the terms.
  $terms = array(
    'Primary school',
    'Junior school',
    'Secondary school',
    'Special school',
    'Pupil referral unit',
  );

  // Check if term exists in vocabulary and add it if not.
  _bracknell_deploy_safe_add_terms($terms, $vocabulary, 'school_level', 0);
}

/**
 * Helper function for adding terms to existing vocabularies.
 *
 * @param array $term_names
 * @param string $vocabulary_machine_name
 * @param int $weight
 */
function _bracknell_deploy_safe_add_terms($term_names = array(), $vocab, $vocabulary_machine_name = '', $weight = 100) {
  //  Make sure the vocabulary exists.  This won't apply all desired options
  //  (description, etc.) but that's okay.  Features will do that later.
  //  For now, we just need somewhere to stuff the terms.
  if (!isset($vocab) && !empty($vocabulary_machine_name)) {
    $vocab = taxonomy_vocabulary_machine_name_load($vocabulary_machine_name);
  }

  // Load the vocabulary.
  // Check if field already exists and add it if not existing.
  if (is_object($vocab) && property_exists($vocab, 'vid') && $vocab->vid > 0) {
    //  Load each term.
    $i = 0;
    foreach ($term_names as $term_name) {
      $term = taxonomy_get_term_by_name($term_name, $vocabulary_machine_name);
      // Check if term exists and if it doesn't exist create a new one.
      if (count($term) == 0) {
        $term = (object) array(
              'name' => $term_name,
              'vid' => $vocab->vid,
              'weight' => $weight + $i,
        );
        // Save new term.
        taxonomy_term_save($term);
        $i++;
      }
    }
    drush_log($i . ' terms added to ' . $vocabulary_machine_name . ' vocabulary', 'notice');
  }
  else {
    drush_log('Vocabulary "' . $vocabulary_machine_name . '"" not found', 'error');
  }
}