Understanding Tax Refunds

How Tax Deductions at Source Impact Your Refund.

Calculating your tax refund involves understanding the relationship between the tax you’ve already paid and the total amount due upon completing your tax return.

Here’s a detailed explanation:

When you receive income subject to tax deductions at source, such as through CIS or PAYE, a percentage of that income is paid to HMRC.

For CIS deductions, the deduction is usually 20% of all income; for PAYE, it’s variable.

You can also make advance payments towards your next tax bill, known as payments on account.

Any deductions or payments you have made count as an advance payment toward your final tax bill.

At the end of each year, you’ll complete a self-assessment tax return, including all sources of taxable income, such as:

• CIS
• PAYE
• Sole-trader non-taxed income
• Dividends
• Rental income
• Pension

Any allowable expenses, such as travel and materials, are then reduced from the income, a self-assessment tax calculation is made, and an amount due to pay is produced.

Crucially, at this point, any payments you have made or deductions suffered at source are deducted from the total amount due to pay.

If the total amount due is less than the total amount you’ve already paid, you’re entitled to a refund for the difference.

Let’s illustrate with examples:

• If you have made payments or suffered tax deductions totalling £500 and your tax calculation determines you owe £300, you’ll receive a refund of the £200 difference.
  
  
• If your tax calculation determines you owe £1,000, and you’ve made payments or suffered tax deductions totalling £500, you’ll need to pay the additional £500 difference.
  
  
• If your tax calculation matches the amount you paid, you will not receive a refund or pay any additional tax.

Understanding these dynamics is crucial for managing your finances effectively and avoiding surprises come tax time.

If you would like to estimate your tax calculation and see if you are entitled to a refund, try the NJB TAXBACK Rebate calculator, available in the NJB TAXACK App.

If you need help navigating your tax obligations or maximising your refunds, please don’t hesitate to contact NJB Taxback for expert guidance.

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Can NJB Taxback Help?

At NJB Taxback, we are committed to empowering individuals and small businesses by understanding the role taxes paid play in determining taxes due.

We offer a free Refund calculator to estimate your calculation at any point throughout the financial year.

For assistance and expert advice, contact us at 02038220201.

Of course, Just get in touch via any of these methods, and we will be happy to assist.

The NJB Taxback App

Download the free NJB TAXBACK App now to get started, and use our free rebate calculator to check if you are due a tax refund, or book a call with one of our experts to get started.

All of our clients already have a preloaded NJB TAXBACK App account.

Select log in from the options along the bottom and follow the reset password method to sign in.

NJB Taxback has helped to save its clients £10 million in tax over the last four financial years.

NJB Taxback offers a revolutionary one-stop solution to filing your self-assessment tax return guaranteed against HMRC investigation.

The NJB Taxback service combines the expertise of a qualified, friendly team with a free App to supercharge the process of completing your end-of-year tax return.

The NJB Taxback Trustpilot reviews speak for themselves.