Your tax return is made up of 5 key areas: Income, tax deducted, expenses, taxable income and personal allowance.
Income: total income from all employment, self-employment, private works, property, anything that you have “earned.”
Tax deducted: the amount of tax that has been deducted on your employment and self-employment income
Allowable expenses: the amount of allowable expenses/costs you have( income – allowable expenses = net profit)
Personal allowance: the tax-free allowance.
Taxable income: your total income minus Allowable expenses and personal allowance.
So in 3 steps, it goes like this:
Total income minus Allowable expenses = Net Profit
Net Profit – personal allowance = taxable profit
The tax calculation then works out how much tax and national insurance should be paid on your “Taxable profit”, if you have had more tax deducted from you than you needed to pay, then you have “overpaid” tax, and you get that overpaid amount back.