UK Tax rebate

[MK_Dizzle]

Hi

Every year my mate gets a tax rebate of a couple of grand. He's registered as self employed he works for a break laying firm but I don't understand why people get a tax rebate. I thought you fill out a tax return form the government calculates how much tax you pay and that's it. Why do people get tax rebates?

Thanks

Nathaniel

 

[Snorbenz]

You get tax rebates if you pay too much tax, simple as!

I suspect that your friend is paying tax under CIS. He will be paying tax on everything he earns and no account will be taken of his tax free allowance (£8,105 for 2012/13).

Let's assume he pays tax of 20% on earnings of £25,000 - i.e. £5,000.

However, he is due a tax free allowance of £8,105 on which he doesn't pay tax, so the calculation should be

25,000
- 8,105
_______
16,895

£16,895 x 20% = £3,379

So your friend would be due a rebate for the difference between the £5,000 he paid already and the £3,379 he should have paid - i.e. £1,621.

Hope that helps.