How Our Tax Refund Calculator Works

Our calculator uses the latest UK tax rates and allowances for the 2025/26 tax year to provide accurate estimates of your potential tax refund. It considers various factors that impact your tax situation, including income levels, employment status, and eligible deductions.

First, we calculate your taxable income by subtracting your personal allowance from your annual income. Then, we apply the appropriate tax rates based on your income bracket. For those who qualify, we also factor in additional benefits such as R&D tax credits, pension contributions, and capital allowances.

The result is a comprehensive breakdown of your potential tax refund, showing you exactly how much you could save through proper tax planning. This information can help you make informed decisions about your finances and ensure you’re maximizing your tax benefits.

Key Tax Information for 2025/26

As of 2025, the UK tax rates for the 2025/26 tax year are structured to accommodate different income levels. The basic rate applies to individuals earning between £12,571 and £50,270, while the higher rate applies to those earning between £50,271 and £125,140. For incomes exceeding £125,140, the additional rate of 45% applies.

Additionally, there’s a personal allowance of £12,570, which means you don’t pay any income tax on the first £12,570 of your income. However, this allowance begins to reduce when your income exceeds £100,000, tapering off completely at £125,140.

These tax bands and rates are designed to ensure fairness and equity in the tax system, providing relief for lower-income earners while ensuring higher earners contribute appropriately to public services.

Tax Band	Rate	Threshold (£)
Personal Allowance	0%	Up to 12,570
Basic Rate	20%	12,571 – 50,270
Higher Rate	40%	50,271 – 125,140
Additional Rate	45%	Over 125,140

R&D Tax Credits Explained

For AI startups and technology companies, Research and Development (R&D) tax credits can provide substantial savings. These credits are designed to encourage innovation and support the growth of tech-driven businesses.

To qualify for R&D tax credits, your company must be engaged in qualifying activities that advance science or technology. This includes developing new software algorithms, creating innovative machine learning models, and building AI-powered solutions.

The government offers two types of R&D tax credits: SME and Large Company schemes. For SMEs, the credit is calculated at 230% of qualifying costs, meaning you can claim back up to 33% of your total R&D expenditure. For large companies, the credit is calculated at 130% of qualifying costs.

These credits can significantly reduce your tax liability, potentially even resulting in a cash payment from HMRC if your claims exceed your tax bill. This financial relief can be reinvested into further research and development, helping your business grow and innovate.

Business Tax Deductions

Many businesses can reduce their tax burden through various deductions and allowances. These include home office expenses for remote workers, equipment purchases with capital allowances, professional development courses, business insurance premiums, and travel and subsistence expenses.

For example, if you work from home, you may be able to claim a portion of your utility bills, internet costs, and other home-related expenses as business deductions. Similarly, when purchasing equipment for your business, you may be eligible for capital allowances, which allow you to deduct a portion of the cost from your taxable profits.

By taking advantage of these deductions and allowances, you can reduce your taxable income and lower your overall tax bill. This can free up capital for reinvestment in your business, helping you grow and expand your operations.