What is a P60 and what’s it used for? A simple guide for businesses
I don’t need to tell you that running a business comes with a lot of paperwork. Particularly if you have employees.
One essential employee document is the P60. If you’ve only just begun to hire your first employees, you may have never heard of a P60.
So, what is a P60? Well, you’ve come to the right place.
In this guide, we’re going to explore what the P60 is, what it means for employers, and why it’s important for employees.
What is a P60?
A P60 is a document that provides a summary of an individual’s total income and the tax deducted from it over a specific tax year. It is issued annually to Pay As You Earn (PAYE) employees in the United Kingdom and Ireland.
The P60 contains important information about an employee’s earnings, the amount of income tax paid, and the national insurance contributions they’ve made during the tax year. It serves as a comprehensive record for everything income and tax-related and includes other statutory payments such as maternity or sick pay.
What does a P60 look like?
The UK Government has published a blank P60 form for the year 2022-2023 on the GOV.UK website, and you can download an empty P60 form here.
As you can see, the P60 includes boxes for information including:
- National Insurance Number (‘NINO')
- The total amount of money paid and tax deductions
- National insurance contributions
What’s a P60 used for?
The P60 is a comprehensive record of an individual’s earnings and tax deductions in a given year. Employees might use this when applying for loans, mortgages, and other financial arrangements, as well as when presenting evidence of income during certain legal proceedings.
The P60 can also be used for employment verification, helping new employers authenticate an employee’s history and previous income. PAYE employees who are also self-employed can use their P60 to aid in submitting their self-assessment tax returns accurately.
Why is a P60 important?
P60s are essential for tax compliance because they serve as a full record of an individual’s annual earnings and provide proof that employers have fulfilled their tax obligations. Let’s look in more detail.
- Tax compliance: The P60 plays a crucial role in ensuring tax compliance for both employers and employees. It provides a full record of an individual’s income and tax deductions over a given tax year, and this information is essential for calculating tax liabilities, reporting income, and claiming tax refunds.
- Proof of income: The P60, as we’ve already mentioned, serves as an official proof of income for employees; it provides evidence of earning and tax incomes which can be used for a variety of purposes.
- Audit and transparency: P60s are essential for audit and compliance purposes, enabling employers to prove that they’ve fulfilled their legal obligations by accurately reporting income and tax deductions to the tax authorities. During times of audit, the P60 can serve as evidence of this and protect employers against legal issues.
It’s also an important document for employees to be able to reclaim tax if they’ve overpaid. Sometimes, P60 details are not on record with the tax office, so having a P60 to hand can help HM Revenue & Customs (HMRC) to update an employee’s record and refund the correct amount of tax.
Do my employees need a P60?
Yes, there is a legal requirement in the United Kingdom and Northern Ireland for employers to issue P60 forms to their employees on an annual basis.
Failure to provide P60s or incorrect or incomplete information can result in serious legal consequences, fines, and other penalties for employers. These can be very expensive and seriously damaging to an organisation’s reputation.
In short, you must issue your employees with a P60 every year.
When are P60s issued?
P60s are issued at the end of each tax year. In the United Kingdom and Northern Ireland, the tax year runs from April 6th to April 5th. The current tax year, for example, runs from April 6th, 2023, to April 5th, 2024, and the next will run from April 6th, 2024 to April 5th, 2025. And so on.
P60s can be issued after April 6th in a given year, and this should be done as soon as possible for compliance purposes.
Who issues a P60?
It’s the responsibility of the employer to ensure that employees are issued their annual P60s. The employer must set up processes and mechanisms for ensuring this happens, such as tasking responsibility to payroll departments who will use generate and issue the paperwork.
It is not the responsibility of the tax authority — this is a common misconception.
What’s the difference between a P45 and a P60?
A P45 is issued to employees when they leave a job. It provides details about an individual’s employment and tax information up until the date of their departure. It’s essentially a way of passing tax and payroll information from the old employer to the new employer and the employee for their own tax records.
When an employee leaves a role, the old employer submits P45 information to HMRC electronically and gives an electronic or paper copy to the former employee. The employee then forwards this copy to their new employee who notifies HMRC.
How to claim tax back with a P60
Using a P60 is the most effective way of claiming a tax refund because the document contains all the information that HMRC needs to determine how much money is owed.
HMRC will typically pay tax refunds automatically when employers submit P60s to them — but if they are not received within a reasonable time, it’s always worth contacting HMRC directly because P60 details are not always recorded correctly.
This can be done by visiting the GOV.UK website and completing a rebate application. Once HMRC has received and reviewed your application, they will let you know if you are entitled to a tax refund and how much it will be. You may need to send additional documentation, so be sure to keep everything that might be relevant to your claim such as receipts and payslips.
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Frequently Asked Questions
What if your P60 isn’t correct?
If your P60 is showing any incorrect information you should contact your employer — they can issue you with a new P60 or explain the changes to your P60.
How to change a P60
Only your employer can change your P60. If the information is not correct, they may issue you a new one marked as a replacement or give you a letter.
What are P60 deadline fines?
HMRC will charge penalties if P60s are submitted after the deadline. There are some exceptions to this. Fines are based on how many employees you have and accrue monthly from £100 per month for businesses with 1 to 9 employees to £400 per month for businesses with 250 or more employees.
What is the purpose of a P60?
A P60 serves as an official record of all income, taxation, and other statutory information related to an employee for a given tax year. It’s used for a variety of purposes including reclaiming overpaid tax, reclaiming expenses, and proof of income.