Whether you’re an employee or an employer in the work environment it’s likely that at some point you have asked or been asked – what is a P60 form? Although the P60 is one of HMRC’s most recognisable form names the name itself doesn’t give much away. This article will help you to understand all you need to know about the P60 form including when you will receive a P60 form and what is a P60 form used for.
What Is A P60 Form?
At the end of each tax year all UK employers need to perform a year end payroll process which involves submitting the final payroll figures to HMRC that cover the entire tax year (6th April – 5th April the following year). Each employer will inform HMRC the pay details of anyone they employed throughout the tax year. As part of this process a summary is also generated to be distributed to all the current employees for their own records – This end of year payroll summary is the answer to our question what is a P60 form?
What Details Does The P60 Contain?
The form contains the personal details of the employee that it relates to, such as name, national insurance number, tax code and works payroll number if they have one. As well as the personal details, each P60 will detail the following pay information:
– Pay in current employment + tax deducted
– Pay in previous employment + tax deducted
– National insurance deductions in this employment
– Details of any maternity/paternity/adoption pay
– Details of any student loan deductions
It is always a good idea for employees to check their P60 to ensure all the details are correct. In particular that the pay from previous employment (if any) has been added correctly and also that the correct tax code has been used as this can result in an under/overpayment of tax. If an employee spots any mistakes they can raise the issue with their employer or HMRC if needed to ensure they a corrected before future use.
What Is A P60 Form Used For?
Apart from serving as evidence of earnings for employees and in some cases proof of previous employment the form P60 also has a number of practical uses that we see in everyday life. These include:
– Loan applications
– Mortgage applications
– Applying for tax credits
– Claiming if you’ve overpaid tax or national insurance
– To prove income when renting a property
Any situation where a third party wants to confirm your income level may result in the P60 form being used as evidence so it’s best to keep it safe. Employers can provide additional copies where needed but its best to keep a digital copy for your records.
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Although the P60 covers the tax year which ends on 5th April, employees usually don’t receive them until slightly after this. Employers are set a deadline of 31st May following the end of the tax year to ensure employees have received theirs.
The P60 can be provided to employees in paper form or digitally so if you haven’t received a hard copy then it’s best to check your email. If you’re an employer looking to send P60’s digitally be sure to use a secure platform as the information it contains is sensitive.
I’m Self Employed Will I Get A P60 Form?
No, if you’re working as a self employed individual you won’t receive a P60 form. Instead your income is reported via an annual self-assessment which is also when the tax liability is calculated and later paid. In circumstances where you need to prove your income (such as a mortgage application) you can generate an SA302 form via the government gateway which will serve in place of the P60. The SA302 will summarise all the sources of income declared on your tax return.
If you are self employed and your business has its own employees then you will need to issue each employee with their own P60 but you will not receive one yourself.
What Is The Difference Between P45 And P60
Employers will only issue a P60 to employees who remain in employment at 5th April . If an employee leaves employment at any point before this date then they are issued with a P45 form instead. The P45 contains similar information but demonstrates that the employment has now ended. If the employee then finds new employment they will provide the P45 to the new employer who will include the figures in any future payroll calculations and on the P60 should the employee still be there at the end of the tax year. The figures from the P45 would then end up filling the “pay from previous employment” sections of the P60.
So in summary what is the difference between P45 and P60?
The P60 is issued to all employees still in employment at the end of tax year (5th April) and details an overview of gross pay received in the period and tax that has been deducted.
The P45 is issued to all employees who leave employment part way through a tax year. It contains details of their pay to date and tax deducted by the employer. The employee will then provide a copy of this to their next employer (assuming they start a new job in that tax year) so that they can ensure the correct amount of tax is deducted from future pay.
Multiple Employments
Where an individual is employed by more than one company at 5th April they should be provided with a P60 from each employment that they have. In case they need to prove their income they can use multiple P60’s to demonstrate the different income streams.
It is common that someone with multiple employments overpays tax. If this is the case it would be spotted when the end of year payroll submissions are made by the respective employers and a refund would be issued.
Limited Company Director/Shareholders
If you operate your small business as a limited company setup and you too are asking what is a P60 form then there is a good chance that you have missed an important part of the payroll process. As a limited company director/shareholder your income is distributed as a mix of salary and dividends for the purposes of tax efficiency. In this case your ltd company will still need to issue you with a P60 end of year tax summary for the part of income classified as salary. Any dividends you received from your company will not be detailed on the P60 but instead will be reported on your self assessment and will appear on your SA304
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Adam Hill
Practice based accountant with over 10 years experience, specialising in SME's, Freelancers and Personal Tax. "I take pride in proactively recognising tax planning opportunities on behalf of clients to help them operate more efficiently."
