What is a P60 Form? A Comprehensive Guide You Must Know.

The significance of complying with the HMRC tax regulations cannot be downplayed since every eligible business is liable to pay taxes. Likewise, when filing tax returns, employees must know the accurate amount of the tax paid and National Insurance contributions to ensure the correct tax deductions and compliance with HMRC regulations. It is where a P60 comes to the fore. Wondering what is a P60 form? At its core, the P60 form is a crucial document in the UK tax system that provides a summary of an employee’s annual earnings and the tax deductions (like income tax and NICs) that their employer makes throughout the tax year.

Therefore, understanding the ins and outs of the P60 is important for both employees and employers since it not only ensures compliance with tax regulations but also helps in maintaining accurate financial records.

Accordingly, this blog is meant to be an all-encompassing guide to what is P60 and the key considerations you must remain mindful of.

 

 

What is a P60 Form?

A P60 is an essential document that contains an employee’s all tax-related information throughout the year. A P60 details an individual’s total earnings, tax deductions, and NI contributions for a tax year, which runs from April 6 to April 5 of the following year. Further elaborating, it is a year-end certificate or annual statement highlighting the income tax and NICs your employer deducted from your salary over the last tax year. You can simply consider a P60 as a receipt that HMRC gives you for the tax you have paid.

To know more about a P60 as per HMRC guidelines, visit the government website:

When Does An Employee Get a P60?

Under the HMRC guidelines, employers are legally required to provide a P60 to all their employees who are on their payroll as of April 5, which is the last day of the tax year. The deadline for issuing the P60 is May 31, i.e. following the end of the tax year. Typically, the employers issue the P60 to their employees by May 31 of each year. Nevertheless, if an employee changes their jobs during the tax year, they will only receive a P60 at the end of the tax year from their current employer, not the former one. Notably, your former employer will only give you a P45, which outlines your earnings and tax status for the year up until your termination from that employment.

It is a common practice for individuals to confuse P60 and P45. Although both forms are vital to an employee’s job lifecycle, both are quite distinct in terms of their purposes. To illustrate, the P45 is issued by an employer upon the termination of an individual from employment. A P45 highlights the employee’s earnings and tax contributions until the point of their departure. On the contrary, a P60 is broader than a P45 since it summarises an employee’s all of the financial transactions within the tax year. Consequently, a P60 is more comprehensive than a P45.

Moreover, if you want to know more about a P45, read our blog:

What is The P45 Form And Why Is It Important In The UK?

It is worth emphasising that, being an employee, you are strongly advised to keep your P60 form safe in case you need to prove the amount of tax or National Insurance you paid in the last tax year. However, if you have lost your P60 by a genuine mistake, you should ask for another copy from your employer. Similarly, if your employer is unable to provide the form, you can directly contact HMRC for the information.

Lastly, employers can issue the P60 in paper or electronic form.

What Information Does A P60 Have?

Learning the contents or information a P60 contains is essential in comprehending what is a P60. A P60 form usually includes your:

Employee personal information:

A P60 shows your full name and your National Insurance number.

Employer Details:

It contains your employer’s name and their PAYE (Pay As You Earn) reference number for their identification.

Taxable earnings:

Your P60 form will contain all the income that is subject to taxation. It includes any salaries, bonuses, and commissions you obtain from your employment.

Gross Pay And Net Pay:

When your employer issues you the P60, you will see your gross earnings. It is the total pay you earn in your current employment. Next, it shows your final or net pay and the income tax deductions in the current job. Additionally, if you switch jobs during the tax year, your P60 will display your gross income and tax paid for both jobs, including your annual figures. For further clarity, a P60 form shows your total pay and tax from any previous job during the same tax year.

If you are wondering what the difference between gross pay and net pay is and how to calculate each, our following guides will be greatly beneficial in this regard:

What is the difference between gross pay and net pay?

How to calculate gross pay and net pay?

National Insurance Contributions:

Similar to the income tax, your P60 will also include the amount of NI you paid and your contribution to each NI threshold.

Final Tax Code:

Your P60 form essentially includes the final tax code applied. Notably, it is your tax code that determines the amount of tax you are liable to pay. It depends on several factors, such as your income and any allowances or deductions you can claim. HMRC issues your tax code based on your annual earnings before any tax has been deducted.More importantly, a P60 calculates your tax by maintaining an accurate record of your earnings and applying your tax code.

Statutory Pay:

If you have received any statutory pay, like parental leave or your student loan repayments, P60 will also verify these figures.

Understanding The Importance Of A P60:

The P60 is a crucial document for both employers and employees because it  serves several important tasks, such as:

Personal Records:

To begin with, a P60s helps you maintain an accurate record of your earnings and tax payments, which has ample use for your future financial planning and any potential disputes that may arise with HMRC.

Proof Of Income:

Next, a P60 acts as official evidence of your earnings and tax deductions, which you are required to display when applying for mortgages, loans, or rental agreements.

Benefit Claims:

Likewise, if you are applying for tax credits or other state benefits, your P60 might be required to verify your income.

Tax Refunds:

Consider a scenario where you overpaid tax during the year, and you are now entitled to a tax refund. Fortunately, with the P60, you can provide all the necessary information in order to claim back the amount from HMRC.

Key Considerations Regarding A P60 Form:

• A P60 is a crucial resource for employees when filing their tax returns or applying for loans and mortgages because it provides a detailed breakdown of their total income, NICs, and taxes paid.
• An employer issues a P60 to an employer at the end of each tax year in the soft form (electronic version) or hard form(in paper).
• If an employee loses their P60, they can ask their employer for another one.
• With a P60 form, you can keep an accurate record of your earnings and tax payments, which is useful for future financial planning and any issues with HMRC.

 

 

Conclusion:

In the end, the above discussion clearly illustrates why and how the P60 is a fundamental document for tax purposes. The P60 encapsulates an employee’s annual earnings and tax deductions. Hence, it is important that you understand what is a P60 form, its contents, and the timeline for receiving it. Alternatively, a skilled accountant can deal with all your financial affairs more effectively and adeptly so that you do not have to do the effortful task of keeping your tax matters in order.

In this connection, payrollservices.accountants might just be the right option for you to consider for payroll outsourcing.

The primary goal of our accountants is to simplify your payroll operations, such as calculating your employees’ accurate amounts of income taxes and NI contributions. Moreover, rendering our services across the UK, our proficient team works with improved accuracy with the help of advanced software, reducing your administrative burden. Thus, by trusting our expertise, you can ensure the timely, effective, and accurate management of your payroll responsibilities. Do not waste the opportunity to seek expert financial advice from an amazingly wallet-friendly and competent accountant.

Disclaimer: Please note that the information provided in this blog is exclusively for informational purposes and should not be considered financial advice. Always consult with a professional accountant to ensure compliance with UK laws and regulations.