Employers guide to P60s

Employers have a lot of documentation, information, and deadlines they need to keep track of to successfully run their business, stay compliant, and avoid fines. PAYE forms are something which employers often come across, specifically the P45 and P60 forms. 

With the P60 deadline looming, we wanted to provide some more information on the P60 — what it is, why we need it and of course when the P60 deadline is. Read on to find out more!

What is a P60? 

A P60 is an end-of-year statement outlining an employee’s tax and National Insurance contributions from the previous tax year. Employers must provide their staff members with this form by the payroll deadline, or risk facing penalties. 

What is a P60 used for?

A P60 is the simplest way to prove how much money employees have earned and how much tax they’ve paid. 

There are times when employees may need their P60 to prove how much they’ve earned and how much tax they’ve paid. For example, when applying for a mortgage, claiming a tax rebate, or if there is an issue with HMRC.

What is the difference between a P60 and a P45?

Employers will often come across two PAYE forms: P45 and P60. The main difference between these forms is that employees only receive a P45 when they change jobs. In contrast, a P60, as discussed above, summarises employees' tax information at the end of the financial year. 

The information in a P45 includes:

• The employee’s identification

• The taxable earnings so far that tax year 

• Any tax paid that year

• A tax code

• The old employer’s PAYE (Pay As You Earn) tax references

The information in a P60 includes:

• The employee’s identification

• The taxable earnings for that tax year 

• Any tax paid (for the current employment and the total for the year if there was a previous employer in the same tax year)

• The National insurance paid in the current employment for the tax year (6th April - 5th April)

• A tax code

• The employer’s PAYE (Pay As You Earn) tax references

When is the P60 deadline?

Employers must provide staff members with a copy of their P60s by 31st May. If employers miss this deadline, HMRC will take action ranging from a warning letter to an expensive fine. Fines start at £300 for a late release, followed by £60 per day until the employer issues the P60. 

How do you issue a P60?

Employers must provide P60s in paper form or electronically. How they are issued depends on the company payroll’s management system. If present within the business, accountants will likely distribute the forms and accounting software often quickens the process. However, companies with 10 or fewer employees without these resources can use HMRC Basic PAYE tools, a free payroll software, to help with this task. 

What to do if there's a mistake on a P60?

If employers issue a P60 with a mistake — there’s no need to panic. Employers can provide a new P60 if it isn’t completely accurate, but should clearly label it as ‘replacement’. Employers can also issue a letter confirming the changes to the replacement. 

It’s best to avoid frequent mistakes — it looks unprofessional and could also lead to tax liabilities, so employers should ensure employee details are updated often. Using HR and payroll systems can help to reduce errors and hit deadlines.

Who does and doesn’t need a P60?

Employees

Staff employed as of 5th April must receive a P60 by the deadline (31st May). Employees who left before the new tax year will already have the relevant information on their P45, so will not need a P60. 

Limited Company Director

Those who own a limited company and take a salary as the director must remember to issue themselves a P60 form, as well as their employees.

Sole Trader

As sole traders don't pay themselves, they don’t need to provide themselves with a P60 — just their employees.

Self-Employed and Employed Individuals

Those who run a self-employed business and are an employee of another business simultaneously must ensure they receive a P60 from their employer. Whether self-employed workers must provide themselves with a P60 form depends on whether they are a sole trader or a limited company. For those in this position, the process can get confusing. Self-employed people must declare their income by submitting a self-assessment tax return and paying the relevant income tax. To accurately complete the tax return, the P60 summary of the coinciding employed income and tax payments is required. 

Don’t forget!

To avoid missing this deadline, employers can set a reminder in their calendars, invest in payroll or accounting software or hire an accountant to improve efficiency and help stay on track each year.

Intuit Quickbooks payroll software can make paying employees, and providing them with the correct documentation, much easier — find out which payroll software option suits your business!

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