What is a P60 Form? - Accountants in London

 All UK employees must receive a P60 form at the end of each tax year as part of the PAYE scheme. This 'End of Year Certificate' summarises their total pay and tax deductions for the tax year.

But what does this mean for you as a business owner?

Don't worry, a P60 isn't a difficult task!

All employers must provide an annual P60 to all employees by the 31st of May following the end of the fiscal year.

There are three options for handling your P60 admin:

  1. Your payroll software can generate P60s for you automatically, saving you hours of paperwork. Adding compatible payroll software to your FreshBooks account simplifies things even more.
  2. You can also use HMRC's free payroll software if you have fewer than ten employees.
  3. If you are not eligible for online filing, you can order paper P60 forms from HMRC to complete manually. Allow at least 7 days for these to arrive via mail, so don't wait until May 30th to place an order.

Of course, you can instruct your accountant to handle it for you.

It's reassuring to know that you're only responsible for issuing a P60 based on the work done for you by the employee. If they work for more than one company, they will receive a P60 from each one. You won't have to collect income tax information from multiple jobs.

The May 31st deadline is the absolute latest date for your employees to receive a P60. It's a good idea to plan your P60 distribution for the end of the fiscal year. You can start issuing them on April 5th. The information about that tax year will not change after that date. So, why not cross it off your to-do list as soon as possible?

Examining a P60

A P60 form contains a lot of personal and financial information. However, you are not looking for new information. Simply a summary of each worker's financial situation during the tax year in question. A P60 form serves as proof of earnings and the amount of tax paid by each employee.

P60 data includes the following:

  • Your information as well as your employer's PAYE reference number
  • Employee information and a National Insurance number
  • Total annual pay
  • Total National Insurance Contributions (NICs) and deducted student loan payments
  • Received statutory pay: shared parental, adoption, paternity, or maternity pay

Who Requires a P60?

You must ensure that all employees hired on April 5th receive a P60 by the May 31st deadline. If an employee worked for you more than once in the same tax year, only one P60 is issued.

Anyone who left before the end of the fiscal year does not require a P60 because their P45 contains all of their information. At their new job, the employer is responsible for the P60.

DIRECTOR OF A LIMITED COMPANY

Don't forget about yourself! If your company is a limited company and you receive a salary as its director, you must also file a P60 form.

INDEPENDENT BUSINESSMAN

Because you do not pay yourself a salary as a sole trader, you do not receive a P60. You simply need to distribute them to your employees.

EMPLOYED AND SELF-EMPLOYED

If you run a self-employed business while also working as an employee, you must obtain your P60 form from your employer. And whether you are a sole trader or a limited company determines whether you need a P60 for your self-employed work.

This is a slightly more perplexing situation. To declare your self-employed income and pay the applicable income tax, you complete a Self Assessment tax return. You'll also need the P60 summary of your concurrent employed income and tax payments to accurately complete this tax return. HMRC takes your total pay into account to ensure that you don't end up paying too much tax.

What Is the Importance of P60s?

Issuing P60 forms is important to you because it is a legal requirement. If you miss the May 31st deadline, you may face financial penalties. That's an immediate £300, followed by £60 per day until they're issued. Nobody wants their hard-earned money to be squandered on unnecessary HMRC fines.

  • Outside of the workplace, your employees' P60 is a very valuable document. As you will be aware if you have previously worked.
  • less paperwork and more of the work you enjoy
  • P60s are used for the following:
  • Applying for tax credits or other means-tested benefits. This allows them to reduce their tax deductions and increase their tax refund.
  • Obtaining a refund of income taxes or reclaiming overpaid National Insurance.
  • Contributions: You cannot apply for a tax rebate unless you can prove the total amount of tax paid. Sometimes taxpayers pay too much tax, and if the tax office has the relevant P60 form, it can work out a tax refund more efficiently.
  • If you are both employed and self-employed, you must file a Self Assessment tax return.
  • As income proof for a mortgage, loan, renting, or purchasing other financial products.

The importance of the documents to your employees, however, does not have to make this a daunting task for you. Issuing P60 forms to your employees is a routine part of your end-of-tax-year procedures. Using available software also significantly reduces the administrative burden.

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