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Payroll is a complex discipline that covers a wide range of responsibilities and requires in-depth knowledge about many employment-related topics. One key area is the various forms issued to employees, both periodically and as needed. Among these forms is the P60, a document that both employers and employees need to understand. But what is a P60, and why is it important?
What is a P60 form?
A P60 is an official document issued to employees at the end of the tax year, summarising their total earnings and the amount of tax deducted. It acts as a record of their financial information, making it crucial for accurate tax reporting and personal financial management.
A P60 is generated by the employer after the end of the tax year, typically by May 31st. It provides employees with a comprehensive overview of their income, tax paid and National Insurance contributions, helping them to understand their tax position and ensure that they’re paying the correct amount. For businesses, a P60 can be used to verify compliance with HMRC regulations.
What does a P60 look like?
A P60 is a straightforward document, usually printed on A4 paper or delivered electronically as a PDF. In most cases, it will be orange in colour, making it easy to recognise at a glance.
Here’s a quick overview of what a P60 looks like, and the information you can expect to find on it:
- Employee name
- Employee National Insurance number
- Employee payroll number
- Total earnings for the year
- Income tax deducted
- Tax code
- Statutory payments (such as maternity pay), if applicable
- Student loan deductions, if applicable
- Employer’s address and PAYE reference
Why is a P60 important for employees?
A P60 serves as proof of income and the tax paid, making it an important document for a variety of different purposes. Employees may use their P60 for:
- Verifying that tax payments are accurate
- Claiming back overpaid tax from HMRC
- Applying for a loan or mortgage
- Accessing certain benefits, like tax credits
What's the difference between a P45 and a P60?
While both a P45 and a P60 relate to employee taxes, they are different documents with different uses. It’s therefore important to understand the differences between the two, both to inform your payroll practices and to ensure that you’re able to accurately explain them to your employees.
A P45 is only provided to employees when they leave a job, summarising their earnings and tax deductions up to their leaving date. In contrast, a P60 is provided annually. It summarises the entire tax year, covering both current and previous positions, providing they fall within the same tax period. For example, if an individual was employed in job A from the start of the tax year to July, then in job B for the remainder of the tax year, the P60 would include earnings and deductions from both these roles. As an employer, you would obtain the information on their previous role’s earnings from their P45.
Another document that could cause confusion is the P46 form, which is used to provide information about new employees who don’t have a P45. This enables employers to determine the correct tax code for future deductions.
Your P60 responsibilities as an employer
As an employer, you have important responsibilities regarding P60s to ensure compliance with tax laws and support your employees. Knowing these responsibilities will help you to provide the necessary documents for your employees’ financial records, while avoiding penalties from HMRC.
You must make sure to:
- Maintain accurate payroll records
- Generate P60s for all eligible employees
- Distribute P60s by the deadline of May 31st each year
- Keep records of all P60s issued for compliance purposes
Let’s explore a few specifics that you’ll need to know as an employer to make sure you’re meeting your responsibilities with regards to providing P60 forms to employees.
When do you get a P60?
Employers must issue P60s by May 31st each year as part of the payroll year end process. It’s important to carry out these processes accurately and efficiently to ensure that all employees receive their documents in a timely manner.
Which employees require a P60?
You must provide a P60 for all employees on your payroll who are working for you on the last day of the tax year (5 April). This includes both part-time and full-time workers. Self-employed contractors don’t require a P60, as they aren’t employed by your company and are responsible for their own tax documentation.
What happens if a P60 isn’t issued?
Failing to issue P60s, or issuing them late, can lead to penalties from HMRC. This type of payroll error can be costly for your business, but can also lead to employee dissatisfaction and an erosion of trust. As we’ve seen above, employees rely on P60 forms for a variety of financial matters, and not being able to access this important document could have lasting repercussions. It’s important to optimise your payroll processes to ensure that you avoid these issues.
How to get a P60 for your employees
So, now you know what a p60 form is, how do you get one for your employees?
Using payroll software is one of the most efficient ways to manage P60 distribution. Cloud-based payroll software allows you to automate the process, minimising the risk of errors and delays while giving employees easy access to their P60s online. This HMRC guide for employers goes into more detail about how to generate and distribute P60s, while the employee guide is a great resource for those wondering how to get a P60 from their employer.
Manage P60s and other HR forms with PeopleHR
Understanding what a P60 is, and its importance for both employers and employees, is an essential part of the payroll process. It helps you to ensure efficient management of P60s and other relevant documents, which will support your wider payroll processes throughout the tax year.
By implementing cloud-based payroll software, your business can streamline this process and enhance overall payroll efficiency. This offers a great return on investment by increasing employee satisfaction and ensuring that you’re operating in line with all relevant tax legislation.
To explore PeopleHR’s payroll software for yourself, feel free to request a free demo or contact our team for more information.
