Explaining Tax Forms. What is a P60 and Why Do You Need It?

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What is a P60?

With all the different taxes, legal obligations, reliefs, and other technical tax issues, it’s unsurprising to find there’s a lot of paperwork involved, and a huge number of forms available or required. Today we’re looking at what is a P60, what it is, why you need it (as an employee), and why you need to issue them (as an employer).

What is a P60?  And What Information Does it Show?

P60’s are issued once a year (annually), and show the amount of tax paid on a Pay as You Earn (PAYE) salary. They are issued for each PAYE job that the employee works, so for employees with multiple jobs – they will receive multiple P60s (one from each employer).

The form (whether paper copy or electronic) should show:

  • Your National Insurance Number (NINO)
  • Your details (such as name and address)
  • Your employers details
  • The tax code the employer has been using for your employment
  • The amount you’ve earned in the specific tax year (your gross income)
  • The amount of tax and National Insurance Contributions (NICs) that the employer has paid

The style and format of the P60 may vary between employers (there’s no mandatory standard template), but it should, at a minimum, include the information listed.

What is a P60 and Why Do You as an Employee Really Need to Have a P60?

The P60 acts as proof of how much you’ve been earning, and the tax you’ve been paying on your salary. It can also be used as proof if you need to:

  • Claim overpaid tax
  • Apply for Tax Credits
  • Support benefit claims
  • Apply for a loan or mortgage

The P60 will show what you’ve earned, and how much you’ve paid in the relevant tax year (6 April to 5 April), and employers are required to provide a P60 (either on paper or electronically) by 31 May.

You should hold onto your P60 as part of your personal accounts for at least two years, but it’s recommended that you file these documents and hold onto them for at least four years – as the tax office, when investigating overpayments and other tax affairs, generally go back this far – but they can (if warranted) look back at up to 20 years.

As an Employer You Must Prepare P60s for Your Employees – Why is This?

Preparing the accounts for your business can be a tricky and involved business and making sure you issue P60s to your employees is a legal obligation – in other words, you have to do it.

The forms can be done on paper (a traditional P60) or given to employees via a digital platform; but they have to be created and provided to employees by 31 May of each year in order to remain legally compliant.

Failure to issue the P60s by the deadline can face increasing penalties from HMRC – starting with a £300 fee, then an additional £60 fine per day that they remain overdue.

Employers should also keep the P60s they’ve issued for at least 2 years, as this is proof of what tax and NICs you’ve paid on the employees behalf, and an important part of your accounting records; HMRC take a dim view of incomplete records, and should they request your accounts – and find them incomplete, they may charge a £3,000 penalty for the failure to keep or preserve adequate records.

Top Tips for Keeping Your Records Up-to-Date and Ready for Review

As we mentioned, there’s a lot of paperwork involved in keeping accounts up-to-date and in ‘adequate’ (by HMRC standards) condition.

Whether you’re an employee or an employer we recommend:

  • Keeping your paperwork for at least 2 years
  • Organising the forms (this might be by type, by employer / employee, by tax year, etc)
  • Keep any copies of correspondence (both sent and received) with the relevant documents
  • If you’re inputting your records onto a spreadsheet, update it regularly

Your annual accounts are important, especially if you think you’ve over or under paid tax for the year. We know it’s tricky, and can be a headache to prepare and maintain, which is why we offer an Annual Accounts Service that takes the pressure off and provides you not just with first class services to sort out the tax office, but is supported by our expert team, and plenty of advice to make your tax affairs easier.

If you’d like to learn more about our services, or get in touch for a consultation, we’d love to hear from you! Check out our Contact Us page, and let’s get your tax affairs in order!

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