Understanding a P60 form

Every business owner that employs staff needs to be familiar with several key tax forms, one of them being the P60. This article gives business owners a complete guide to P60s, including what they are, who needs to receive one and the information it should provide. 

As always, if you require further information you can contact our helpful team of employment lawyers who will be only too happy to assist you.

What is a P60 form?

A P60 is an official form provided to employees. It sets out the amount a particular employee earned over the course of a tax year, for example, 6th April 2021 to 5th April 2022. 

Furthermore, it will state any deductions made from an employee’s pay, including tax and National Insurance (NI) contributions.

Employees must be provided with their P60 by 31st May following the end of a tax year. It can be issued in paper or electronic format.

If an employee has left your employment during the tax year and they have been issued a P45 you do not need to provide them with a P60.

What is included in a P60 tax form?

A P60 shows the following information:

• Your business name
• The employee’s name
• Their National Insurance number
• The employee’s PAYE reference
• Gross pay
• Tax paid
• National Insurance contributions
• Any statutory pay such as sick pay, maternity pay etc
• Student loan deductions (if applicable)

What is a P60 used for?

Employees may need to provide a P60 for several reasons, including:

• Applying for a mortgage, loan, or residential tenancy (the P60 provides proof that the employee is employed and can repay the loan or make future payments)
• Applying for tax credits
• Claiming a tax refund at the end of the tax year if they have overpaid
• Completing a self-assessment
• Querying their tax code 

For the reasons listed above, employees must file their P60 in a safe place. If an employee loses their P60 you will need to provide them with a copy as the HMRC cannot.

If I own a limited company and pay myself a salary, do I need a P60?

Many small business owners are directors of a limited liability company. If this applies to you and you pay yourself a salary you will need to issue yourself with a P60.

What about if I am a sole trader?

If you do not pay yourself a salary through PAYE you will not need to issue yourself a P60. If you employ people, however, they will need to be issued with a P60 by 31st May.

What are the penalties for not issuing employees with a P60 by 31st May?

It is imperative that you issue your employees with their P60s on time as HMRC can charge an initial penalty of £300 for late issuing and an additional £60 per day for every day that it is late. If you promptly rectify the late issuing of your P60s and explain that a genuine error occurred it is unlikely that HMRC will charge you a penalty.

What if I make a mistake when creating a P60?

If you have made a mistake and need to issue a new P60 the new form must be labelled ‘replacement’. Alternatively, you can issue your employee a letter confirming any changes made to the original P60.

Get legal assistance from LawBite

Issuing P60s is just one of the many accounting responsibilities business owners have. If you require any support regarding HMRC compliance, please contact to speak with one of our expert employment lawyers. To book a free 15 minute consultation, just click ‘Get started’ below.

 

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Additional resources

• National Minimum Wage in 2022
• Tax changes SMEs need to be aware of in 2022
• The key dates for SMEs in 2022
• Understanding the increase in National Insurance Contributions
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