In the UK, a P60, or ‘End of Year Certificate’, is legal statement issued by employers to their employee at the end of a tax year.
It is vital that the taxpayer retains this certificate as it is a vital document for their employer and as proof that they have paid their annual taxes.
A P60 details the employees’ taxable income and deductions made via income tax and national insurance for that financial year.
The P60 forms are created by the UK Government’s Department for Work and Pensions and is also used for those claiming taxable benefits and Jobseeker’s Allowance.
A P60 will also show your pension contribution. It will also show if you have multiple jobs and how that has affected your payments.
P60 certificates are issues at the end of each financial year – and usually this is in March, April or May – but this can vary, depending on what company and sector you are in.
How to get a P60?
As it is a vital document for tax, employment and other legal reasons, it is imperative that you retain your P60s and have them available to your employer when needed.
They have up to six weeks to provide you with this at the end of each financial year. It is your legal right to have this document and cannot be refused by the employer.
However, if they do not provide you with this document, you must contact your local tax office.
HM Revenues and Customs will then contact your employer and obtain the necessary paperwork and make sure the employer is up to date with other PAYE documents.
This certificate can be provided in electronic copy or in a hard copy through the post.
Before you receive this document – and if you haven’t received it from your employer within the six week timeframe – you can request that Revenues and Customs provide you with all the information that is provided on the P60.
Accounts and human resources are the part of the business that are in control of payroll and employee safety, therefore they are the ones responsible for sending out any legal documents – including your P60.
What do you need a P60 for?
There are several reasons why you need to keep hold of your annual P60 form, and it is important to keep them in a good condition as they may need to be reviewed at a later date.
They are needed for;
- To claim a tax rebate
- To apply for tax credits
- To renew your application for tax credits
- If you are self-employed – you will need a P60 from HM Revenues and Customs to complete a self-assessment tax return
- Banks and building societies may request a copy before agreeing to a loan
- Banks, building societies and legal representatives will need to see a copy before proceeding with a mortgage application
You will need to provide a P60 from each of your employers, should you have multiple jobs.
How long does your employer keep your records for?
As outlined by HMRC, your employer must retain records of your P60 for three years, and should you need a copy at any point, they must provide you with one.
Anything longer than three years, it is unlikely they will have any records and so it is vital that you retain each P60 every year.
However, your local tax office will be able to provide you with more, in-depth information on your tax history. So, if you need to request any information from your past, they are the ones to contact.
How is a P60 different from a p45?
Your employer should issue A P60 certificate each year in order to keep compliant with the law.
However, when you contract ends with your current employer, they will provide you with a P45.
Whether you have been fired, contract ends or you are moving to a new employer, you will need to have a P45 to give to your new employer.
A P45 is a certificate given to an employee at the end of their period of employment with the company.
The certificate will provide details on the person’s tax code, gross annual pay, and the tax paid on that wage over the year.
It is split into three parts.
Part one is filled in by the employee and previous employer and is retained by the employee for tax, employment and legal purposes.
Part two is retained by the new employer.
Part three is taken by the new employer and given to the UK tax office (HMRC).
What is a P11D?
A P11D is a statutory form provided by MHRC Revenues and Customs that details the benefits and expenses that a business has provided during the financial year.
This is for all employees, from directors through all departments where an employee is earning more than £8,500 a year.
The HR and accounts departments will submit a P11D form to HMRC though electronic submission via the government website or via a hard copy in the post. The HR department must be prepared for any PAYE issues.
In total, there are 14 sections to the P11D;
- Section A – Assets transferred
- Section B – Payments made on behalf of the employee
- Section C – Credit cards and vouchers
- Section D – Living accommodation
- Section E – Mileage allowances
- Section F – Cars and car fuel
- Section G – Company vans
- Section H – Beneficial loans
- Section I – Medical health
- Section J – Qualifying relocation payments
- Section K – Services supplied
- Section L – Assets placed at employee’s disposal
- Section M – Other items
- Section N – Expenses payments
In order to calculate the total amount an employee will have to pay the tax on, the employer has to calculate the cash equivalent of the benefit/expenses.
Some areas of business expenses can be more complicated, such as those on company cars, as other legal ramifications need to be taken into consideration. In order to remain above board and legally correct – contact the local tax office and they will be able to provide the necessary information or contact details.
A P11 is slightly different. This is a ‘Deductions Working Sheet’ and is used for tracking deductions made by PAYE.
If an employee on the books is earning less than the £8,500 each year then a similar P9D form will need to be provided to HMRC.
What is income tax?
Income tax is the tax that is imposed on an individual or legal entity in respect to their annual income or profit.
From a businesses perspective, it is known as companies tax or corporate tax.
You pay tax on;
- Money earnt from employment
- Profits made if you are self-employed
- Profits made on services that are sold as a business or side-business (websites, apps, etc)
- Some state benefits
- Rental income
- Benefits from current job
- Income from a trust
You do not pay tax on;
- Interest on personal savings
- Income from tax-exempt accounts and ISAs
- The first £5,000 of dividends from company shares
- Some state benefits
- National lottery win (however, this could change once you bank the winnings)
- Rent from any lodgers in your household, as long as it is below the Government’s Rent a Room Scheme
Legal residents in the UK get a series of personal tax allowances for tax free income. This is the amount of income you can earn before you have to pay tax. Contact your local council and outline how you made your income and if it is taxable.
This amount can be reduced by tax reliefs. These can depend on the area of the UK you live in and how you have made your income. Contact your local council to find out what tax reliefs you can use.
What is national insurance?
National insurance is the compulsory payment made by both employers and employees to provide the state in order to assist those people who are sick, unemployed or retired.
You will pay National Insurance (NI) if you are over the age of 16 and either earn more than £157 a week or are self-employed and make an annual profit of more than £6,025 a year.
Your NI number is stated on your P60, payslips and any letters regarding taxes, pensions or benefits. This number doesn’t change for your entire life.
Your employer will need this in order to pay you a wage and have you legally part of the company.
You should have a NI card with your NI number clearly stated across it. This should be kept safe with other legal documents – such as a P60. However, if it is lost, you must inform HMRC and have a new one sent out via the post.
There are four classes of National Insurance;
Class 1 – Employees earning more than £157 a week and are under state pension wage
Class 1A or 1B – Employers pay these directly on their employee’s expenses or benefits
Class 2 – Self-employed people earning less than £6,025 a year
Class 3 – Voluntary contributions
Class 4 – Self employed with profits exceeding £8,164 a year
Most people are Class 1. In 2017/2018, if you earn between £157 and £866 a week you will pay 12% NI from you wages and £2 if you earn over $866 a week.
For legal enquiries and to make sure you are paying the correct amount you will need to contact your local tax office.
If any personal details change in your life (name, address, marital status, etc) or you change from employed to self-employed (and vice versa), you must inform HMRC immediately.
If you cannot find your NI number then contact HMRC and fill out a CA5403 form online.
What does the ‘P’ stand for in P60, P45 and P11D?
These forms are important for employer and employee alike.
The ‘P’ in these forms stands for PAYE – this stands for Pay As You Earn.
PAYE is the money that is taken away from your wages each month for tax and National Insurance. This money is then used by HMRC.
Everyone is issued with a PAYE Code that signifies how much tax is to be paid each month. This is given out by HMRC and can change upon promotion, demotion or changing employers.
What to do if you lose a P60?
Historically, if you lost your P60, you would need to fill out a ‘Starter Checklist’ form – however, this now only applies to P45s when you start a new job.
Your employer will provide you with a new P60 if requested and your local tax office will have all information on your recently paid taxes.
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