In January 2019, changes were made to P45s and P60s in that paper submissions were no longer required. These documents can be accessed and submitted online via the HMRC website. This gazetted change might have meant nothing to many people due to a lack of understanding of these documents. In this article, we discuss the purpose and the difference between a P45 and a P60 and include guidelines to help you start a new job with a little more ease.
What is a P45 form?
The HMRC tax form “Details of employee leaving work” form is registered with the reference code P45. As an employee, you used to receive this form from the company that you work for, in the United Kingdom, when you were leaving the company for good. This form is a component of the HMRC pay-as-you-earn (PAYE) procedure. The form must now be accessed by you, online, directly on the HMRC website.
The P45 form is utilised for the capturing of:
your personal details,
the company details,
your existing tax code,
details relating to any outstanding student loans
the amount of tax paid deducted from your salary,
the amount of insurance paid deducted,
within the period measured from the beginning of the relevant tax year to the point of termination of your employment contract.
Tax administration takes time but getting it correct means you won’t land up in hot water with underpaid taxes or, on the other hand, overpay taxes. The P45 form contributes towards determining whether you qualify for a tax rebate.
When you move onto your new job, your new employer will look at your P45 to see the following deductions:
PAYE – Pay as you earn
PRSI – Pay-related social insurance
USC – Universal social charge
The employer that you are departing from will have added leave pay, sick leave pay. etc. Even if you are retiring, you will need a P45. In the instance that you are transferring to a different branch of the same company or group of companies, you will need a p45 if that branch is registered as a different legal entity.
If you have not been employed before, then you will not have a P45. The new employer will then utilise HMRC’s Starter Checklist.
What is a P60 form?
An HMRC P60 form is also related to salaries, but it is a recurring form, not a once-off form like a P45. It is a requirement to update details if a company is issuing salaries to employees, including the boss. A P60 or income statement is accessible on the HMRC website.
The P60 form is issued once a year, at tax year-end, and is utilised for things such as claiming a tax refund or supporting a mortgage application.
The UK tax year ends on the 5th of April, so you must go online and print out your P60 form from 31 May. If you left before the end of the tax year, you access the P45 online. Your new employer will commence with uploading your details onto the HMRC system, and you can then access your P60 at the end of the tax year, showing both employers.
A business can use their Regular UK payroll software to issue P60s or use a payroll contractor or bookkeeper. If you have more than ten employees, you can use the free HMRC software.
The P60 includes the following information:
Your name (as the employee)
Your national insurance number
Your gross income
The tax deducted
The contributions deducted for National Insurance
Statutory pay, e.g. leave pay
Student loan deductions
If you misplace your P60 form, you can apply to your employer to obtain another copy. This can be supplied in paper form or electronically, and it will be marked as a duplicate.
If you are not given a P60 by your employer, then the first step would be to request one. If that first request was verbal and was not resolved, then follow up in writing. If it is still not resolved, then contact the HMRC directly. HMRC might charge the employer a penalty of up to £300 for failing to issue the P60 and, in addition, might add to the penalty with extra charges of £60 per day if further violations are found.
When you find mistakes in your P60, you should also request a correction and reissue. The new P60 will be marked ‘replacement’, but a letter on a company letterhead is also acceptable if it outlines and confirms the changes and the correct totals.
If you are the owner of a limited company and are being paid a salary by your company, then you must issue yourself a P60. Even if you are a sole trader and you are paying yourself a salary using the PAYE system, then you will need to issue yourself, and any employees, with P60s.
A P60 is an important document to have on hand for the submission of applications for a loan, a mortgage, tax credit, or a tax refund.
Accessing your myAccount services online with HMRC
You will need to register for a myAccount service with HMRC if you fall into these categories:
A PAYE taxpayer.
An LPT taxpayer (this is a self-assessed tax calculated on the market value of residential properties, paid on an annual basis).
A Business customer, even if you have an active digital certificate for the ROS.
A P45 form is like a snapshot statement of an account detailing all the pay and the related deductions that have happened within a tax year. The timing of the snapshot for the P45 is specifically at the employment termination date.
Your P45 will show your new employer that you have been taxed for the tax year thus far, and they can ascertain whether you have been taxed correctly or not.
A P60 is issued at the end of each tax year and will be accessible through the Revenue website.
What to do if your employer won’t give you your P45
If your employer doesn’t give you your P45, simply contact the HMRC, who will request the form from your employer.