Finance · 2 September 2021

What is the difference between a P45 and a P60?

What is the difference between a P45 and a P60?

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.