Everything Employers Need to Know About P60s

P60s are important documents used to summarise an employee’s tax information at the end of the tax year. In this guide, we’ll look at the P60 meaning in more detail to explain everything employers need to know including;

• The deadline for issuing P60s
• What the P60 must include
• Who needs to be issued a P60
• How long do P60s need to be kept for
• How to update the information on a P60

 

It is an employer’s responsibility to provide accurate information to their employees regarding their contributions and payments received, therefore it’s important that if you employ staff you understand P60s and how the information on them can impact your team.

Read on to ensure that your P60s are issued correctly and on time so that all of your employees have the information they need to understand their tax position. 

What Is A P60?

A P60 is an important document that provides a formal statement of income earned, Tax Deducted at Source (TDS) and National Insurance Contributions that an employee receives from their employer in a tax year.

Many people consider a P60 as an ‘end of year certificate’ that provides proof of employment, and taxes paid in any given tax year. Employees should be issued with a P60 from every employer they have worked with in any given tax year and the document provides evidence of the tax that has been paid which can be useful if employees need to claim back overpaid tax, apply for tax credit, or provide proof of income for loans and mortgages.

When Does A P60 Need To Be Issued?

Employers are legally required to issue a P60 to each employee by the 31st of May following the end of the tax year. The tax year runs from the 6th of April to the 5th of April each year, and the P60 must be issued by the 31st of May following the end of the current tax year.

This deadline applies even when employees leave during the tax year, meaning that employers must issue a P60 for any former employee within one month of their leaving date.

Meeting this deadline ensures that employees have the necessary information required to submit their yearly Self-Assessment Tax return if applicable. Employers must provide each employee with a copy of their P60, which can be either in paper or electronic form – both are accepted by HMRC. If submitting your P60s electronically, this can be done through your usual payroll software.

What Happens If The Deadline Is Missed?

Employers need to be mindful of meeting the P60 deadline; HMRC can take action if they fail to do so. This could range from a warning letter all the way up to a hefty financial penalty, depending on how serious the case is.

Employers who fail to meet the deadline may incur hefty fines, including an initial £300 penalty for late issuance followed by a £60 fee per day until P60 is issued.

It is important therefore that employers factor in enough time for P60 generation into their end-of-year accounting processes along with payroll and other financial administration. Using good accounting software can really save employers time and make the end-of-year process as easy as possible.

Who Needs To Be Issued A P60?

Employers must issue a P60 to each employee who is still employed with them by the 5th of April and to any employee who has left during the tax year.

Employers also need to provide a P60 for every director, even if they are not taking a salary. It is important that employers keep accurate records of employees’ start and leaving dates so that they can issue a P60 within one month of the employee’s leaving date.

Do All Workers Need A P60?

No, not all of your workers will need a P60. Those who are self-employed, or freelancers and contractors that you hire through an umbrella company, do not need to be issued a P60.

It is important however to ensure that you understand the working status of anyone that is working for you to ensure that they are being paid correctly following HMRC rulings. You check the employment status for anyone working for your organisation using the employment status criteria from ACAS here.

What Information Must Be Included On A P60?

A P60 must contain the following information:

• Employee identification – this includes name, address, and PAYE reference number
• The employee’s tax code
• The tax year – for example, 2023/24
• All taxable earnings for the current tax year must be reported, along with taxes paid to both the present and former employers throughout that tax year.
• National insurance contributions made between (April 6th- April 5th) through your current employment.
• Their statutory payments, such as maternity pay, paternity pay, or shared parental pay and further deductions
• Student loan deductions or postgraduate loans reductions are also shown

 

P60s don’t reflect pension contributions, so it is wise for employees to retain their last payslips should they need to track those payments later.

How Long Do Employers Need To Keep Records Of P60s?

Employers are required to keep records of P60s for three years after the end of the tax year. This is important for both employers and employees in case HMRC needs to review the information at any point during this period.

It’s important to be aware that, even after the three-year limit has expired, employers are still obligated to provide employees with a copy of their P60 upon request.

Best Way To Store P60s

If you have a large organisation, the ideal of storing payroll records for every employee for three years or more may seem like a daunting task, but digital storage can make this a simple process.

The simplest way to store P60s is digitally, either on a secure cloud-based system or within an encrypted document management system. This will make it easier to find the information quickly and securely should HMRC need proof of the documents at any point. Keeping digital records will also remove the need for paper copies to be stored on-site which can take up valuable space.

It’s also important for employers to keep backup copies of records in case of any system failures. Make sure that you understand your backup processes with the payroll provider that you use or your firm’s IT company if storing these important documents locally on your own servers or PCs.

How Can Employers Generate P60s?

Employers can generate P60s through their payroll software once they have completed the final payroll period for the tax year. Depending on the software in use, this may be a simple task or it might require more technical knowledge of the programme and its settings. Employers should refer to their specific software manual for details on how to generate P60s correctly.

If your payroll system isn’t able to generate P60s, employers can use online PAYE tools from HMRC to produce P60s.

How Can Employers Update The Information On A P60?

If you discover an error or are notified of an inaccuracy on a P60, you will need to correct the wrong end-of-year certificate.

Employers must then notify HMRC of any Corrections using form P35 and return the amended P60 to the employee – this must be done within 30 days. Full guidance on the process for updating the information on a P60 is available from HMRC.

Once the correction is completed and an employer is assured of its accuracy, they can receive a REPLACEMENT P60 either digitally or in paper form. Alternatively, you may send out a letter confirming that these changes have been made to rectify any discrepancies.

What About P60s For Employees That Have Left?

A P60 must still be issued to any employee that has left the company during the tax year but this should be done within a month of their leaving date. If the employee has given you an updated address then you will need to issue it electronically or send them a paper copy. If they have not given you an updated address then you should keep the P60 on file until they contact you to request a copy.

Keeping Employees In The Loop About P60s

It is important to keep employees informed of when their P60s will be issued and how they can access them. If you are using an online payroll system, you should also make sure that each employee has access and a secure login so they can view their P60 as soon as it is available – this should have their up-to-date contact information attached.

If you are sending out P60s by post, it is important to let employees know when they can expect to receive theirs. If any employee requests a copy of their P60 after the three-year limit has expired, employers must provide them with this information as soon as possible.

Updating Employee Records For Accurate P60s

You must hold accurate contact information for all of your employees. Not only is this crucial in the case of emergencies at work, but also when it comes to important tax documentation like the P60 forms that you need to issue.

It’s recommended that you send out regular reminders to your employees asking them to let you know of any change in personal details including their bank accounts, address and telephone numbers.

As it’s your responsibility to create, update and keep records of P60s, timely notification of these types of changes in personal details will help to ensure that the information you have on file to generate and issue end-of-year summaries is accurate.

Difference Between A P60 and P45

There are several important documents that employees must be provided when they leave or join a company, or at the end of the tax year. Two of these are the P60 and P45, which are often confused but there are clear differences between the two.

A P45 is issued by an employer to the new employer (a copy should be kept by the employee) when the employee leaves a role. The P45 states their pay and tax deductions up until that point in the tax year at the point of the last payroll date before they left.

A P60 is issued by a current employer at the end of each tax year, (meaning employees can have more than one P60 if they are employed in several organisations). The P60 summarises the amount of income earned from all sources, along with the total amount of National Insurance and Income tax deductions taken in that period for the current job only.

Summary

You should now have a good understanding of the meaning of a P60 and your responsibilities as an employer surrounding this important tax and income summary document.

To recap;

• P60s are issued to employees each year, summarising the amount of income earned from all sources and the total amount of National Insurance and Income tax deductions taken in that period.
• It is your responsibility as an employer to create, update and keep records of P60s for accurate end-of-year summaries.
• Employers must ensure that they issue P60s to all employees by the 31st of May after each tax year and then must keep a record of the document for at least three years in case HMRC requests information about an individual’s earnings.
• If an employee has left during the tax year then a P60 must still be issued by the 31st of May – either electronically or in paper format – so that employees can use it for tax return purposes.
• It is important to keep employees informed of when their P60s are issued and how they can access them, as well as regularly updating employee records for accurate P60s.
• Finally, it is important to remember that the P60 document is different from the P45 which should be issued when an employee leaves your organisation.

 

We hope this has been a helpful guide for employers on how to create and issue accurate P60s. For further in-depth information, you can find helpful resources and guidance on HMRC’s website.

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