When the financial year comes to a close, it’s important that anyone who has employees or is the director of an LLC knows how to issue a P60. If you’re not already familiar with what’s required in a P60, we’ve created a helpful guide covering the main facts about this paperwork.
What is a P60?
A P60 form is a record of an employee’s pay and deductions for the tax year. The form must be correct and accurate as it can be used as evidence for a variety of reasons:
- To claim back overpaid tax
- To complete a self-assessment tax return
- As proof of income for loan or mortgage applications
- When applying for means-tested benefits such as tax credits
After the P60 is issued, employees are expected to keep it for at least 22 months after the end of the tax year, that way they have a record of their taxable income to hand should it be needed for any of the reasons above or others.
Employers also have record keeping obligations and should keep copies of employee P60s for a period of 3 years after they are issued. You’re not required to send these to HMRC, just to have them on file in case they are requested.
Who needs to be issued a P60?
Every employee who is working for you and on your payroll at the end of the tax year (5 April) needs to be given a P60. If you have completed a P11 Deductions Working Sheet or a Full Payment Submission (the document you submit to HMRC each time you pay an employee) for an employee, then you should be issuing them a P60. If an employee has worked for you on several contracts during the year you would still only issue one P60 for them, instead of multiple, even if the jobs were not the same.
However, this only applies to people currently working at your company on 5 April each year. If someone has changed jobs and no longer works for you, you are not responsible for their P60 even if they have not sought other employment. This is because all the relevant salary and tax information that would be included in a P60 would have been detailed on the P45 you issued when they left your business.
If you’re a sole trader, you technically don’t draw a salary so you will not need to issue yourself a P60. If you’re a limited company director that draws a salary from your business, however, you will need to issue a P60 for yourself.
What information should a P60 Show?
There’s a lot of information that is included on a P60 such as:
- Employee name
- Employee National Insurance number
- Employee payroll number
- Gross pay and tax deducted for all employers during the tax year
- Employee tax code
- Employee National Insurance contributions for their current employer
- Student loan deductions during their current employment
- Any statutory payments from their current employment (sick pay, maternity pay, etc)
- Name and address of your business
When do you Issue a P60?
Employers must issue P60s for every employee between 5 April and 31 May at the latest. You cannot issue them prior to the end of the tax year on 5 April, but then you have a short window to give everyone their documents.
Penalty for Failure to issue a P60
If you miss the 31 May deadline, you could face a fine. HMRC can charge an initial penalty of nearly £300 plus about £60 more per day for every day that the P60 remains outstanding. Whether or not HMRC decides to issue a fine will often depend on why the forms have been delayed in the first place.
The longer the delay, the more likely you are to get a fine. However, if it’s a genuine error and you try to rectify it quickly, you are less likely to be fined.
How do you issue a P60?
This depends on how your payroll is managed. If you have an accountant that deals with payroll, they’ll likely be able to issue these for you. If you manage payroll yourself, then you’ll have to take care of producing P60s.
You can issue the P60 in paper or electronic forms depending on what you and your employees prefer – though paper forms are a bit easier to lose. Should this happen to one of your employees, you are allowed to provide them with a duplicate. The digital method may allow you to email P60s to employees with password protection on the documents, making it both secure and simple.
If you use an accounting software, it’s very likely that this may be able to help you with issuing the P60s and is a very quick way to manage this task. Companies with fewer than 10 employees can use HMRC’s Basic PAYE tools which is a free payroll software – saving you from making the investment. HMRC’s software can help with calculating tax and national insurance in addition to helping you generate P60s and other forms.
If you prefer to work with paper, you can order the P60 forms from HMRC, but it will take several working days for these to arrive, so be sure to order them well in advance of the 31 May deadline.
What if there’s a mistake on a P60?
Mistakes happen to the best of us, so don’t panic if one of the P60s you’ve issued has a mistake on it. While you don’t want it to be a frequent occurrence, if a P60 isn’t completely accurate you can issue the employee a new one that is clearly labelled ‘replacement’ or provide your employee with an official latter confirming the changes on their P60.
To cut down on changes needing to be made, make sure that you regularly check employee details and update them in your system. If you use HR and payroll software, try to find systems that integrate well and so that all the information pulls through correctly.
Getting help with your P60s
If you’re struggling to sort out your P60s, here’s a few places you can find guidance and the tools necessary to succeed:
All links are checked and valid at time of publishing, 12 April 2020.
