Everyone earning over £120 a week has to pay tax. The weekly or monthly deductions should be made by your employer, but it's valuable for you to know how much tax you've paid too.
HMRC reported that between April to July 2021, £125.7 billion was paid in taxes. This included taxes such as Income Tax, Capital Gains Tax & National Insurance Contributions. These taxes are one of the biggest sources of income for the UK government each year.
Every employee should know how much they're being taxed on their salary. The easiest way to see the full amount that you've paid in tax throughout the year is by reading your P60 form.
In this article, we'll explain the importance of a P60, when you expect to receive one and other information that is necessary to understanding this annual report form.
What is a P60?
A P60 is a form that employees receive at the end of the tax year. It states how much you've been paid, as well as how much you've been taxed on your salary. This will include deductions such as your PAYE and National Insurance contributions. The form can be used to prove that you have paid the correct amount of tax.
You can ask your employer for a replacement P60 if you lose the original copy. It's important that you keep your P60 in a safe place because you may be asked to provide it as evidence when applying for things such as a mortgage or loan.
Continue reading to find out when you will be issued with a P60, what information the form should contain and what to do if there is an issue with your P60.
Why do I need a P60?
A P60 is the easiest way to show someone how much you've paid in tax and as proof of income. You could use your P60 to check if you have overpaid taxes and to make sure you are on the right tax code. The P60 can be used to claim for tax reimbursements if it turns out you have been overpaying tax.
The most common way to use a P60 is when you approach the bank for a mortgage. A P60 will prove what you are earning and how much tax you pay. This will make it easier to estimate how much you are capable of paying back on your mortgage. It isn't essential to have a P60 when applying for a mortgage, but it will mean that you will have to provide other pieces of evidence to prove your income, such as previous payslips.
You can also use your P60 when applying for a property rental and you need to provide proof of your salary.
Employers will issue you with a P45 when you leave their company. This form will show your next employer how much tax you've been paying so that you can be put on the correct tax code.
What information is on a P60?
P60s will include the following information:
- National Insurance number and category
- Employer details (such as name and company address)
- Your personal details such as name and payroll number
- The amount you've paid towards your student loan (if applicable)
- Pension contributions
- Statutory sick pay (if applicable)
- Amount of tax you've paid over the tax year
- Statutory pay such as maternity, paternity and adoption
When will I be issued with a P60?
It is a legal requirement that all employers give their employees a P60 each year. The tax year runs from 6 April to the following 5 April. You should be given your P60 form by 31 May.
HMRC don't keep copies of P60s so it is up to the employer to keep them on file for approximately three years after they were issued. You can request a replacement copy of your P60 if you lose the original.
Will I get multiple P60s if I have more than one employer?
Yes, you can receive more than one P60 if you are working multiple jobs at the same time. This is because you will be paying different amounts of tax on your earnings in each job. Your employers won't communicate with each other so they will simply issue you with a P60 for the tax that you have paid whilst working for them.
You should pay close attention to your various P60s to make sure that you have paid the correct amount of tax for each job.
Do I get a P60 if I'm self-employed?
You will only get a P60 if you are employed at a company. However, you will receive one if you were employed before the end of the tax year (5 April).
Instead of a P60 form, you will need to complete a Self Assessment form. This is a form that you will need to annually send to HMRC so that they can see how much income you've been paid and the tax that has been deducted.
HMRC will provide you with an SA302 form based on the information on your Self Assessment form. The form will contain your tax and income information from the previous four years. You can use this form in the same way as a P60 when you are applying for things like mortgages and loans.
What should I do if my P60 is wrong?
As your P60 is such an important document, you need to make sure that all of the information is correct. You should contact your employer if you think there are incorrect details and explain where you think the error is. This will help them to identify the mistake and correct it.
Your employer should send you a replacement copy once they have changed the details on your original P60. The amended copy should be clearly marked as a replacement.
You can be fined if it turns out you have been underpaying tax. In most cases, HMRC will just tell you to repay the amount you owe. The deadline is usually 12 months, although some people are given an extension of up to 36 months depending on their circumstances.
HMRC can issue a fine from 30 days after your late payment, then again after six months and another penalty after 12 months. The penalty is 5% of what you owe.
What happens if an employer doesn't give a P60 to their employee?
It is a legal requirement for employers to issue all of their employees with a P60 each year. HMRC can issue a fine of £300 if they fail to provide you or other employees with a P60. They will then be issued with a £60 per day until the employer gives out the P60s.