Every entrepreneur should be aware of his or her legal obligations. One such obligation is to provide all employees on the payroll with a P60.
A P60 shows how much tax an employee has paid during the tax year.
This document summarises the total pay and deductions made by every employee in any given tax year.
When must a P60 be issued to employees?
As an employer, you must give a P60 to each employee who was working for you on 5 April.
This can be supplied on paper or electronically and must be provided by 31 May. This is one part of payroll year end.
This will allow enough time to check the details before filing a tax return.
What is a P60 used for by employees?
Employees need their P60s to prove how much tax they’ve paid on their salaries and make any claims, for example:
- Claiming back overpaid tax
- Applying for tax credits
- As proof of income if applying for a loan or a mortgage.
P60s include details of earnings and deductions including National Insurance contributions and tax.
These are important elements required by employees.
What happens if a P60 is not provided?
Failure to deliver P60s on time may lead to a fine from HMRC.
If employers don’t provide their employees with their P60s by the May deadline, they should aim to do so as soon as possible after that point to reduce the chance of being fined.
On the topic of penalties, HMRC can charge £300 initially if P60s are issued late, with £60 added every day until the documents are sent to the employees.
But if there’s a genuine error on the part of the employer, and they move to get the P60s to their employees as quickly as possible, the chance of receiving a fine will be reduced.
How do your provide employees with a P60?
Payroll software can be used to generate and manage P60s online.
Employees can easily and securely access their P60s (as well as their payslips) online, using a mobile phone, tablet, laptop or desktop computer.
It’s also possible for employers to order copies of the P60s from HMRC. However, unlike using payroll software, they can take up to seven days to arrive.
Do I need a P60 if I am self-employed?
Anyone classed as a sole traders doesn’t need a P60 as they don’t draw a salary.
It’s a different case for those who run a limited company. As they do draw a salary, they’d be required to issue themselves with a P60.