What is a P60 Tax Form?

With HMRC no stranger to using puzzling terms to describe relatively simple things, we thought you might benefit from a jargon-free guide to the P60.

So we’ll get straight to it - the P60 explained…

What is a P60?

Also referred to as a ‘P60 end of year certificate’, the P60 form is a document that shows all your employment income and deductions in a tax year - from 6th April to 5th April the following year.

For freelancers and contractors, it’ll contain the salary you’ve received from your limited company or income earned from working via an umbrella company or other employers, along with employment-related tax payments and other bits of information, depending on your circumstances.

What will my P60 include?

Depending on which applies to you, your P60 tax form will show a detailed breakdown of the following:

• Total pay from employment in a particular tax year
• PAYE tax deductions
• National Insurance Contributions (NICs)
• Student loan repayments
• Any statutory income, such as sick, maternity or paternity pay

Why do I need a P60?

Other than to document your history of tax payments, a P60 is important when:

• Filing your annual Self-Assessment Tax Return
• Claiming a tax refund
• Applying for tax credits
• Proving income when securing loans or mortgages
• You’re subject to a tax investigation

Does everyone receive a P60?

Anyone who is paid a salary needs a P60, regardless of whether the amount received falls under the tax threshold or not. While employees (including umbrella employees) will get one from their employer, contractors that are on the payroll of their own business will need to issue one to themselves, and any other employees of their business. That said, an accountant can easily take care of this for you.

Does the P60 show dividends?

No, because the dividends you draw from your business are not regarded as employment income - and the P60 only includes income earned from employment.

Lots of contractors pay themselves a relatively low salary (often set at the Secondary NI Threshold of £9,100 for the 2022/23 tax year) before topping up their income via dividends as and when they need.

In this scenario, your P60 will show zero PAYE tax deductions and no NICs payments.

What happens if I’ve held more than one job?

If you’ve been an employee of more than one business in the same tax year (and this might be the case for contractors who have recently left their job to go freelance) you’ll be issued with two P60 forms - one from your previous employer and one from your current employer (you).

How do I organise my own P60?

If you would prefer to complete your own P60, software used for your payroll reporting should be able to provide you with one. Alternatively, you can use the government tool to produce it.

Do sole traders need a P60?

Because sole traders don’t pay themselves a PAYE salary, they don’t need to issue themselves a P60. However, any employees they hire will need to be given one.

Is a P60 a legal requirement?

Yes, if you work on the payroll and receive a salary. All employers (even if it’s your own business) must issue a P60 to employees by 31st May, as part of the payroll year end. Less than a week later, on the last day of the financial year (5th April), P60 forms need to be filed with HMRC.

If you miss either of these deadlines, HMRC could investigate your affairs - so needless to say, the P60 is crucial to your tax compliance.

Compliance-led solutions

Here at Caroola, we are fully FCSA accredited and compliance is at the heart of everything we do. If you would like to find out more about our compliant solutions, request a callback and a member of the team will be in touch.