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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…
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.
Depending on which applies to you, your P60 tax form will show a detailed breakdown of the following:
Other than to document your history of tax payments, a P60 is important when:
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.
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.
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).
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.
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.
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.
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.
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Appointing an accountant can save you time and stress when starting up on your own. If you would like to speak to someone about any of the above information or any other queries you may have, arrange a callback and a member of the team will be in touch.
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