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What is a P60? A guide for small businesses

4-minute read

Simply Business

29 March 2022

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Supplying employees with P60s is an annual job that shouldn’t take up too much of your time. But what happens if you miss the P60 deadline, and how can you claim a P60 tax refund?

This simple guide explores the P60 meaning for employers, business owners, and employees in the UK.

  • A guide to bookkeeping for small businesses

What is a P60?

Your employee’s P60 summarises their total pay and deductions for the tax year (6 April to 5 April the following year).

It’s an official document which clearly states pay (from their current and any previous jobs during the tax year), total tax deducted through PAYE, National Insurance contributions, and any student loan or statutory payments like maternity pay.

When are P60s issued?

P60s are issued by employers once a year.

Employees need to receive their P60 every year by 31 May, and it can be paper or electronic.

Do my employees need a P60?

All employees on your payroll who were working for you on the last day of the tax year (5 April) will need a P60.

When do you get a P60 if you're self-employed?

If you run a limited company and draw a salary, you’ll need to issue yourself a P60.

Sole traders however don’t draw salaries, so won’t need a P60.

How to get a P60

If you’re using payroll software which automatically produces P60s, this’ll be much quicker.

If not, you can order copies from HMRC, but bear in mind these will take at least seven working days to arrive.

Another option is to use HMRC’s Basic PAYE tools, which provide free payroll software for businesses with fewer than 10 employees.

Do you need to include a P60 on your tax return?

If you’re self-employed and not part of a PAYE scheme, you won’t receive a P60 and you won’t need to include it in your tax return.

However, if you receive a P60 from an employer but still need to file a Self Assessment for other work, then you can include it.

For example, if you run a clothing business from home but also work in a local coffee shop, you’ll need to complete a Self Assessment for your clothing business. You’ll also receive a P60 from the coffee shop as a record of your income and tax deductions from that job.

Read our guide to second job tax for a more detailed overview.

It’s important to note that if you’re employed by several companies during the same tax year, you should receive a separate P60 from all of them.

How to get a copy of P60 information

If you've lost your P60, ask your employer to send you a replacement.

If this isn't possible, sign in to your personal tax account or contact HMRC to find out the information that was on your P60.

What does tax deducted mean on a P60?

All P60s will have a section for ‘total tax deducted’. This is the amount of tax taken by the employer during the tax year the P60 is being issued for.

For example, if an employee earns £34,000 in a year from an employer and pays £4,750 in tax, their ‘total tax deducted’ figure for that tax year would be £4,750.

What does a P60 look like?

A P60 will include the following information about you or your employees:

  • National Insurance number
  • employee and employer details
  • any statutory maternity, paternity, shared parental, or adoption pay
  • total amount of student loan deductions made during the tax year
  • employer’s PAYE reference
  • annual total pay, tax deducted, and final tax code

How to claim tax back with a P60

It’s good practice to check the figures on P60s because if they’re wrong, you or your employees could be paying too much tax.

If this is the case, a P60 can be used to claim a tax refund. Here are some of the most common reasons for overpaying tax:

  • starting a new job and being put on an emergency tax code
  • having more than one job at the same time
  • a change in circumstances, such as switching from full-time to part-time work

Employees can claim a refund from HMRC after the end of the tax year in which they overpaid. They’ll need to provide all their details, including National Insurance number, employer reference number, P45, and P60.

When claiming a refund, taxpayers will need to outline the following details to HMRC:

  • how much they earned
  • how much tax they paid
  • how much they think they overpaid

Taxpayers have four years from the end of the tax year in which they overpaid to claim a refund. For example, anyone requesting a refund for overpayment in the 2021/22 tax year will have until 5 April 2026 to submit their claim.

P60 tax refund example

When you hire a new member of staff, it’s important that you provide HMRC with enough details about their salary. If you don’t, the employee could be put on an emergency tax code and end up overpaying tax.

For example, if the employee is given a ‘BR’ tax code, they won’t receive the tax-free personal allowance of £12,570. As a result, they’ll end up paying a basic tax rate of 20 per cent on all their earnings and overpaying their annual tax bill by more than £2,500.

When this happens, they’ll need to get in touch with HMRC to claim back the tax they’ve overpaid.

P60 deadline fines – what can I expect?

If you’ve missed the P60 deadline, make sure you give your employees their P60s as soon as possible. The longer the delay, the more likely you are to get a fine.

HMRC do have the right to charge initial penalties of around £300 for late issuing, plus around £60 every day after that, until you issue the P60.

However, this depends on reporting and enforcement. If it’s a genuine error and you take steps to issue the P60 as soon as possible, you’re less likely to get a fine.

How can I change a P60?

Made a mistake? If you need to issue a new P60, HMRC says you should clearly label it 'replacement', or give your employee a letter confirming the change.

P60 help and support

P60s are usually easy to sort out, once you have the right tools and guidance. Bookmark these HMRC pages to get you started:

This article is intended as a guide. You should speak to a professional accountant or financial advisor if you’re not sure about anything.

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Photograph: baranq/stock.adobe.com

We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer

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