What’s the Difference Between P45 and P60
When you’re working for an employer in the UK, there are two forms you’ll come in contact with that could be easily confused with each other: your P45 and your P60. If you’re not sure of the difference between these two tax forms, you could be owed hundreds or even thousands of pounds in tax!
Both forms are essential if you want to receive your full entitlements at the end of your employment, so it’s important to understand how they work and what they mean for your salary. Let’s take a look at what each form means, how to get them and how long they are valid.
Table of Contents
What is a P45?
When an employee quits their employment, the employer provides them with a P45 form. It is a method for the previous employer to transfer tax and payroll data to the new employer as well as the employee for their own tax records. Previously, a paper copy was provided to HMRC, but today the procedure is handled electronically through Real Time Information payroll reporting.
The former employer electronically uploads the P45 information to HMRC rather than through the postal service and provides a paper or electronic copy to the departing employee. The employee sends a copy to the new employer, who will enter the information into their payroll system and electronically notify HMRC
What Details are on a P45?
- Identification of the worker
- This tax year’s taxable income and any taxes paid
- Tax laws
- References to PAYE taxes from the previous employer
Since National Insurance deductions and pension payments are not shown on P45s, it may be helpful for the employee to preserve a copy of their most recent paystub in case they need to track down these details after retirement.
You can enter the data from the P45 into your payroll software to make sure that tax is still being withheld from the new employee at the appropriate rate.
How Does One Obtain a P45?
You must be quitting your work or have recently quit in order to receive a P45. No matter why you’re leaving—whether you’ve resigned, been sacked, or even retired—you should be given a P45 at this point.
If you don’t receive a P45 when you quit your employment automatically, you should request one. Your employer is required by law to supply it, therefore they can’t refuse.
For How Long is a P45 Valid?
P45s, like all tax documents, should be retained for six years after the end of the tax year to which they pertain by the employee, the previous employer, and the new employer. However, because HMRC can conduct back checks for up to 20 years, it may be worthwhile to preserve them for longer.
You shouldn’t use a P45 form that you received for an earlier tax year. As customers must submit details on the current tax year, request that they complete a beginning checklist instead.
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What is a P60?
For those who were still working as of 5 April, the end of the UK tax year, a P60 form summarizes identical employment and tax data for continuing employees. Employees will have a unique P60 for each present job at the end of the tax year. Therefore, if you work two jobs, you should get two P60s.
It is required by law that you give your staff a physical copy or an electronic copy promptly after April 5 of each year. It includes a breakdown of the employee’s taxable income, taxes paid while under your service, and any employment history.
Although your employees’ personal tax accounts now have access to this information, many people still choose to utilize the P60 because it is a reliable method of demonstrating income for tax breaks or loan or mortgage applications.
What Details are on a P60?
- Employee information
- The fiscal year
- For the tax year, taxable income and any taxes paid
- National insurance paid for the tax year while working at the current job (6 April – 5 April)
- Tax laws
- The PAYE tax references of the employer
The employee may find it helpful to maintain their most recent pay stub in case they have to trace their pension contributions in the future as P60s do not include pension contributions.
Each employee must receive a copy of the P60 to maintain their personal tax records, and you must also submit an electronic copy of the P60 to HMRC using your regular payroll software.
Every employee must receive a P60 by May 31 of every year, just as you are legally required to provide them a payslip each pay period. This comes in both print and digital formats. The P60 must be retained for a minimum of six years by both the employee and the employer.
How Does One Obtain a P60?
If you’re still working for your company at the conclusion of the tax year, they must offer you a P60 (5th April). By the end of May of that calendar year, they should have delivered this to you, either electronically or in hard copy. If you own a business and receive a salary from it, you must issue a P60 to yourself.
You will only receive one P60 if you have one job. If you changed jobs within the same tax year, the data from your old P45 will have been transferred to your new P60, which will indicate your overall earnings for that tax year. You should receive multiple P60s for that tax year, one from each employer, if you are working multiple jobs concurrently and are still hired by all of them on April 5.
If you’ve misplaced your P60, don’t panic; all you need to do is ask your present employer, who should maintain copies for three years. But keep in mind that former employers are not required to retain copies of your P60.
Final Note
A P45 form functions as a snapshot summary of an account that summarizes all pay and associated deductions made throughout a tax year. The P45 is summarized at the time of employment termination.
Your P45 will demonstrate to your new employer that you have paid taxes for the current tax year so they can determine whether or not you have been correctly taxed. Meanwhile, a P60 includes a breakdown of an employee’s taxable income, taxes paid while employed, and employment history. At the conclusion of each tax year, a P60 is issued and made available on the Revenue website.
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