At the end of each tax year in the UK, most employees receive a document that summarizes their earnings and tax payments over the last 12 months. This document, known as a P60, is crucial for managing your tax affairs. Whether you’re applying for a loan or checking your tax deductions, understanding your P60 is key to staying on top of your finances. In this guide, we’ll break down what a P60 is, its purpose, and how you can make the most of it.
What is a P60?
A P60 is an official statement from your employer detailing the total income you earned during the tax year and the taxes you’ve paid through PAYE (Pay As You Earn). It’s an essential document for anyone employed in the UK, as it helps you keep track of your earnings and tax contributions. The P60 is typically issued by your employer by May 31st after the tax year ends (on April 5th).
If you’re employed on the last day of the tax year, you should receive a P60 from your employer. However, self-employed individuals or those working on a freelance basis through a limited company do not receive a P60. Directors who pay themselves a salary also receive this document.
What Information is Included in a P60?
Your P60 provides a summary of your pay and deductions for the tax year. The information included will generally cover:
- Your personal details (name and National Insurance number)
- Your employer’s details (company name and PAYE reference number)
- The tax year it covers
- Total earnings for the year from your job
- The total income tax deducted from your salary
- National Insurance contributions for the year
- Your final tax code
- Statutory payments you may have received (e.g., maternity or sick pay)
- Any student loan deductions, if applicable
It’s important to review this information to ensure that everything has been calculated correctly.
The Role of Your Tax Code
A key part of your P60 is the tax code, which determines how much tax-free income you’re entitled to during the year. A tax code can reflect a variety of circumstances, such as unpaid tax from previous years or work-related expenses. For example, tax codes like “BR,” “K,” or “W1/M1” can indicate special circumstances, and you should check that these codes match your situation. If you have any doubts, it’s a good idea to contact HMRC to clarify why your code is different.
Student Loans, Statutory Benefits, and Payments
If you have a student loan, the P60 will show the amount deducted towards it. This helps you track your repayments, especially if you plan to switch to direct payments for overpayments. You may also see entries for statutory sick pay (SSP), statutory maternity pay (SMP), or other entitlements, which should be checked to ensure they align with what you’ve received.
P60 vs. P45: What’s the Difference?
While both the P60 and P45 relate to your earnings and tax payments, they serve different purposes. A P45 is given to you when you leave a job and outlines the earnings and tax paid up to that point. In contrast, the P60 summarizes your entire year’s pay and deductions if you were employed on April 5th, the last day of the tax year.
Why is Your P60 Important?
Your P60 is used for various financial and tax-related purposes. Here’s how it can be beneficial:
- Tax Refunds: If you’ve overpaid tax during the year, the P60 is crucial when claiming a refund.
- Self-Assessment: If you’re completing a Self Assessment tax return, your P60 provides the necessary figures for an accurate submission.
- Proof of Income: Whether you’re applying for a mortgage or a loan, your P60 will likely be requested as proof of your earnings. Lenders want to ensure you can afford repayments, and the P60 confirms your income and tax contributions.
- Tax Reliefs: You may need your P60 to apply for certain tax reliefs, such as marriage allowance.
Spotting Errors in Your P60
It’s important to review your P60 carefully, as mistakes can happen. Common errors may involve incorrect tax codes, missing deductions, or incorrect pay figures. To avoid problems, follow these steps:
- Compare with Your Payslips: Review your P60 alongside your final payslip to ensure all figures match.
- Contact Your Employer: If you find discrepancies, reach out to your employer’s payroll department to correct the issue.
- Contact HMRC: If your employer can’t resolve the problem, or if the issue involves your tax code, contact HMRC for assistance.
How to Get Your P60 if You Work Through an Umbrella Company
If you’re employed via an umbrella company, your P60 will be provided by them, not your agency or end client. As your official employer, the umbrella company is responsible for issuing your P60 and managing your tax affairs. You’ll receive your P60 by the end of May, just like any other employee.
What Happens If You Lose Your P60?
Losing your P60 isn’t something to panic about. Here’s what you can do to retrieve it:
- Contact Your Employer’s Payroll Team: Employers often keep copies of issued P60s and can provide a replacement or a summary.
- Check Online Portals: Many employers now upload P60s to online payroll systems. Log in to your account and download the document directly.
- Use HMRC’s Personal Tax Account: If you cannot get a replacement, you can view your pay and tax details through HMRC’s online system, although it may not be the exact P60 document.
If all else fails, your employer can provide a letter confirming your pay and tax details, which may serve as an acceptable substitute.
Conclusion
Your P60 is an essential document that provides a complete summary of your income and tax contributions for the year. By understanding what it includes and how to use it, you can stay in control of your finances, ensure your tax records are accurate, and make informed financial decisions. Always double-check the details, and if you notice any discrepancies, take the necessary steps to resolve them promptly.
