What is a P60?
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Issuing P60s is a legal requirement for any business with an employee-base, including small to medium-sized enterprises. They ensure legal compliance, streamlined tax planning, and help build employee trust and staff progression.
If you have any employees in your company, you are required to issue P60s with all the relevant tax information to ensure accuracy, compliance, and due diligence.
This article describes what a P60 is, what needs to be on it, and how to integrate the form into your cloud accounting processes for a streamlined and transparent payroll system.
Contact Mollan today for a detailed consultation with no fees or obligations.
What is a P60?
A P60 is a statement detailing the tax your business has paid in a tax year. It summarises your deductions and earnings. It ensures:
- Legal compliance & professionalism: Issuing P60s ensures you are adhering to rules and regulations set out by financial governing bodies like HMRC, avoiding fines or sanctions. It demonstrates transparency, which builds trust with HMRC and employees.
- Streamlining tax processes: P60s simplify employee tax refund claims or self-assessment tax returns, creating accurate record-keeping for both the employer and employees.
- Employee trust and satisfaction: Your employees can use the P60 as proof of their earnings in your company, which helps them to secure mortgages, loans, and other financial progressions. It also shows that your company values the well-being of staff by providing this amenity.
- Auditing and accountability: P60s serve as an official record to hand over to auditors when audits occur. They also build a strong foundation if/when disputes occur over pay, deductions, or tax compliance.
- Reputational management: Demonstrating tax compliance enhance an SME’s credibility with stakeholders, employees, and regulators, allowing businesses to grow.
How does this impact SMEs?
Small and medium enterprises are legally required to issue P60s to their employees if they are operating a payroll system under the UK’s Pay as You Earn (PAYE) scheme, making it a fundamental element of payroll processes for business owners and employers.
It’s mandatory to issue P60s under UK tax laws, regardless of the size of the company.
What a P60 includes/should include
P60s vary depending on the company. Any P60 must include the following information. It’s worth seeking tax accountants out for ensuring these details are included accurately:
- Employee details: Full name, National Insurance (NI) number, and employee payroll/works number (if applicable).
- Employer details: Employer’s name, PAYE reference number
- Tax year: The tax year covered by the P60 (6th April-6th April in any given year)
- Income and tax details: Total pay for the year (gross income before deductions), total tax deducted under PAYE
- National Insurance contributions: Total NI contributions made by the employee
- Statutory payments: Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP).
- Student Loan Deductions: Total student loan repayments deducted during the year (if applicable).
- Workplace Pension Contributions: Amount deducted for workplace pension contributions (if applicable).
- Tax code: The PAYE tax code used to calculate deductions.
- Cumulative totals: Year-to-date totals including gross income, tax paid, and national Insurance contributions.
- Final Taxable Pay: Gross pay that has been subject to tax for the year.
- Additional Adjustments: Any tax adjustments for underpayment or overpayment (if applicable).
- HMRC Helpline: Contact details for HMRC in case employees have queries.
- Declaration: A statement confirming that the information is correct to the best of the employer’s knowledge.
Difference between P60 and P45
Sometimes conflated, P60 and P45 are two distinct PAYE forms.
- The P60 is used to sum up an employee’s tax information at the end of a tax year. Unlike a P45, a P60 is issued to current employees who are still employed at the end of the tax year.
- The P45 is used for when employees change jobs. P45s are issued to employees who are leaving or have left a company and require the form to secure employment elsewhere.
Integrating P60 forms to cloud accounting – the benefits
Integrating P60 forms into your cloud accounting, whether it’s Xero or another platform, is a good way to enhance the efficiency and accuracy of payroll management. Benefits include:
- Streamlined P60 distribution: Cloud accounting allows employers to disseminate P60s electronically, eliminating the need for paper forms and reducing repetitive administrative tasks. This ensures employees receive their P60s promptly and securely.
- Enhanced accessibility: Cloud-based systems mean employees can access their P60s anytime with any device, provided they have internet access. This self-service capability empowers staff to retrieve their financial information without delays, which is highly practical when applying for loans or mortgages.
- Improved data accuracy & compliance: Cloud platforms automate payroll processes, minimizing manual data entry errors. They are also regularly updated to comply with the latest tax regulations, ensuring that P60s are accurate and meet any shifting legal requirements.
- Cost and time efficiency: Electronic mediums reduce the cost of printing and posting paper documents. They also free up time, allowing companies to focus on value-added tasks in place of administration.
- Environmental benefits: Reducing paper usage contributes to sustainability efforts, aligning with corporate social responsibility goals.
How Mollan & Co helps
When ensuring legal compliance and accurate data inclusion in P60s, partnering with expert accountants makes a huge difference. At Mollan & Co, we provide several specialised accounting services crafted to incorporate the unique elements of your company and employees.
Utilising over 40 years in the industry, we have crafted streamlined accounting solutions to provide you with the professional eye and tools to issue compliant and comprehensive P60s.
Contact Mollan & Co today for a free, zero-obligation consultation.
Author ProfileI'm the owner and Managing Director of Mollan & Co Accountants. I'm a skilled and efficient accountant with more than 20 years of experience in the industry.
I developed valuable skills in commercialisation through my work in the science and technology department at the Scottish University. Then, in 2002, I formed my own internet-based marketing company, producing and distributing 360° virtual reality tours for the Scottish tourism sector.
I now use my commercial skills, expert tax knowledge and first-hand experience to help other businesses grow and flourish through strong accounting practice.
Our success at Mollan & Co is directly related to the success of our clients.
