P45 vs P60

HMRC P45 vs P60

P45 vs P60

Understanding the differences between the P45 and P60 forms is crucial for UK business owners and employers, as both play significant roles in the payroll and tax processes. Here’s a breakdown of each form and how they differ:

HMRC Form P45

  1. Purpose: The P45 is issued to an employee when they stop working for an employer. It’s a record of their pay and the tax that’s been deducted from it in the current tax year, up until their last day of employment.
  2. Contents: This form includes the employee’s tax code, total earnings, and the total amount of tax paid in the current tax year.
  3. Issuance: It’s provided by the employer when an employee leaves their job. Each employee receives only one P45 when they leave a job, and it’s divided into four parts.
  4. Usage: The employee gives parts 2 and 3 of the P45 to their new employer or to the Jobcentre if they’re claiming Jobseeker’s Allowance. Part 1 is sent to HMRC by the former employer, and Part 1A is for the employee’s personal records.

HMRC Form P60

  1. Purpose: The P60 is an annual statement issued to employees at the end of each tax year. It outlines the total pay and deductions (like tax and National Insurance) for that tax year.
  2. Contents: It includes information about the employee’s total earnings from that employer in the tax year, the total tax deducted, and contributions to National Insurance.
  3. Issuance: Employers must provide a P60 to every employee who is on their payroll at the end of the tax year (5th April). Each employee gets one P60 per year from each of their employers.
  4. Usage: The P60 is used by the employee for various purposes, such as completing a Self Assessment tax return, applying for tax credits, or proof of earnings when applying for loans or mortgages.

Key Differences

  • Timing and Frequency: The P45 is issued when an employee leaves a job, regardless of the time of year, and they receive a new one from each job they leave. The P60 is issued annually, at the end of the tax year, to all current employees.
  • Information Provided: The P45 details earnings and tax up to the employee’s leaving date in the current tax year, while the P60 summarizes the total earnings and deductions for the entire tax year.
  • Function: The P45 is used primarily to inform a new employer or Jobcentre about an employee’s previous income and tax paid, to ensure correct tax calculation going forward. The P60 serves as an annual summary for the employee’s records, important for personal tax affairs and applications requiring income verification.

Both forms are vital for maintaining accurate and compliant payroll and tax records. As an employer, ensuring timely and accurate provision of these forms is part of your key responsibilities under UK tax law.

About Graham

Accountant specialising in tax, property, and estate planning. A regular speaker at landlord, property Investor, and later life planning events.

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