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The Importance of a P60 Form

importance of P60

When you are residing in the UK and working as well, you are normally part of the PAYE (pay as you earn) system. When a tax year ends, it is important for every employee to get the form P60. However, people often enquire about what is the importance of the P60 Form. Well, this works as a summary at the end of a tax year that explains what you have paid and what was the amount for your tax deductions.

On the other hand, when you are in the role of an employer, the scenario changes. Further in the discussion of this article, we will delve into the frequently asked queries like what are the ways to handle the P60 admin, how to read the form P60 professionally, what is the need of this form, and why is the form P60 so important?

 

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What are the Three Ways to Handle Your P60 Admin?

The employers are under the obligation to issue form P60 on an annual basis for every employee by the end of a tax year. This is done by the end of 31st May. Let’s take the example of the tax year from 6th April 2021 to 5th April 2022, you as an employer will have to issue the form P60 by the end of May that is 31st May. The question that arises here is what are the possible ways that are workable to handle the P60 admin? They are listed and explained as:

  1. Your payroll software will help you in this regard because it generates the form P60 automatically for you. The time is saved here so is the paperwork. When you synch your payroll software with our accounts books, the process becomes even easier for you.
  2. HMRC offers free payroll software and you can use that as well. This is only possible when your employee count is not more than 10. You can do the online filing as well as the manual filing.
  3. You will have to wait for a period of seven days if you want it to arrive to you by post. You can always seek the guidance of your accountant in this regard.

Moreover, this is to reassure here that you will be held responsible as an employer for every employee that has done work for your company. In the case of an employee who has more than one job, he will have to get the form P60 from all of his employers. You will not have to worry about his relevant information from multiple income sources. However, be considerate about your employees getting the form by the end of May.

 

How to Read a Form P60?

It is known by most of us that form P60 contains a lot of financial and personal information about an individual. However, this information is not considered to be something new to find out, this kind of information is available everywhere. It mostly refers to the summary of a tax year that explains the tax payment and relevant deductions. This form also works as proof of how much you have earned in the period of a tax year and how much tax you have paid. The information on the form P60 includes the following:

  • The PAYE reference number of the employee and your basic details.
  • The details of the employee along with the national insurance number.
  • The sum of annual pay.
  • The total of the national insurance contribution along with the details of tax deductions.
  • The final tax code.
  • If there is any statutory pay received that might include maternity, paternity, and shared parental pay.
  • The deductions of the student loan.

 

What is the Need for Form P60?

Generally, the sole traders, the directors of the limited company, employees of the company, and self-employed individuals are the ones who need the form P60. When you are in the role of an employer, you will have to make sure that all of your employees get the form P60 before the deadline which is the end of May. For the kind of employees who have worked only once for you in the period of a tax year, you will have to issue one P60 form.

When you are in a business that is considered to be a limited company and you are in the role of a director who takes the salary, you will have to issue a form P60 for yourself as well. In the case of the sole traders, since they do not get a salary so there is no need for the form P60. Now when it comes to the discussion of the individuals who are employed or self-employed, you are required to get the form P60 in both cases.

 

What is the Importance of the P60 Form?

The need of issuing the form P60 is so important because it is a legal requirement in the industry. You will have to go through financial penalties if you do not consider doing it before the deadline arrives. The importance of the form P60 can be explained by the following uses:

  • It is useful when you have to make the claim for tax credits.
  • Income tax refund.
  • Refund of the overpaid payments in the national insurance.
  • It is useful for completing self-assessment tax returns.
  • This form works as evidence that can prove your financial product.

 

The Bottom Line

Now that you have gathered a fair amount of information about what is the importance of P60, we can say that it is useful in several ways for directors, employees, and even employers as well.

 

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Disclaimer: All the information provided in this article on what is the importance of the P60 form, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.