Understanding Your P60: Every year, millions of UK employees receive a P60. This essential document summarises your earnings and tax details for the tax year. Although it is crucial, many find it confusing. So, I’d like to break down everything you need to know about your P60.
Understanding Your P60: What is a P60?
A P60 is an end-of-year certificate that your employer issues. It summarises your total pay and the tax you’ve paid during the tax year. The tax year runs from 6 April to 5 April the following year.
Why is the P60 Important?
Your P60 is crucial for several reasons:
- Proof of Income: It provides a record of your annual earnings.
- Tax Returns: It’s essential for completing self-assessment tax returns.
- Claiming Tax Refunds: It helps if you’ve overpaid tax and need a refund.
- Loan Applications: Lenders often require a P60 for mortgage or loan applications.
- State Benefits: It’s needed when claiming certain state benefits.
Key Sections of the P60
Personal Details
The top section includes your personal information:
- Name: Your full name.
- National Insurance Number: A unique number used for tax and benefits.
- Tax Code: Indicates your tax-free allowance and how much tax should be deducted.
Employment Details
This section details your employment information:
- Employer’s Name and Address: The name and address of your employer.
- Payroll Number: Your unique identifier within the company’s payroll system.
Pay and Tax Details
The most crucial part includes your earnings and tax information:
- Total Pay in This Employment: Your total earnings for the tax year.
- Total Tax in This Employment: The total tax deducted from your pay.
- National Insurance Contributions: Amounts deducted for National Insurance.
- Student Loan Deductions: If applicable, the total student loan repayments deducted.
Previous Employment Details
If you’ve changed jobs during the tax year, this section summarises your earnings and tax from previous employment. It ensures your tax calculations are accurate.
Understanding Your Tax Code
Your tax code is critical in determining how much tax you pay. Common tax codes include:
- 1257L: The standard tax code for most employees, indicating a personal allowance of £12,570.
- BR: Indicates you’re taxed at the basic rate on all earnings, often used for second jobs.
- D0: All earnings are taxed at the higher rate, typically for high earners with multiple jobs.
Understanding Your P60: How to Use Your P60
Checking Accuracy
First, ensure all details on your P60 are accurate. Verify your personal information, tax code, and pay details. Errors can lead to incorrect tax calculations.
Claiming Tax Refunds
If you think you’ve overpaid tax, use your P60 to claim a refund. You can claim online through HM Revenue and Customs (HMRC) or by post. Your P60 provides the necessary information to complete the claim.
Completing a Tax Return
If you’re required to file a self-assessment tax return, your P60 is vital. It provides accurate figures for your earnings and tax paid, ensuring your return is correct.
Applying for Loans or Mortgages
Lenders often require proof of income for loan or mortgage applications. Your P60 serves as a reliable document to verify your earnings.
Common Issues with P60s
Missing P60
If you don’t receive your P60, contact your employer immediately. They are legally required to provide it by 31 May following the end of the tax year. If issues persist, you can report this to HMRC.
Incorrect Information
Mistakes on your P60 can affect your tax status. Contact your employer immediately to correct any errors. They can issue a revised P60 with the correct information.
Keeping Your P60 Safe
Why Keep It?
You should keep your P60 for at least six years. It’s a valuable document for tax purposes and financial records. HMRC can request information from up to six years ago.
Storing Your P60
Store your P60 in a safe place. Consider both physical and digital storage options. Scanning and saving a copy electronically ensures you have a backup.
Differences Between a P60 and a P45
P60
A P60 summarises your annual pay and tax. It’s issued at the end of each tax year.
P45
A P45 is issued when you leave a job. It summarises your earnings and tax from the start of the tax year to your leaving date. It’s essential for your new employer to calculate your tax correctly.
Final Thoughts: Understanding Your P60:
Understanding your P60 is crucial for managing your finances and tax obligations. This document summarises your earnings, tax paid, and more, providing a comprehensive overview of your financial year. By checking your P60 for accuracy and using it wisely, you can ensure your tax affairs are in order. Keep your P60 safe, as it’s an important record for future reference. If you encounter any issues, contact your employer or HMRC for assistance.
