What is a P60 and do contractors need a P60?
A P60 is, effectively, a certificate showing your taxable earnings from an employment, and the amount of tax, national insurance and other deductions deducted from your pay in a tax year.
And as most contractors tend to know, the tax year runs from April 6th to April 5th in the following year, writes Graham Jenner of chartered accountancy firm Jenner & Co.
When is a P60 issued?
The P60 should be issued by May 31st following the end of the tax year by any employer (including an umbrella company) you are working for on April 5th. The P60 may be issued on paper or electronically.
Who issues a P60?
If you were working for the employer at the end of the tax year, then they should issue a P60.
Where you have more than one employment in a tax year but consecutively, then you will only receive a P60 from the employer you were employed by at the end of the tax year.
Any other employers in the year will have issued a P45 when you left.
The P60 should, normally, show the earnings from that employment, together with earnings and tax deducted from previous employment(s).
If you are working for more than one employer as at April 5th, then each will issue a P60.
What about a P60 if I work through my own limited company?
You will normally be employed by your company and paid a salary (albeit, perhaps a small salary). So your limited company will need to issue a P60, as outlined above.
Your accountant, or other payroll services provider, may well prepare this HMRC form for you.
Why is the figure for ‘pay’ different to my gross pay for the year?
Although the P60 shows “Pay”, the figure included is your “taxable pay” and not necessarily your gross pay.
For example, if you are in a pension scheme, the total amount of pension contributions you have made in the year, will be deducted from your gross pay, in arriving at the “taxable pay.”
Key sections of the P60
The tax year will be shown at the top of the P60 and then there are five main sections to the P60.
- Employee’s details – your name, your national insurance number and your works or payroll number if you have one.
- Pay and income tax details - this will show Pay and Tax deducted in previous employments in the tax year, if any, the pay and tax deducted in this employment (i.e. the employment that the P60 relates to), and the total pay and tax deducted for the year, and your final tax code.
- National Insurance contributions in this employment – this is a table showing the earnings on which National Insurance contributions have been calculated, under each contribution letter (NIC table letter). There will normally only be one NIC table letter.
- Statutory payments – this section shows the amount of statutory payments, such as Statutory Maternity Pay and Statutory Paternity pay that has been included in the pay “in this employment,” as noted above.
- Other details – this section gives details of any Student Loan and Postgraduate Loan deductions.
Then, on your P60, you will see a minor section towards the bottom – it’s a space for your:
Employer’s full name and address and their Employer Paye reference.
Contractors, keep your P60 safe!
You will need your P60 to:
- Fill in your tax return (if you need to complete one)
- Claim tax credits
- Check that you have paid the correct tax
- Check that your employer has used the correct National Insurance number and deducted the correct amount of National Insurance Contributions
- Prove your taxable earnings (from that specific employment) if you need to apply for a mortgage or loan or similar.
What if I lose my P60?
You may request a duplicate from your employer, who should help with that request if, at the time of the request, you have been an employee of theirs within the last three years.
What if I think my P60 is incorrect?
Note that the P60 details the tax and national insurance actually deducted.
If you think the P60 is incorrect, you should raise this with your employer. If they agree that it is incorrect, then they should issue a new P60 marked as “replacement” and send you a letter detailing the changes made.
If the employer does not issue a replacement, then you could ask an accountant to check the figures for you, or contact HMRC.
Take a look
Very finally, this overview of a P60 will be more understandable to contractors who familiarise themselves with the ‘look and feel’ of the HMRC form.
Below is a link to a blank P60 for the 2020/21 tax year which is the year you will currently be looking at for your tax return: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/885841/P60Single20-21.pdf