P45 and P60: What You Need to Know
Starting a new job can seem to entail a never-ending ream of paper, forms and bureaucracy. Much of this paperwork is attributable to the taxman.
It is vital that HM Revenue and Customs (HMRC) is made aware of your new employment arrangements. This is not only a legal necessity – it is also personally important in order to ensure that you pay the right amount of tax.
There is a range of forms designed to make sure that HMRC gets the information it needs, and that you have accurate records showing how much tax you have paid.
Your P45Your previous employer should have provided you with a P45 when you stopped working for them. This document shows how much you have earned, and how much tax you have paid, during the tax year to date.
The P45 consists of four parts. Part 1 should be sent by your employer to HMRC, and you should keep Part 1A. Parts 2 and 3 should be given to your new employer.
The form should contain a range of information, including your tax code and PAYE reference number. It should also show your National Insurance number and leaving date. This data is needed by your new employer, and by HMRC, to ensure that your tax code remains correct – and that you therefore pay the right amount of tax.
Your P60The P60 is primarily for your own information. Like parts of the P45, it provides you with information about how much you have earned during the tax year to date, and how much tax has been deducted.
You will need your P60 if you intend to claim a tax refund, or if you are required to complete a Self Assessment tax return. You may also be asked for this document if you apply for a loan from the bank. Your employer is legally obliged to give you a P60 if you are working for them on 5 April each year. You should keep these documents safe.
Other FormsThere is a range of other forms that you may receive during the tax year, depending on your employment circumstances. Perhaps the most important of these is the P11D.
The P11D details any ‘benefits in kind’ that you have received during the tax year. Many employees receive benefits of this type, and they are treated as income by HMRC. The most common such benefits are a company car and private medical insurance.
Again, you should make sure that you retain your P11Ds, as they can be used to support a loan or mortgage application.
The range of forms you receive when starting and ending a job can be confusing. It is important that you hold onto any documents you are given, as you are likely to need them in the future.
If your employer has failed to provide you with a P45 or P60, you should contact them immediately. You are legally entitled to these – and not having them can make the process of switching employers much more difficult.