What is Form P45?
A P45 is a form which is used in the United Kingdom by its tax authority. As it is an official document which is specifically meant to be provided by an employer to an employee on the leaving of their job. Thus, this form often provides a purpose which is to record the details about the earnings of an employee and all the taxes that have been deducted during their employment period.
To put it simply, the document tells you and the tax authorities about how much tax you’ve paid on your earnings as you worked with the company you are about to leave. This goes from April 6th to April 5th in the UK.
The P45 form typically includes the following information:
- Details of an Employee: This contains the name of an employee, his/hers/their residential address, and the National Insurance number. Details of their Employment: This section rolls out information about the employee’s job, such as the job designation, start date, and the end date of the employment.
- Tax Deduction and Earnings: The form P45 will have the total earnings the worker received during their employment, and the total amount of income tax and National Insurance contribution received which were then minus from their pay.
- Tax Code: The form P45 will also add the tax code that was then used to figure out the employee’s tax deductions. The same tax code is based on the circumstances of an employee and determines how much of the tax should be withheld from their income.
- Reason for Leaving: The form may contain the reason for leaving your job, so either it can be resignation, retirement, or termination.
Form P45 is further divided into four parts:
- In the first part, the form is officially sent for record to HMRC which is His Majesty of Revenue & Customs, the tax authority.
- The second part is when it gets to you for your record so you must keep it safe.
- The third part is when you pass it down to your new employer, so the employer can decide on how much tax deduction should happen on your new wage.
- Fourth is not often counted as crucial, but it is essential that in situations like when you are unemployed, you may provide previous documents to the job centers.
What is the form P60 about?
Certainly, a P60 form is like a year-end report for people who still have their jobs as of April 5th, which marks the end of the tax year. If someone has more than one job, they might get a separate P60 for each of their current jobs. Employers are legally required to give their employees either a paper or electronic copy of this form shortly after April 5th each year.
It shows how much money the employee earned and how much tax was taken out while working for that employer, as well as any details from previous jobs if they provided a P45 from those jobs. Although this information is now available online, many people still like using the P60 because it’s a handy way to prove their income when they need it for things like tax credits or when applying for mortgages and loans.
A P60 is a yearly document from your employer, it includes your name, address, National Insurance number, tax code, gross pay, tax and National Insurance payments, days worked, and any taxable benefits received.
This document is crucial as it allows you to claim tax refunds if you’ve overpaid, apply for tax credits, prove your income for loans or mortgages, and complete self-assessment tax returns. If in case, you lose your P60 then request a replacement from your employer.
Key differences in between P45 & P60?
|Purpose||P45 is||P60 is provided at the end of the tax year.|
|Time of Issuance||P45 is typically issued when leaving a job.||P60 is issued at the end of the tax year (April 6th to April 5th).|
|Information Included||Report of tax paid and earnings until the last date of the job.||Total tax paid and earnings received throughout the entire tax year.|
|Requirement for Starting a New Job||P45 is often required when you are starting a new job if a P60 hasn’t been received from the previous employer.||P60 is not necessarily required when starting a new job; P45 or other documentation can be used instead.|
How Does one acquire P45?
The first and foremost factor to obtain P45 form, is that you must be quitting your current job or have recently left it. Your employer can’t refuse to provide this form as they are legally obligated by law to provide P45 to their employee. Thus, one should get this form automatically. So, whatever the reasons might be, no matter if you have resigned, been terminated, or even retired you are by default entitled to receive form P45.
How Does one acquire P60?
If you consistently work for one company until the end of the tax year (April 5), your employer should provide you with a P60 by the end of May, either digitally or on paper. If you have just one job, you’ll receive only one P60.
Incase if you make a switch in a job within the same tax year, then your old job’s information can be added in your new P60, showing the overall earnings for that year.
Also, if you have multiple jobs at the same time and you’re still employed by all of them as of April 5, then you will be able to receive separate P60 forms from different employers.
Suppose if you own a business and draw a salary from it, you need to create on your own your P60.
If you happen to lose your P60, there is no need to worry. You can simply make a request for a copy from your current employer, as they must keep the copies for up to 3 years.
However, it is important to note that your former employers are not anyhow obligated to retain the copies of your P60.