P45 and P60 - Important Documents for Working in the UK

2024 is already halfway through in the blink of an eye. For those of you who are working, you’ve probably received your P60 by now. But what exactly is it? Besides it, you might have heard of other documents like the P45. What are these documents used for? Today, we will give you a simple introduction.

Pay As You Earn

Before we start explaining, you need to understand what Pay As You Earn (PAYE) is. PAYE is a method of paying income tax in the UK. As the name suggests, the wages you receive have already had Income Tax, National Insurance, and student loan repayments deducted. PAYE was introduced in 1944 and has been in place for nearly 80 years. It has become the most common method of paying employees in the UK. Employees paid through PAYE will receive documents like the P45 and P60.

What is a P45?

When an employee leaves a job, UK law requires the employer to provide them with a P45, which details the amount of tax paid by the employee during the tax year. The documents consists of four parts: Part 1, Part 1A, Part 2, and Part 3. You might wonder why you only receive Part 1A, Part 2, and Part 3 when you leave a job, and not Part 1. Did your old employer miss something?

Actually, when an employee leaves, the old employer sends Part 1 to HM Revenue and Customs (HMRC). The employee only receives Part 1A, Part 2, and Part 3. When the employee finds a new job, they must give Parts 2 and 3 to the new employer, while Part 1A is kept by the employee. The new employer then completes Part 3 and sends it to HMRC.

Here’s what each part contains:

Part 1：Details of employee leaving work (Copy for employee)

Part 1 contains the employee’s personal details such as name, NI number, leaving date, and address. It also includes the employee’s total salary and tax paid for the tax year, the tax code at the time of leaving, and the old employer’s PAYE reference number.

Part 1A：Details of employee leaving work (Copy for employee)

Part 1A has the same information as Part 1.

Part 2：Details of employee leaving work (Copy for new employer)

Part 2 is almost identical to Part 1 and Part 1A but does not include the total salary and tax paid for the tax year.

Part 3： New Employee details (For completion by new employer)

Part 3 also contains the employee’s personal details such as name, NI number, leaving date, and address, as well as the tax code at the time of leaving and the old employer’s PAYE reference number. The new employer needs to fill in their PAYE reference number, the employee’s start date, address, date of birth, and position, and then send the completed Part 3 to HMRC.

How long does it take to receive a P45 after leaving a job?

UK law does not specify a timeframe within which an employer must provide a P45 to a former employee. The employer just needs to provide it within a reasonable time.

What is a P60?

The full name of the P60 is "End of Year Certificate". Simply put, you can consider it as an annual salary statement. It records the total earnings and the amount of income tax and National Insurance paid by the employee from April 6 of one year to April 5 of the next year.

Note that it does not include information about private pension contributions. If you want to keep records of private pension contributions, you should keep each payslip. Additionally, it is issued per employer and as of April 5. If you worked for two different employers on April 5, you will receive two P60s.

What is the purpose of it?

If you have other income besides your job and need to do self-assessment for tax purposes, you will use the information on the P60. This is similar to the annual salary summary provided by employers in Hong Kong for tax reporting purposes.

If you don’t have other income and don’t need to do self-assessment for tax purposes, it can still serve as proof of long-term residency in the UK when applying for citizenship several years later.

When will you receive a P60?

UK regulations require employers to provide the previous tax year’s P60 to employees by May 31 each year. It can be distributed in paper or electronic form. For more details, you can refer to the official website:https://www.gov.uk/payroll-annual-reporting/give-employees-p60-form.

Conclusion

Both are important documents for proving your employment in the UK. After reading this article, hopefully, you’ll have a better understanding of their contents, when you’ll receive them, and their purposes.

If you want to learn more about retirement benefits while working in the UK, you can refer to Chen’s other article - Essential Information for Working in the UK: National Insurance (NI).

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(The above information is for reference only. Please refer to the official website for everything.)

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