Welcome to our comprehensive guide to understanding payroll essentials! As ‘Payroll Guru’s’ at Glow Accounts, we often get asked the same questions, whether you’re a seasoned employee or new to the workforce, grasping the fundamentals of P60s, P45s and tax codes is essential for managing your finances effectively and ensuring compliance with tax regulations.
My new employer is asking for my P45, but what is it?
The P45 is an essential document that employees need when starting a new job. It provides important information for tax purposes, helping the new employer calculate the correct tax deductions.
If you haven’t worked before you won’t have one, so will need to sign a new employee declaration confirming that this is either your only job or you are employed elsewhere or also receive a state pension.
If you haven’t worked since the last tax year (and your P45 is dated prior to 5th April of the current year) you will also need to sign this declaration which your employer will provide. This ensures even without a P45 you will be on the correct tax code.
When can I get my P45 from my old Employer?
An employer will need to pay you everything owed in your last payroll with them before they can generate and send your P45. So if you are usually paid at the end of the month but leave an employer on the 12th of the month for example, you will have to wait until after your final pay has been paid to you.
What is a P60?
A P60 is a document in that provides a summary of an individual’s income and deductions for a specific tax year. It is typically issued by employers to their staff at the end of the tax year, which runs from April 6th to April 5th the following year. Employers are required to issue P60 forms by the end of May following the end of the tax year. The P60 includes details such as total earnings, tax deducted, National Insurance contributions, and other relevant information.
I left a company in November last year, but its June and I haven’t been sent a P60 from my old employer, why not?
If you leave during a tax year the employer will not need to send you a P60 when they run the year end in April.
What do the tax codes on my P45 and/or Payslip mean?
The numbers within your tax code hold specific meanings, each contributing to the calculation of your tax liability:
Personal Allowance: The first part of your tax code represents your tax-free allowance – the amount of income you can earn before paying tax. For the tax year 2023/24, the standard personal allowance is £12,570. Hence, if your tax code is 1250L, it indicates that you’re entitled to the full personal allowance.
Adjustments: Additional digits in your tax code may reflect adjustments based on various factors. These could account for things like taxable benefits, state benefits, or deductions.
The letters in your tax code convey specific information regarding your circumstances and how they affect your tax obligations:
| L | The most common letter found in tax codes, 'L' signifies that you're entitled to the standard tax-free Personal Allowance. This is the default code for most individuals with one job and no untaxed income. |
| BR | If your tax code includes 'BR', it means you're being taxed at the basic rate (currently 20%) on all your income. This might be used if you have multiple sources of income, and your Personal Allowance has been fully utilized elsewhere. |
| K | A 'K' code indicates that additional deductions are being made from your pay. This could be due to factors such as state benefits or taxable company benefits that exceed your tax-free allowance. |
It is crucial to ensure that your tax code is accurate and reflects your current circumstances. You can find your tax code on your payslip, annual P60 form, or through your HMRC online account. If you believe your tax code is incorrect, it’s important to contact HMRC promptly to rectify any discrepancies.
Can my employer sort out my tax code for me?
In short no.
An individual must contact HMRC themselves if they believe their tax code is wrong. Employers will receive regular tax code updates from HMRC which will be applied to their payroll, but if you think your tax code is incorrect contact HMRC.
How do I contact HMRC?
There is both an online chat and a contact number for HMRC to discuss your tax code.
Details can be found below:
Interested in learning more about our Payroll Accountant Services?
Managing payroll can be both time-consuming and crucial for the smooth operation of your business. As one of the most business-critical functions, it’s essential that payroll runs seamlessly to ensure the satisfaction of you, your employees, and your clients.
But, what happens if your payroll manager falls ill?
Can you promptly adapt to changes in government legislation?
The intricacies of payroll services extend beyond these immediate concerns, and there are numerous factors to consider in ensuring its efficiency and compliance.
If you’re unsure or need help with your payroll accounting services, Glow Accounts is a payroll accountant specialist ready to provide the support you need.
Call us today on:
01892 267 750
