Anyone in PAYE can get a variety of documents from either HMRC or their employers, virtually all beginning with the prefix P and all of which are designed to inform the individual of different aspects of Income Tax, NIC and taxable benefits.
There are a whole host of PAYE forms , some of which you may never heard of and some which are more familiar than others, for example you will almost certainly have heard of the P45 and are well aware that it is connected with leaving an employment. But how many of you know the purpose that a P2 would serve for you?
In this Blog, I will go through all of the different aspects of PAYE, what the main forms do and the importance that these documents hold for you, your employer and HMRC.
P2 is actually the form issued most frequently by HMRC, but I suspect most of you would struggle to tell me what it does. It’s actually your coding notice and informs your employer or pension provider exactly how much Tax and NIC to take from your wages each month.
HMRC will send you a PAYE Coding Notice before the beginning of a tax year or if your tax code changes during a tax year. It will tell you what your tax code is and how it’s been worked out.
You don’t need to do anything with your PAYE Coding Notice, unless you think it is wrong, which in most cases means you’ve overpaid your tax. HMRC’s advice page at https://www.gov.uk/claim-tax-refund is actually quite user friendly and helpful if you’re in this situation.
A P45 will be issued to employees when their employment ceases and provides them and their new employer, with a record of the pay that they have received and the tax that has been deducted during the tax year.
Additionally, as well as the employees pay and tax, it documents the date that an employment began, the date that it ceased, your National Insurance Number, tax code, and PAYE reference number and National Insurance deductions.
The P45s comes in four parts; the employer you’re leaving sends Part 1 to HMRC and gives you the other three parts. You keep Part 1A and give Part 2 and 3 to your new employer who will forward one copy to HMRC to get you a new P2 (or to Jobcentre Plus if you’re not working).
Remember, by law your employers must give you a P45, so ask them for one.
If your employer promises to send the P45 on to you and it never arrives or you lose your P45, you will need to complete form P46 to ensure you are correctly taxed. HMRC will go back to your old employer and then issue an amended P2 to your new employer.
The P60s shows the tax you’ve paid on your salary in the tax year as well as the gross amount of pay received. If you’re working for your employer on 5th April, legally they must give you a P60 and they must provide this by 31st May, on paper or electronically (providing you’ve given your permission for this first).
The P60 may be needed for a variety of reasons, such as completing you Self-Assessment Tax Return, claiming back any overpaid tax or National Insurance deductions, to apply for tax credits or as proof of your income if you apply for a loan or a mortgage; to name but a few.
Your employer will send a P11D to HM Revenue and Customs (HMRC) if you get any ‘benefits in kind’ (for example a company car, free petrol, free private health insurance or interest-free loans).
The P11D records how much each benefit is worth and will be sent to HMRC by your employer if your earnings, including the value of company benefits, are at least £8,500 in the tax year (6 April to 5 April).
Your employer will usually give you a copy of the P11D. They don’t have to by law, but they must tell you what’s on it in writing.
A P800 is also known as a tax calculation and shows the breakdown of all your taxable income and tax paid. You’ll get a P800 from HMRC if you make a tax rebate claim, or if it turns out you’ve underpaid your tax.
- total income
- total tax paid
- tax free personal allowance
- tax deductible expenses incurred in that tax year
Not everyone will get a P800 tax calculation from HMRC. They are generally only issued to you after the end of the tax year on 5th April, if you have made a tax rebate claim and you are owed a repayment of tax, or if you have not paid enough.
To paraphrase HMRC’s advert Tax can be taxing for any employers, however it is vital that the correct forms are completed, submitted and either submitted to HMRC or given to employees in a timely manner. So if you are struggling to get your head around tax procedures and the new reporting regime for PAYE, called RTI, you may wish to consider seeking the guidance of a professional firm Accountants, such as Morgan Jones & Co, who can deal with all aspects of PAYE for both employers and employees, and take the weight off your mind.
If any of you would like more detailed information on any aspect of PAYE, send me an e-mail and I’ll be pleased to advise further.
David Jones is the Senior Partner and Founder of Morgan Jones & Company. Born in Liverpool and an Accountancy graduate of the University of Wolverhampton, David spent twenty years working for the Customs & Excise in London then Shrewsbury before starting his own business. David's depth of knowledge of the UK tax system and his ability to communicate this learning has seen Morgan Jones & Company grow into Shropshire's most respected Accountancy Practice.