The Pay As You Earn (PAYE) system allows employers to easily pay their staff members’ income tax and National Insurance Contributions (NICs) through payroll.
Using the PAYE scheme, you can deduct all of the necessary tax and NICs from your employees’ wages before they are paid – making things simpler for everyone.
However, the process can become a little complicated when it comes to the details. There are certain forms you must include in your payroll to prove how much each employee is paying to HMRC.
Here is TWP’s employers’ guide to PAYE forms.
P60 – End of Year Certificate
In this form, you’ll need to show how much tax each employee has paid on their salary throughout the tax year.
For all employees working for you on the 5th April of any year, you’re legally obliged to give them a P60 form by the 31st of May before. This can be done either electronically or by paper.
The P60 is known as an End of Year Certificate, and can be used if a member of staff needs to claim back any overpaid tax or apply for tax credits.
This form also comes in handy for your employee if they need to provide proof of income for loan or mortgage applications. It also shows an employee’s total earnings from any jobs or pensions over the previous tax year.
What if your employee works two jobs for two different firms? They would then receive a P60 from both yourself and their other employer each year.
Lost a P60 form?
By law, as an employer, you must keep all records of pay for at least three years.
If an employee comes to you in that time and requests a new copy, you should be able to provide it. However, it will need to be clearly marked as a ‘duplicate’.
If an employee needs a P60 from three or more years ago, and you no longer hold a copy, you should be able to provide a ‘statement of earnings’ on company headed paper instead.
P11D – Expenses and Benefits
The P11D form is used to report any “benefits in kind” that your employees may receive from you. That could be a company car, medical insurance, or free/cheap loans.
You will be responsible for calculating the cash value equivalent for each benefit or expense you provide your staff throughout the tax year. This is so you can prove you’re paying the right amount of tax.
For every employee earning more than £8,500, you’ll need to send HMRC a P11D form with the cash value of all benefits and expenses they receive.
You don’t need to send a copy of this form to your employees, but you may still wish to as you are still required to tell them what was included on it.
Lost a P11D form?
If an employee has lost their copy of their P11D form and you don’t have it on file, they can request a new version directly from HMRC.
P45 – Details of employee leaving work
This form, more commonly known by its reference code, is given to employees when they stop working for you.
You are legally obliged to give or send a P45 to employees when they leave your company. It shows how much they have paid on their salary in tax that year and any necessary details for their next employer.
The P45 is made up of four parts:
Part 1 – Completed and sent to HMRC by you. They can then take down all of the details for the employee’s taxpayer record.
Part 1A – This is a copy of Part 1 for your employee to keep.
Part 2 – Completed by you and given to the employee. They would then hand this to their new employer or jobcentre.
Part 3 – Given to the employee to be completed by their new employer or jobcentre.
If you are given a P45 by a new employee, you’ll need to fill out Part 3 and submit it to HMRC to confirm their employment with you.
Lost a P45?
If you’re taking on a member of staff that has not had a job before, was previously self-employed, or is working part-time for you as their second job, it’s unlikely they will have a P45 to give you.
Instead, you’ll need fill out a Starter Checklist either online or manually. Replacing the old P46 form, you’ll need collect all the information in your Starter Checklist to work out which tax code the new employee should be put on.
PAYE forms – Advice
If you need any advice or guidance navigating your payroll system or filling out an employee’s PAYE forms, please call us today on 01932 704 700 or email firstname.lastname@example.org to talk to your usual contact partner.