PIXIE PAYROLL Blog

One of the important documents for employees that is generated at the end of the financial year in April is the P60. But we know that it’s easy to just file it without being really sure what it’s all about so this month, we’re going to decode your P60.

What is a P60?

P60 is actually just the name of the HMRC document; its full name is the End of Year Certificate. It is a summary of all the tax and NI that’s an employee as paid, as well as any statutory payments that might have been received.

An employee will receive a P60 for every job they have so for example, if someone has two part time jobs, they will receive two P60s and the amounts will need to be added together to get the full picture of all the deductions and payments in the tax year.

If an employee has changed jobs in the tax year, they will only receive one P60 and the amounts from the previous job will be recorded on the P60 in the ‘in previous employment’ boxes.

There are a couple of key dates for P60s each year. The first is 5^th April – all employees on the payroll on this date are due a P60. The second is 31^st May – this is the date by when those P60s should be done. Even if an employee moves to a new employer during April, their old employer will still need to give them their P60.

Why is it so important?

A P60 actually contains quite a lot of information that will be important elsewhere. If an employee needs to claim Universal Credit or apply for or renew tax credits, a P60 will be an important piece of paperwork that will need to be submitted.

If anyone applies for a refund of overpaid tax, a P60 is needed for that process too.

Similarly, if an employee is applying for a mortgage or a loan, a P60 can be used as proof of income although mortgage companies will generally require additional evidence such as payslips and copies of bank statements. 

It also allows the employee to check that their employer holds their details, such as NI number and tax code correctly so they are being deducted the correct amounts and those deductions are being applied to the correct account.

What about the self-employed?

If someone is entirely self-employed and doesn’t receive any income from working for someone else and being on their PAYE system, they won’t receive a P60.

But if someone does have paid employment, however small, they’ll receive a P60 and those amounts will need to be recorded on their self-assessment tax return for that tax year. If the tax return is done online and the NI number is recorded correctly, the employee will find their personal tax account will have been automatically updated with the P60 amounts.

What to do if an employee doesn’t have a P60?

If an employee hasn’t received a P60 by the end of May, they should ask their employer to provide one. But if that doesn’t happen, the same information that would be on the P60 can be found on their personal tax account and the details can be printed off from here if required.

Because we at Pixie Payroll work on high standard payroll software, the P60s for our clients are generated automatically and very soon after the end of the tax year. But if you need any help getting them done for your employees, just get in touch.

Earlier this month, some important pieces of new legislation came into force that have a direct effect on employers and employees so for this blog post, we’re looking at them in a bit more detail.

Employment Rights (Flexible Working) Act 2023

Before this new act came into force, employees could only request to make a change to where and when they work after they had been in their job for six months, and they could only make one request within any 12 month period.

The new act, which came into force from 6^th April this year, allows employees to request flexible working from the very first day of their employment and to make up to two requests in 12 months. The definition of flexible working can cover a number of different scenarios that include asking to move to part time or reduced hours or only working during term time to accommodate child care needs. It also includes flexitime, which is when an employee can vary their working hours each day, often within the parameters of daily core hours and so that the contracted hours for each week or month are met. So for example, an employee can work 9am to 3pm on one day but those missing two hours will need to be made up at another time.

An employee can also request to work compressed hours, where all the contracted hours are worked over a shorter time. For example, 40 hours can be worked over four 10 hour days rather than five 8 hour days. This can be useful for an employee but consideration should always be given to staff welfare when working long days.

Finally, flexible working might also include a request to vary the location where the employee is based. Most typically this will be a request to work entirely or partly at home, but it might also be a request to work out of a different office location.

Previously, employers had 3 months to make a decision on a flexible working request but that has now been reduced to 2 months. Employers could also reject a request without giving a reason but the new legislation means that’s no longer the case; employers have to back up a refusal with a full explanation for their decision.

Obviously the impact of this new legislation will be different for each employer and may be difficult to manage in small businesses with only a few employees. But all employers are treated the same under the new law so solutions will need to be found when and if an employee requests flexible working.

Carer’s Leave Act 2023

This is the second major piece of new legislation to come into force on 6^th April and has been designed to support employees with caring responsibilities.

The Act gives employees the right, from their first day of employment, to request leave so they can care for someone they look after. This would normally be a close family member – spouse or civil partner, child, parent or other dependent. They might need care because of age, disability or illness or injury that is likely to be needed for at least three months.

The leave that can be granted under the Act is unpaid and the maximum amount of leave that can be taken is one week per year. This can be combined with other leave such as annual leave or even compassionate leave, but this will be at the discretion of the employer and may not be available to everyone. And many employees may find any amount of unpaid leave difficult to manage.

Employers cannot deny a request for Carer’s Leave but if it would disrupt the business too much, they can postpone it to another time.

Protection from Redundancy (Pregnancy and Family Leave) Act 2023

This is another law that came into force on 6^th April and it extends the protection from redundancy already afforded to those on maternity leave to those who are pregnant or who have recently returned from shared parental leave, maternity leave or adoption leave. It can give up to 18 months protection from redundancy, calculated from the child’s date of birth.

If you need any more information on these new laws, speak to your HR professional or just get in touch.

The Chancellor has announced his measures for the country’s finances in what was the last Spring Budget before the General Election later this year and here’s our traditional blog post detailing the key features.

National Insurance

It feels like National Insurance is something we’ve talked a lot about in recent years as it has been the preferred mechanism for reducing taxation and that is the case again this time. National Insurance rates for both employees and the self-employed will be reduced by 2% from 6^th April 2024 (the start of the new tax year). This is in addition to the 2% reduction that was announced last year which came into effect from January this year.

However, there was no announcement that the amount an employee can earn before paying tax or national insurance will increase so more people will be paying tax on their earnings.

VAT

At the moment, businesses have to register for and start paying VAT once turnover reaches £85,000 but that will be increased to £90,000 from April.

Child Benefit

In recent years, the High Income Child Benefit Charge was introduced which meant if a parent earned over £50,000, then they would be liable for the charge. This did introduce an element of unfairness into the system because it meant a household of two parents earning £49,000 wouldn’t have to pay the charge but another with one parent earning £50.001 would pay the charge. The Chancellor announced he would review this scheme to address this unfairness but, in the meantime, the threshold for paying the charge would increase to £60,000.

Holiday lets

Something that’s going to be relevant to us here in Cornwall was the announcement that tax breaks on furnished holiday lets is going to be scrapped. Currently, owners of furnished holiday lets can claim tax relief on things they buy for the property including furniture and other fixtures. The Chancellor hopes that in abolishing the relief, more holiday lets will be made available for long term rent in an attempt to ease the housing crisis in tourist areas such as Cornwall.

Duties

The cut of 5p on duty on fuel was due to end this month but that cut has now been extended for another year. Tobacco duty will increase and a new tax on vapes will be introduced in October 2026 following a period of consultation.

The freeze on alcohol duty was due to end in August but that will now continue until February next year.

Household Support Fund

The Household Support Fund, which was introduced in 2021 to help the poorest families cope with the cost of living crisis was due to end in March 2024 and although there was no mention of an extension in the Autumn Statement last year, the Chancellor has now announced that it will be extended for another six months.

More information on the measures announced in this year’s Spring Budget, including some things we haven’t had room to mention in this blog, can be found here. If you have any questions about how the change to National Insurance will affect your employees or payroll, just get in touch.

Although one of the best things about my job is that no two days are the same, I thought for the blog post this month, it might be interesting to describe what a day in the Pixie Payroll office might look like, especially now my fellow director and husband Phil is working alongside me full time now.

There’s not much that gets done first thing in the morning until we have a cup of tea. That’s also a good time for us to go over the to do list for the day and priorities the tasks. We manage both weekly and monthly payroll schemes and so although there’s no doubt we’re busier towards the end of each month, we do have payrolls to run each week so ensuring our clients’ employees are paid correctly and on time is always top of the list. That’s also when we might contact our clients to request any missing information such as time sheets, employee information or bank details.

Each day is also filled with emails and phone calls from clients. We might need to add a new employee to a payroll scheme by processing their new starter form and dealing with their P45. We will often prepare a new contract of employment for new employees and have that ready for their first day to ensure our clients are meeting their legal obligations. At the other end of the relationship, we might also be asked to process the paperwork when someone leaves their employer which involves creating the P45 and ensuring they are paid the correct amount up to their last day.

All employees are auto-enrolled in their workplace pension schemes (unless they opt out) and so each day will have a fair bit of pension scheme admin to take care of. As well as enrolling a new employee into the workplace scheme, we might also be asked to prepare a pension forecast if someone is considering retiring. We will refer the employee to the actual scheme administrators for more detailed help and support about their pension but we’re always on hand to help out if needed.

There will be times in each day when focus turns to our own business. We have to keep up to date with any payroll-related bulletins and new information so there’ll be some reading to do. Occasionally, it might be appropriate for us to undertake some training which can often be done remotely from the office but sometimes requires travelling. And of course, we have to continue to work on our business so there might be a bit of marketing, financial management, new business generation and networking to do.

At the end of the day after all that, we’re ready to switch off the computers, relax and enjoy some family time before the alarm goes off the next morning and it all starts again. It’s hard work running our own business, but we wouldn’t swap it for the world!