P45 – A P45 slip is a form that contains all of the employee’s wages and tax issued during the duration of their employment that they receive upon termination of said employment. This is then passed to the next employer so that the earnings and tax each year and to verify their previous employment. The term P45 has subsequently picked up meaning as a slang term for being let go as it is synonymous with the termination of employment.
P46 – In cases where the tax payer has no P45, either because it is lost, damaged or invalid or if they are being employed for the first time, they will be asked to fill out a P46 form. This will notify HM revenue and customs of the new employment, and the information will be used for the formation of a new P45 once they leave that job.
P60 – P60 are forms which are issued at the end of each tax year and contain information regarding a tax payer’s total salary that year, along with any tax deductions, Income Tax and National Insurance deducted, Student Loan repayments and statutory payments such as SMP, SAP and SPP. This then provides the most comprehensive and detailed report of taxable income and non-taxable outgoings and is so crucial for calculating the amount of tax owed each year. P60s are not given to those who leave their jobs before the end of that tax year. P60s cannot be reissued, so if they are lost or damaged it may be prudent to look into obtaining a replacement. p
P14 – The P14 is handled by employers and contains information for each employee’s salary and deductions for each year and is filed with HM revenue and Customs at the end of each tax year. This means that they too have a record of tax payers’ earnings and can therefore monitor tax payers’ earnings and check for inconsistencies. It also means that they have back ups should employers, officials or employees request the information.
PAYE – PAYE stands for ‘Pay As You Earn’ and is the method by which most employees pay their tax. This method deducts tax as it comes in and will be reflected in wage slips. Alternatively the self employed can set it up online to deduct tax automatically.
Tax Return – Each year, UK citizens, mostly self-employed but also occasionally employees, are required to fill out a tax return. This is used in order to declare exact earnings as well as other outgoings. For the self-employed and those who own their own businesses only net profit is taxed and money reinvested into the business or supplies is exempt. This encourages investments and investment and protects struggling businesses. Filling out a tax return requires careful consideration of all outgoings and profits as if it is done incorrectly you may end up paying more than necessary, or alternately paying not enough can result in it being claimed back and you may be subject to a charge. This is where P60s can come in handy as a reference point for earnings. Those who have lost or damaged their P60s may want to look into a replacement.
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Understanding the difference between payslips will be useful irrespective of whether you are a salaried individual or a self employer person. Get the right wage slips before you work on tax returns.
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