For most people, submitting a tax return is not a favourite task. But it’s in everyone’s best interests to avoid errors and remove the risk of being dealt a penalty for submitting an inaccurate claim. Many don’t realise that an inaccurate P60 could lead to tax issues further down the line and even costly penalties. Here’s why accuracy is essential when you’re submitting a tax return and the role a P60 plays in that.
What is a P60?
A P60 is a form detailing how much you’ve earned over the course of the tax year. It also shows how much you’ve paid in National Insurance contributions and Pay As You Earn (PAYE) income tax. The information included in your P60 is taken from your total employment earnings, or total pension, for the current tax year.
Note: The P60 will only show the pension provider if the P60 is from a pension payroll scheme. It will not show how often you pay into your pension.
Your P60 serves as evidence that you’ve paid tax for the year, and how much, but it also provides evidence of your earnings. For this reason, you’ll often be asked to provide a copy of this form when you apply for a mortgage, sign on to a property rental or use another type of financial service.
The importance of checking the figures
As an employee, it’s likely that you’ll assume your P60, P45 and any other forms provided to you by your employer will be accurate. But don’t be fooled. There could be situations where employers issue their staff with inaccurate documents, which could then render the employee’s tax returns incorrect if they have to file a self-assessment return and their taxes are investigated.
If an individual reports the wrong information to HMRC, whether that’s undeclared benefits, earnings or tax deductions, it could result in penalties being issued as a result of carelessness. It might seem unfair that an employee can be penalised for the errors of a business, but in the eyes of HMRC, it’s the taxpayer’s responsibility to check that the figures they’re submitting are accurate.
Why accuracy is important
The accuracy of your tax returns is determined not just by the processes your employer adopts, but also by your own processes. Any business, large or small, whether it’s a team of hundreds or a solo individual, can be subject to an audit, and the more discrepancies there are with your report, the higher the risk of an audit.
By keeping your records as accurate as possible, and supplying any documentation required by HMRC, you can avoid the risk and save yourself the time of having to deal with an investigation which can be stressful. Inaccuracies can mean that businesses miss out on deductions and could end up overpaying, which affects their profits. But there’s also the fact that in submitting your return with accurate figures, you’ll have a better overview of how your business is performing and where it stands financially. This will help you make better, more informed decisions as your company grows.
How to check your P60
It’s always worth double-checking the numbers to ensure they match up with your payslips for the tax year. The tax year runs from 6th April to 5th April, and you’ll be issued a new P60 for each of your jobs/pensions every tax year. Your final payslip for the tax year should include the year-to-date figures which you can check align with your P60. If there are issues or the numbers don’t match, raise it with your employer so it can be amended.
You shouldn’t assume that the figures included in your P60 are correct, just because they’ve been supplied by your employer. It’s always better to double-check your tax return or have it submitted by a professional who will ensure everything is correct and you’ve filed for the correct deductions and expenses. Submitting your tax return can be a nerve-wracking task, especially if you’re not knowledgeable about what’s required. That’s why it can be worthwhile speaking to a tax professional who will ensure all the figures are correct and minimise the risk of any issues arising.
To find out more or to book the services of our tax professionals, get in touch with Wellden Turnbull today.