Filing a tax return isn’t something most people look forward to, but ensuring accuracy is crucial to avoid costly penalties and complications. Many taxpayers don’t realise that an inaccurate P60 can lead to significant tax issues. This guide explains why precise reporting matters and the critical role your P60 plays in the process.
What is a P60?
A P60 is an end-of-year statement summarising your financial details for the tax year. It includes:
- Total earnings for the year
- National Insurance contributions paid
- PAYE income tax payments
- Tax code and any changes during the year
- Taxable benefits and deductions
This information is compiled from your employment earnings or pension income. If your P60 comes from a pension scheme, it will identify the provider but won’t show contribution details.
Your P60 serves multiple important purposes:
- Proof of tax payment and earnings
- Required documentation for mortgage, loan, and rental applications
- Essential information for completing self-assessment tax returns
Why Checking the Figures Matters
It’s easy to assume that all documents from your employer are correct, but errors happen. An inaccurate P60 can lead to incorrect tax returns, which may trigger penalties from HMRC. Even if the error wasn’t your fault, you’re ultimately responsible for ensuring accurate reporting.
Accuracy is Key
No matter the size of your business, errors in tax reporting increase the likelihood of an HMRC audit. Checking your P60 for accuracy ensures you:
- Avoid penalties for incorrect tax filings
- Claim all deductions you’re entitled to
- Maintain compliance with tax regulations
- Have a clear financial overview to make informed business decisions
How to Verify Your P60’s Accuracy
To avoid complications, take these proactive steps:
- Compare your P60 figures with your final payslip’s year-to-date totals (tax year runs from 6th April to 5th April).
- Ensure your tax code is correct to avoid over- or under-paying tax.
- Verify your name, address, National Insurance number, and employer details.
- Check deductions and ensure they align with your records.
- If you have multiple jobs or pensions, ensure you have a P60 from each source.
- Report discrepancies to your employer immediately and keep records of all communications.
Digital P60s and Record-Keeping
With more employers providing P60s electronically, careful record-keeping is essential. Digital P60s hold the same legal weight as paper versions, so ensure you:
- Save copies in multiple secure locations.
- Retain P60s for at least four years after the tax year ends.
- Keep records for at least five years if you have property income, are self-employed, or have complex tax affairs.
Best Practices for Tax Accuracy
- Always review your tax documents thoroughly before submitting your return.
- Seek professional advice if you have complex financial situations.
- Keep well-organised tax records.
- File your tax return early to allow time to correct any errors.
How MNA Accountants Can Help
Navigating tax requirements can be daunting, but you don’t have to do it alone. Our experienced accountants ensure your tax returns are accurate, compliant, and free from errors that could result in penalties.
To learn more or book our accounting and bookkeeping services, get in touch with MNA Accountants today.