What's the Difference Between P45 vs P60 and Why Does It Matter?
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If you’ve ever started a new job, left an old one, or found yourself staring at an envelope from your employer wondering what to do with it, you’re not alone. The P45 and P60 forms confuse a number of people every single year, and for good reason: they look similar, they deal with similar information, and nobody ever really explained the difference.
When it comes to p45 and p60 forms, the most important thing to understand is the timing. One is a leaving document, and one is a year-end summary. Get those two things straight and everything else starts to make sense. If the confusion still bothers, it is better to take help from a professional tax expert regarding P45 and P60.
Table of Content:
What Is a P45?
A P45 is the document you receive from your previous employer when your employment ends. Whether you’ve quit, been made redundant, or retired, the moment an employee leaves, the employer is legally obliged to issue this p45 form. There’s no grey area here; it’s a legal requirement under PAYE regulations. Your old employer cannot simply decide not to bother.
The form comes in parts. Your employer sends one portion to HMRC and gives you the remaining parts. You then hand those parts to your new employer when a new employee joins their payroll. This handover is what keeps your tax code intact and prevents you from dealing with a temporary tax code or an emergency tax code.
Without Handing over P45
If you start a new job without handing over your P45, your new employer will likely apply an emergency tax code. This means you’ll be taxed as if you have no personal allowance and you could overpay significantly until HMRC corrects your record.
So what information is actually on a P45? It includes your national insurance number, your tax code at the point of leaving, your total earnings and tax paid within the current tax year up to the date you left, your employer’s PAYE reference, and details of any student loan deductions that were being made.
All of this feeds directly into your new employer’s payroll software so they can pick up exactly where your last employer left off.
What Is a P60?
The p60 form is a completely different. Where the P45 marks the end of an employment, the P60 is a snapshot of an entire tax year from 6 April to 5 April the following year. Your current employer issues it once a year, after the end of the tax year, and it must be provided to you by 31 May.
Crucially, you only receive a P60 if you are still employed at the end of the tax period. However, incase of leaving a job mid-year, that employer won’t give you a P60. In such cases, they gave you a P45 when you left. Your current employer at 5 April is the one who issues the P60.
The P60 summarises your:
- Total income
- Income tax deducted
- National insurance contributions
- Student loan repayments
- Any other tax deductions made throughout that tax year
All of this align with the UK tax year, which runs from 6 April to 5 April as explained in our guide on when the tax year starts and ends.
P45 vs P60: The Key Differences
The key differences between P45 and P60 include:
| Feature | P45 | P60 |
| Issue Time | When employee leaves a job | End of each tax year (by 31 May) |
| Who Issues | Former employer | Current employer |
| Tax period coverage | Start of tax year to leaving date | Full tax year (6 Apr – 5 Apr) |
| Includes NI details | Yes | Yes (full year) |
| Used for | Giving to next employer or HMRC | Tax returns, proof of income |
| Who gets it | Anyone leaving a job | Employees still in post at year-end |
It is important to understanding the key differences between these two PAYE forms, however, what really matter to know when to use each one.
How Tax Codes Are Affected
When you hand your P45 to a new employer, then their payroll system uses the information to apply your correct tax code from day one. This means your income and tax payments carry on seamlessly from where they left off in the same tax year. The employer can calculate temporary tax codes if necessary, but the P45 makes this unnecessary in most cases.
Without it, most employers will default to a temporary tax code, often 1257L on a week 1 or month 1 basis, which doesn’t account for what you’ve already earned, so it’s worth understanding how specific tax codes like 1247L affect your personal allowance.
Why You Need Both for Your Tax Records
Both the P45 and the P60 are essential pieces of your own tax records. They are, quite simply, the documentary evidence of how much you earned and how much tax paid has been deducted from your wages throughout each year. HMRC relies on the information flowing through the PAYE system
If you’re completing a self assessment tax return, both documents become critical. Your assessment tax return requires you to accurately report your total income and the tax payments already made through PAYE.
Keep your P60s for at least six years. HMRC can investigate your tax affairs going back that far, and having your own records makes any enquiry far easier to deal with. Store them digitally if your employer issues them electronically.
There are also non-tax situations where these documents prove invaluable, such as demonstrating income and employment status when dealing with VAT-exempt private healthcare and related insurance.
These require:
- Loan applications
- Mortgage affordability checks
- Claiming benefits can all require proof of how much tax you’ve paid and what you’ve earned.
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What is National Insurance?
Both forms include information on national insurance. Your P45 records your national insurance contributions and national insurance deductions made up to the point you left, while your P60 covers the full picture of your tax and national insurance for the complete year.
Your national insurance number appears on both forms and links your employment record to your NI account at HMRC. Gaps or inaccuracies in your NI record can affect your future entitlement to the state pension and certain benefits, and they may also influence how you’re treated for VAT and tax purposes on certain healthcare services.
Other Details You Might Find on These Forms
- Both PAYE forms can contain additional tax details depending on your employment package.
- A company car by an employer is a taxable benefit and should be reflected in your tax code, especially if it is provided through a salary sacrifice arrangement in the UK.
- Private medical insurance provided by your employer counts as a benefit in kind and affects how much income tax you owe, and it also interacts with rules on VAT and Insurance Premium Tax for private healthcare.
Your employer details and their PAYE reference are also included on both forms. The PAYE reference is a unique identifier for your employer’s payroll scheme
For instance, if you had student loan repayments deducted, these appear separately from income tax on both forms. The type of plan (Plan 1, Plan 2, or Postgraduate Loan) matters here, as each has different repayment thresholds, and errors in your tax code can result in incorrect student loan repayments being collected, particularly if you’re on a specific tax code such as 1263L with its defined allowance.
When Things Go Wrong
The most common problems arise when someone starts a new job without a P45. Perhaps the paper form got lost in the post, or the former employer was slow to issue it.
If you’ve paid too much tax as a result of an incorrect code or a delayed P45, you may be owed tax refunds. HMRC usually adjusts this automatically through the annual reconciliation process after the end of the tax year, but understanding how tax codes like 1265L impact your overall deductions can help you spot issues sooner.
For those with complex situations, such as, multiple jobs, significant benefits in kind, or income from sources outside PAYE, keeping meticulous own records alongside your P45s and P60s is genuinely important.
Conclusion
Your P60 covers a complete tax year and your P45 covers a specific tax period. Together they build up a picture of your working life that matters far beyond just filing a tax return. Whether it’s proving your income for a mortgage, checking your NI record, or dealing with a query from HMRC years down the line, having your tax information organised and accessible will save you enormous hassle.
When it comes to the p45 vs P60 debate, they serve different purposes.. The P45 smooths the transition between employers and protects you from paying the wrong tax rate in a new role. The P60 gives you a clean, authoritative record of an entire tax year that you can use as proof of earnings long after the year is done. Both deserve a safe place in your files. Neither should end up in the bin.
FAQs
Is a P45 different to a P60?
Yes, a P45 and P60 serve different purposes. A P45 contains your employment details when you leave a job, helping your new employer apply the right tax code. A P60, on the other hand, summarises your annual earnings and helps maintain accurate tax records.
Do you get a P45 or P60 when sacked?
When an employee leaves a job, the employer provides a P45. This helps the next employer ensure accurate tax calculations and apply the appropriate tax rate when the employee arrives at a new job.
Does a P45 give you money?
No, a P45 itself doesn’t give you money, but it may show if you have paid overpaid tax. This information helps your new employer adjust your tax credits and apply the right tax code going forward.
Do I need a P45 for my tax return?
A P45 is not always required, but it helps provide accurate tax records and correct employment details. This is especially useful if you had more than one job during the tax year.
What’s the difference between a P60 and a P45?
A P45 is issued when leaving a job and ensures correct tax credits and appropriate tax rate in your next role. A P60 is issued yearly to confirm total earnings and deductions, helping you ensure accurate tax calculations.