If you employ even a single member of staff, HMRC expects you to get your P60s and P45s right — every time, without exception. For many small business owners and sole traders taking on their first employees, these forms can feel like bureaucratic hurdles. In reality, they are straightforward once you understand what each document is for, who needs one, and when it must land in their hands. Get them wrong, and you risk penalties, disgruntled staff, and unnecessary correspondence from HMRC. Get them right, and they become a routine part of good payroll hygiene.
What Is a P60 and Who Needs One?
A P60 is an end-of-year certificate that summarises an employee's total pay and deductions — including income tax and National Insurance contributions — for the entire tax year. It covers the period from 6 April to the following 5 April. Every employee who is still on your payroll on 5 April must receive a P60. This is non-negotiable.
The P60 matters far beyond your payroll records. Employees use it to complete their Self Assessment tax returns, apply for mortgages, claim tax refunds, and verify their income for everything from Universal Credit to rental applications. A missing or inaccurate P60 can cause real disruption to someone's personal finances, so accuracy is essential.
You must issue P60s by 31 May following the end of the tax year. So for the 2024–25 tax year (ending 5 April 2025), all P60s must be in employees' hands by 31 May 2025. You can issue them digitally, provided your employee consents to receiving an electronic version. If they haven't consented, a paper copy is required.
What Is a P45 and When Must You Issue One?
A P45 serves a different purpose. It is issued when an employee leaves your employment — whether through resignation, redundancy, retirement, or dismissal. The document shows the employee's leaving date, their total earnings in the current tax year up to that point, and the total tax deducted. It is split into four parts: you retain Part 1A for your records, submit Part 1 to HMRC via your payroll software, and give Parts 2 and 3 to the departing employee.
The employee then hands Parts 2 and 3 to their new employer, allowing payroll to continue without delay or the need to use an emergency tax code. This is why timing matters. You should issue a P45 on or before the employee's final payslip. Sitting on it for weeks after someone leaves is poor practice and can leave them paying the wrong amount of tax in their next job.
One common mistake small employers make: issuing a P45 to an employee who is simply taking a long period of leave — maternity leave, for example. Do not issue a P45 in that situation. The employment relationship has not ended. A P45 is only appropriate when the employment itself terminates.
How to Generate P60s and P45s Through Your Payroll Software
If you are running payroll manually using spreadsheets, generating P60s and P45s is time-consuming and carries a high risk of arithmetic errors. The straightforward solution is to use payroll software that is recognised by HMRC and capable of Real Time Information (RTI) submissions.
Most modern payroll platforms will generate both documents automatically once you have entered the correct payroll data throughout the year. Your year-end P60 data is drawn directly from the Full Payment Submissions (FPS) you have been filing with HMRC after each pay run, so accuracy throughout the year feeds directly into the accuracy of the P60 at year end.
BizHub365 handles this end-to-end. Its payroll module supports RTI submissions — including Full Payment Submissions and Employer Payment Summaries — and generates P60s and P45s directly from your payroll records. Because everything lives in one place alongside your invoicing, expenses, and VAT data, there is no re-keying information between systems. For a small business owner wearing multiple hats, that kind of consolidation is genuinely useful.
When a member of staff leaves, simply process their final pay run in the system, record the leaving date, and the P45 is produced automatically. The Part 1 data is submitted to HMRC as part of your regular RTI filing, and you can provide Parts 2 and 3 to the employee either in print or electronically.
Common Mistakes and How to Avoid Them
Even experienced payroll administrators make errors with P60s and P45s. Here are the most frequent pitfalls to watch for:
- Missing the 31 May P60 deadline. Mark this date in your calendar at the start of every tax year. HMRC does not send reminders, and failing to issue a P60 on time can result in a penalty notice.
- Incorrect tax codes on the P60. If you have been using the wrong tax code for an employee throughout the year — perhaps after ignoring a PAYE coding notice from HMRC — the error will be baked into the P60. Always action P6 and P9 coding notices promptly.
- Not updating the employee's leaving date before running a final payslip. This can result in a P45 with the wrong figures if additional pay (such as accrued holiday) is processed after the stated leaving date.
- Issuing a P45 to an employee on long-term leave. As mentioned above, this incorrectly terminates their employment record with HMRC and can create significant complications.
- Forgetting to give a P45 to a director leaving a company. Directors are employees for PAYE purposes, so the same rules apply.
What Happens If You Get It Wrong?
HMRC takes payroll compliance seriously. Failure to issue a P60 by 31 May can result in a penalty of up to £300 per form, with further daily penalties of up to £60 if the failure continues. More broadly, persistent payroll errors can trigger a PAYE compliance check, where HMRC reviews your records in detail — a process that is time-consuming and stressful for any small business.
If an employee contacts HMRC because they haven't received their P60 or P45, HMRC will typically write to you asking for an explanation. Even if no penalty follows, it creates unnecessary admin and can damage trust with your workforce.
The practical safeguard is simple: keep your payroll records up to date throughout the year, file RTI submissions on time after every pay run, and use software that automates document generation. Human error drops sharply when you are not manually calculating totals or re-typing figures.
A Quick Checklist for Small Employers
- Confirm that every employee still on your payroll on 5 April receives a P60 by 31 May.
- Issue a P45 as soon as an employee leaves — do not delay beyond their final payslip.
- Submit Part 1 of the P45 to HMRC via RTI as part of your next FPS filing.
- Store copies of all P45s and P60s for at least three years — HMRC may request them during a compliance check.
- Action all PAYE coding notices from HMRC promptly to keep tax codes accurate.
- If you are unsure about an employee's leaving circumstances (for example, a fixed-term contract expiry), take advice before issuing a P45.
P60s and P45s are not the most exciting part of running a business, but they are among the most important annual touchpoints between you and your employees. Handled correctly, they protect your legal position with HMRC, support your staff during life transitions — a new job, a mortgage application, a tax refund — and keep your payroll records clean. Build them into your payroll calendar, use software that does the heavy lifting, and they need never become a source of stress.