If you employ even a single member of staff, three documents sit at the heart of your payroll obligations: the P60, the P45, and the payslip. They sound straightforward — and in principle they are — yet a surprising number of small business owners either issue them late, produce them incorrectly, or are simply unsure what the rules actually require. Getting any one of these wrong can mean unhappy employees, queries from HMRC, and in some cases, financial penalties. This guide walks you through each document in plain language, so you know exactly what you need to do and when.
What Is a P60 and When Must You Issue One?
A P60 is an end-of-year summary of an employee's total pay and deductions — Income Tax, National Insurance contributions, student loan repayments, and any statutory payments such as Statutory Maternity Pay — for the entire tax year. It covers the period from 6 April to 5 April and must be issued to every employee who is still on your payroll on 5 April.
The legal deadline for issuing P60s is 31 May following the end of the tax year. So for the 2024–25 tax year (which ended 5 April 2025), all P60s must be in employees' hands by 31 May 2025. There is no grace period. If an employee has left before 5 April, they do not receive a P60 from you — they will have received a P45 instead (more on that below).
P60s can be issued on paper or electronically, provided your employee can access and store them. If you use payroll software, the document should be generated automatically from your year-end payroll data. Employees rely heavily on their P60 when completing a Self Assessment return, applying for a mortgage, or claiming a tax refund — so accuracy is every bit as important as timeliness.
What Is a P45 and What Are Your Obligations?
A P45 is issued when an employee leaves your employment. It records their leaving date, their total pay and tax deducted in the current tax year up to that point, and their tax code. The document is split into four parts: Part 1 goes to HMRC (via your payroll software in the modern RTI world), and Parts 1A, 2 and 3 go to the employee.
You are legally required to give the employee their P45 on or before their last day of work. You cannot withhold it as leverage over an outstanding debt, a garden leave dispute, or any other reason — doing so leaves you exposed to an employment tribunal claim. The employee needs their P45 promptly because their new employer will use Parts 2 and 3 to set the correct tax code, avoiding an emergency tax situation.
A common mistake is forgetting to process the P45 through your payroll submission. Under Real Time Information (RTI), HMRC expects your final Full Payment Submission (FPS) for that employee to reflect the leaving date. Failing to update this promptly can cause discrepancies in the employee's HMRC record — something that creates unnecessary headaches for everyone involved.
Payslips: Legal Requirements and What Must Be Included
Every worker — not just employees, but workers too — has a statutory right to a payslip on or before each pay day. This right was extended to cover all workers (including casual and zero-hours staff) in April 2019 under the Employment Rights Act 1996, so if you have freelancers or casual staff paid through your payroll, they are entitled to one as well.
By law, a payslip must show:
- Gross pay (before deductions)
- Net pay (the amount actually received)
- All variable and fixed deductions, with the amounts and purposes clearly stated — for example, Income Tax, employee National Insurance, pension contributions
- The number of hours worked, where pay varies depending on hours
That last point was introduced in April 2019 and catches many employers off guard. If a worker is paid an hourly rate that varies — for instance, someone who works different hours each week — the payslip must state the number of hours the pay relates to. Fixed-salary employees where pay does not vary by hours are exempt from this specific requirement.
Payslips can be issued electronically (by email or through an employee self-service portal), provided the worker can access them. Paper copies remain perfectly valid. Whatever format you choose, keep a copy for your own records — Employment Tribunal cases often hinge on payslip evidence.
Common Mistakes UK Employers Make — and How to Avoid Them
Small businesses most commonly fall foul of payroll documentation in the following ways:
- Missing the P60 deadline. With year-end often coinciding with a busy period, 31 May can creep up quickly. Set a calendar reminder in early April so you have adequate time to review payroll data before generating P60s.
- Issuing P45s with incorrect figures. If you process a pay run after someone has already left — perhaps a final bonus or accrued holiday pay — you need to issue a revised P45. Many payroll systems handle this automatically, but manual processes often miss it.
- Not providing payslips to casual or zero-hours workers. Since April 2019 this is a legal obligation, not a courtesy. If a worker brings a tribunal claim and you cannot produce payslips, the tribunal can award an amount equal to any unnotified deductions made in the 13 weeks prior to the claim.
- Using outdated tax codes. HMRC issues updated tax codes via a P9 notice, usually in February or March ahead of the new tax year. Missing these updates means employees are taxed incorrectly from 6 April onwards.
- Storing documents insecurely. Under GDPR (overseen in the UK by the ICO), payroll records contain sensitive personal data. They must be stored securely and retained for at least three years after the end of the tax year to which they relate — HMRC can request them during a compliance check.
How Payroll Software Simplifies the Process
Running payroll manually using spreadsheets was just about manageable when HMRC still accepted end-of-year returns. Under RTI, which requires employers to report pay on or before each pay day, the administrative burden has increased considerably. This is where good payroll software earns its keep.
Platforms like BizHub365 handle RTI submissions directly to HMRC — Full Payment Submissions (FPS) and Employer Payment Summaries (EPS) — without requiring any bridging software. P60s and P45s are generated automatically from your payroll data, payslips can be distributed digitally to employees, and the system flags upcoming deadlines so nothing slips through the net. For a small business owner already juggling sales, operations, and cash flow, that kind of integrated automation is genuinely useful.
Auto-enrolment duties are also built into the payroll workflow, which matters because the Pensions Regulator actively monitors compliance and issues fixed-penalty notices to employers who miss their obligations — even those with just one or two staff.
Conclusion
P60s, P45s and payslips are not bureaucratic box-ticking exercises. They are legal documents that protect both your employees and your business. Issue a P60 late and an employee cannot file their tax return accurately. Withhold a P45 and you risk tribunal proceedings. Forget payslips for a zero-hours worker and you are in breach of the Employment Rights Act. The good news is that with a clear understanding of the rules and reliable payroll software in place, staying compliant is entirely manageable — even for the smallest of businesses. Get the fundamentals right, and the rest of your payroll process tends to fall into place.