Running payroll for the first time — or trying to get on top of it after years of muddling through — can feel like navigating a maze of acronyms. P60, P45, P11D, RTI… HMRC does not make it simple. But three documents sit at the very heart of your obligations as a UK employer: the P60, the P45, and the payslip. Get these right and you protect your business from penalties, keep employees informed, and maintain clean records that your accountant will thank you for. Get them wrong and you risk HMRC compliance notices, employment tribunal claims, and a great deal of avoidable stress.
This guide explains what each document is, exactly when you must issue it, what it must contain, and the practical steps you can take to stay on the right side of the law.
What Is a Payslip — and When Must You Provide One?
A payslip is a written statement of an employee's earnings and deductions for a given pay period. Under the Employment Rights Act 1996, as amended in April 2019, you must provide a payslip to every employee and every worker — including agency workers, zero-hours workers, and casual staff — on or before their pay date. There are no exceptions based on hours worked or contract type.
A compliant payslip must show, at minimum:
- Gross earnings before deductions
- All variable and fixed deductions (Income Tax, National Insurance, pension contributions, student loan repayments, etc.) listed individually
- Net pay — the amount actually paid into the employee's bank account
- The number of hours worked, where pay varies by the number of hours (this became mandatory in April 2019)
You can issue payslips on paper or electronically, provided the employee can access and store them. Many small employers now use payroll software that automatically generates and emails payslips on pay day, which removes the risk of forgetting entirely. If an employee asks to see past payslips, you are not legally required to keep copies beyond the current tax year — but as a matter of good practice (and sound bookkeeping), retaining them for at least three years makes sense.
Failing to issue payslips can result in an employment tribunal awarding any unlawful deductions made during the period of non-compliance. That is a costly oversight for a relatively simple administrative task.
What Is a P45 — and What Happens When an Employee Leaves?
A P45 is the document you issue to an employee when their employment ends — whether through resignation, redundancy, retirement, or dismissal. It is a formal record of how much the employee has earned with you in the current tax year and how much tax has been deducted under PAYE.
A P45 comprises four parts:
- Part 1 — Sent directly to HMRC via your payroll software as part of your Real Time Information (RTI) submission
- Parts 1A, 2 and 3 — Given to the employee on their last day of employment (or sent promptly by post if that is not possible)
The employee then gives Parts 2 and 3 to their new employer, who uses the information to apply the correct tax code from day one. Without a P45, the new employer must ask the employee to complete a Starter Checklist (the old P46), which often results in a temporary emergency tax code — meaning the employee pays more tax than they should until HMRC corrects it. That is an inconvenience at best, and a source of real financial hardship for lower-paid workers.
You must issue a P45 promptly. There is no fixed statutory deadline beyond "as soon as reasonably practicable," but best practice is to provide it on the employee's last working day. If you miss this, an employee can raise a formal complaint or involve HMRC. Keep a copy for your own records — you will need it if there is ever a dispute about final pay or tax deductions.
One important note: if an employee dies whilst in your employment, you still process a P45, but you send all four parts to HMRC rather than issuing them to the employee.
What Is a P60 — and When Must You Issue It?
At the end of every tax year — which runs from 6 April to 5 April — you must issue every employee who is still on your payroll on 5 April with a P60. The deadline for doing so is 31 May following the end of the tax year. So for the 2024/25 tax year, your P60s must be in employees' hands by 31 May 2025.
A P60 is a summary of everything that has happened for that employee throughout the entire tax year:
- Total gross pay
- Total Income Tax deducted under PAYE
- National Insurance contributions (employee's and, separately, employer's)
- Student loan deductions, where applicable
- The final tax code used
Employees need their P60 for a range of important tasks: completing a Self Assessment tax return, claiming a tax refund from HMRC, applying for a mortgage (lenders routinely ask to see two or three years' P60s as proof of income), or checking they have not overpaid tax. It is, in short, one of the most important documents you will ever produce for someone who works for you.
Like payslips, P60s can be issued electronically — but only if the employee can access, print, and store the document themselves. You cannot simply say "it's on the HR portal" if the employee has lost access after leaving. For P60s specifically, employees are still employed at year end, so a secure online document portal or an emailed PDF is entirely acceptable.
Common Mistakes UK Employers Make — and How to Avoid Them
Even experienced payroll managers make errors. Here are the most common pitfalls to watch for:
- Issuing a P60 to a leaver: If an employee left before 5 April, they receive a P45, not a P60. Only employees on your payroll on the final day of the tax year get a P60.
- Using the wrong tax code on a new starter's first payslip: Without a P45 or completed Starter Checklist, default to the emergency tax code (currently 1257L on a Week 1/Month 1 basis) rather than guessing.
- Missing the 31 May P60 deadline: HMRC can charge penalties for late or missing P60s. Set a calendar reminder as soon as the tax year ends.
- Forgetting to update payslips when tax codes change: HMRC issues tax code notices (P6 and P9) throughout the year. You must action these promptly — typically from the next pay run.
- Not keeping payroll records for long enough: HMRC requires you to keep PAYE records for at least three years after the end of the tax year to which they relate. Keep them longer if you can.
Streamlining Payroll Compliance for Small Businesses
For many small business owners, payroll is a monthly source of anxiety — particularly around year end when P60s need generating and checking. The good news is that modern payroll software handles the vast majority of this automatically, from calculating the correct PAYE and National Insurance figures to generating compliant payslips and filing RTI submissions directly with HMRC.
BizHub365, for example, includes a full PAYE payroll module that supports RTI filing (Full Payment Submissions and Employer Payment Summaries), auto-enrolment, and P60/P45 generation — all from one place. For a sole trader taking on their first employee, or a small business tired of juggling separate payroll and accounting tools, having everything under one roof significantly reduces the chance of documents slipping through the cracks.
Whichever tool you use, the principle is the same: automate what you can, set reminders for statutory deadlines, and always keep copies of every payroll document you issue.
Conclusion: Your Payroll Documents Are a Legal Obligation, Not a Courtesy
P60s, P45s, and payslips are not optional extras or nice-to-haves. They are legal requirements that underpin your employees' financial lives — from their ability to prove income to a mortgage lender, to making sure they pay the right amount of tax. As a UK employer, issuing them accurately and on time is one of the most fundamental duties you have.
The practical steps are straightforward: issue payslips on or before every pay date, provide a P45 as soon as an employee leaves, and distribute P60s to all current employees by 31 May each year. Keep records for at least three years, use compliant payroll software that files RTI submissions automatically, and action HMRC tax code changes promptly. Do all of that, and payroll compliance becomes a manageable routine rather than a recurring headache.