P45 vs. P60: Value Differences Explained

Why P45 and P60 Matter for UK Contractors

If you work as a contractor in the UK, you’ve likely heard of P45s and P60s. These forms pop up during contract changes or at the end of the tax year, but what sets them apart?

Let’s break it down simply. Both are official tax forms issued by employers, but they serve very different purposes—and understanding them is key to keeping your finances organized.

P45: What Is It, and When Do You Get One?

A P45 is provided to you when you leave a job (or finish a contract). Think of it as your employment leaving certificate—it’s your official record for when you change positions or finish an assignment.

The P45 details:

• Your total earnings in that job for the tax year to date
• How much tax you’ve already paid
• Your tax code
• Your National Insurance number

Key uses for a P45:

• Hand it over to your next employer to ensure you’re taxed correctly
• Use it when claiming benefits
• Helpful during self-assessment or if asked by HMRC

Pro tip: Always keep your P45 safe, as it’s proof of what you’ve earned and paid up to your leaving date.

P60: Your Annual Employment Summary

Whereas a P45 marks the end of a contract or employment, a P60 is issued annually if you’re still employed at the end of the tax year (5 April). It’s like your year-end report card for all the work you’ve done with your current employer up to that point.

A P60 summarizes:

• Total earnings for the entire tax year from that employer
• Total tax deducted
• National Insurance contributions
• Any statutory payments (such as maternity or paternity pay)

Why the P60 matters:

• Needed for tax returns and mortgage applications
• Essential for claiming back overpaid tax
• Useful evidence for loan applications or proof of income

Tip for contractors: Many umbrella companies and PAYE schemes issue P60s automatically. If you haven’t received yours by the end of May, ask your payroll provider.

P45 vs. P60: Key Differences at a Glance

Let’s make it crystal clear. Here’s a quick comparison:

Feature	P45	P60
When Issued	When you leave a job	End of each tax year (April)
Purpose	Shows earnings/tax to date	Annual summary of pay/tax
Who Issues?	Employer you’re leaving	Current employer
Use Case	Starting a new job, benefits	Tax returns, mortgage, loans

Which One Matters Most?

Here’s the honest answer: they serve different purposes, and both are crucial depending on your situation. If you’re moving between contracts, your P45 helps your new employer apply the correct tax code and deductions. If you’re staying put, your P60 is what you’ll need for your annual tax summary.

"It’s not about which form is better—it’s about having the right document at the right time."

What Should Contractors Do Next?

• Keep every P45 and P60 you receive. Store digital copies if possible.
• Double-check the details (earnings, tax paid, personal info) for accuracy.
• Reach out to payroll or HR if you don’t receive these forms when expected.
• Understand their significance. Mistakes or missing forms can lead to delays with HMRC or issues with benefits, loans, or new contracts.

For more guidance on contractor accounting, follow our blog or reach out for tailored support!