HMRC internal manual

Tax Credits Manual

TCM0118100 - Eligibility - income (employed and self-employed): Employment income sources - previous year (Info)

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By 31 May following the end of a tax year, an employer must, by law, supply an employee from whom they have deducted tax or National Insurance contributions with a P60 ‘End of Year Certificate’. This will show either details of all pay and tax for the year or, in certain circumstances, only the pay and tax for the 5 April employment.

If an employee works for more than one employer, then they should have received a P60 from each employer by 31 May, and they will need to add together the figures from each P60 to arrive at their total taxable pay for the year.

Where a customer also receives expenses, payments or benefits in kind (that is, payment other than money payment) in connection with the employment, the employer is required by law to provide the customer with form

  • P11D (if they’re a director or earn £8,500 or more yearly)
  • P9D (other cases) showing the taxable amount of these benefits for the tax year.

Note: Form P9D only relates to tax year 2015 to 2016 and earlier. The form P9D and £8,500 earnings limit were abolished from 6 April 2016.

These should be given to employees by 6 July following the end of the tax year.

Note: Some employers include expenses and benefits on the employee’s P60. The employee should still receive a P11D or P9D that details the benefits in kind. Where this happens customers should deduct the total value of the benefits from the P60 figure, leaving the earnings to be included at box 5.3. The customer will then need to calculate the amount of benefits to include at box 5.4.

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Preferred sources of taxable earnings

The following list is a breakdown of acceptable sources of earnings details for tax credit purposes. They are listed in preferred order of priority

  • P60 (or more than one P60 for all jobs) or P60U
  • payslips for ‘Year To Date’ (YTD)
  • P45 (or more than one P45)
  • salaries
  • earnings details supplied by Enquiry Centres
  • employer contact
  • self-calculation of taxable earnings.

Note: Most of these sources will provide details of taxable earnings. In some cases, the customer will also need to make further adjustments to this figure to establish the amount for tax credits purposes (box 5.3 on the claim form). Follow the guidance in TCM0118240.

Note: If the customer also received any taxable expenses or benefits in kind, then they will also need to consider their form P11D or P9D and consider completing box 5.4 on the claim form. Follow the guidance in TCM0118120.

Note: Form P9D only relates to tax year 2015 to 2016 and earlier. The form P9D and £8,500 earnings limit were abolished from 6 April 2016.

Note: Where a customer is trying to establish their previous year income before their employer is required to issue their P60 for the year (that is, before 31 May), they are permitted to initially estimate this amount. In this case, the information sources should be considered in the priority order of payslips, P45, salaries, and finally self-calculation of taxable earnings.

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P60 / P60U

This is the best source of information about employment income for a previous tax year for all employees who worked for a PAYE-registered employer at the end of the tax year.

If the customer has had more than one job during the tax year and such employments have been consecutive he will only receive a P60 from the employer for whom he is working at 5 April. If a customer is unemployed and claiming Income Support (IS), Jobseeker’s Allowance (JSA), or Employment and Support Allowance (ESA) at 5 April he should receive a P60U showing both taxable benefit and his previous earnings.

If, for some reason, the P60 or P60U doesn’t include previous pay and tax details, the customer will need to refer to the P45 or P45U received when he ceased a previous employment or ended a claim to benefit.

Note: If the customer works for an employer that isn’t registered for PAYE purposes they won’t receive a P60 for that job, so further earnings details will need to be sought for that particular job.

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This may be the next best source if the customer was employed with the same employer for a full tax year.

If payslips include a ‘Year to Date’ (YTD) total for taxable pay, the ‘Month 12’ payslip or ‘Week 52’ payslip for each job will give the amount needed. If they don’t show a total YTD figure the customer can add up all their payslips if they have a full set for that calendar year.

Note: If pension contributions or charitable donations are deducted from pay they will need to deduct the pension or donation from each gross figure before totalling, to find the taxable amount. However, if the employee makes contributions from his or her gross earnings to buy shares in his or her employer’s company under a Share Incentive Plan (SIP), then those contributions must be added back to that employee’s gross pay.

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This may be the next best source if the customer has changed employment during the tax year (with PAYE registered employers).

If the customer wasn’t in work at the end of the tax year, income from their employment can be found on their P45 forms that they received from their employers when they ceased work. The P45 ‘Total pay to date’ should provide the gross pay to date of all jobs worked in that tax year as long as their employers are registered for PAYE.

If the P45 includes the total pay for all employments no further action is required. If not, they will need to add each P45 ‘Total pay in this employment’ together.

If the employer is not registered for PAYE for all jobs that are worked, the P45 details will be sufficient for the PAYE registered jobs. Other sources, such as payslips or bank statements may be helpful for them to establish the income from the other employments.

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This may be the next best source if the customer receives a fixed regular amount.

If the customer receives the same pay week in, week out and works the same hours each week, such as a domestic cleaner, a calculation can be made. For example, the gross pay paid each week multiplied by the number of weeks worked in the tax year. This should give the gross earnings for the tax year providing however, that any pension contributions and donations to charity made through payroll for the year are deducted from that figure.

This should only be advised if the salary each pay period is always the same, and does not alter due to overtime, bonuses or travel expenses, for example.

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Enquiry Centres

This may be the next best source of income if the customer doesn’t know all their wage details.

If the customer states that they haven’t received a P60 by 31 May, doesn’t know their wage details, or part of their earnings details are missing, they may be able to gain the information from Enquiry Centres depending on their individual circumstances. This can be done using the PAYE Service.

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This option should only be recommended if the customer has not received a P60 by 31 May and is unable to establish their earnings details by any of the options above.

If all the above avenues fail then the customer could contact their employer to confirm earnings details.

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Self-calculation of taxable earnings

This option is to be used only if all the above listed options fail.

If, and only if, all of the previously-detailed avenues fail, the customer will have no option but to calculate their taxable earnings for the period from the information available to them. For example

  • as many payslips as they have
  • bank statements (if they don’t earn enough to pay tax).

The customer needs to be clearly advised that a figure they supply to Tax Credit Office as actual PY income will be used to assess their award, and won’t be regarded as an estimate, even if the customer does have to estimate the figures. The customer will also be told that the information they provide could be challenged through an enquiry.

In addition, the customer will be told that, if they do understate their income, they could be subject to recovery of any overpayment and also be subject to penalties if they deliberately provide an understated figure.

Note: If the customer is unable to use one complete source as listed, a combination of any of the above sources can be used in order for them to establish the earnings details.

Note: If a customer has a foreign employer whose tax year doesn’t end on 5 April, they will need to adjust their non-UK annual income figure to reach an annual figure that is equivalent to that received in the UK tax year (6 April to 5 April the following year).