Three letters and two numbers cover most of the document confusion new employers run into. P45, P60, P11D — each does a specific job, each has its own trigger for when it’s issued, and mixing them up is one of the more common small-employer mistakes, and one of the easiest to avoid once you actually know what each one is for.
P45: when someone leaves
A P45 is issued when an employee leaves, for any reason — resignation, redundancy, dismissal, the end of a fixed-term contract. It shows their tax code, total pay and tax deducted in the current tax year up to their leaving date, and a few other details HMRC and their next employer need.
It matters because it’s how a new employer knows what tax code to apply to someone starting mid-tax-year, without that person ending up on an emergency tax code unnecessarily. Leave your business without a P45 and the next employer will likely default to an emergency code or have to ask HMRC directly — which usually means the person is taxed incorrectly, at least temporarily, until it gets sorted.
You issue a P45 automatically through payroll software when you process someone as a leaver — entering their leaving date triggers the form. No separate manual process if the software’s set up correctly; it generates alongside your final RTI submission for that employee.
Worth knowing: since RTI, much of what the P45 historically did is now communicated to HMRC directly through your submissions rather than via the paper trail itself. You still need to give the employee a copy — they need it for their own records and for their next employer — but HMRC has the equivalent information through RTI regardless of the paper form.
P60: the annual summary
A P60 goes to every employee still on your payroll at the end of the tax year (5 April), summarising their total pay and deductions for the year. Due by 31 May following the tax year end.
Where the P45 is event-triggered, the P60 is a fixed annual obligation for every current employee — not something you can skip because someone’s been with you a long time and presumably knows their own numbers already. Employees actually use it for practical things: proof of income for a mortgage or loan application, checking they’ve paid the right tax, reclaiming an overpayment if there’s been one.
Most payroll software generates these automatically once the tax year closes and your final submission has gone in. You’re not filling them in by hand — the software pulls the year’s cumulative figures and produces the form, usually a downloadable PDF you distribute electronically or print.
One thing worth flagging directly: P60s only go to people still employed on 5 April. Anyone who left earlier in the year gets a P45, not a P60, even if they were with you for most of it. Giving someone both just creates confusing, sometimes contradictory paperwork.
P11D: benefits in kind
This is the one that catches small businesses out most, because it only applies if you’ve provided certain benefits — and plenty of small business owners don’t realise some of what they’re already providing counts.
A P11D reports the cash value of benefits in kind that aren’t run through payroll directly — company cars, private medical insurance, low-interest or interest-free loans above a certain threshold, and assorted other non-cash perks. No benefits provided, no P11D needed. If you have provided them, it’s due to HMRC by 6 July following the tax year end, and employees need their own copy (or equivalent notification) by the same date.
There’s also payrolling benefits — registering with HMRC before the tax year starts so you tax benefits in kind through payroll throughout the year instead of reporting them after the fact. Do this and you avoid submitting P11Ds for those benefits at year end, since the tax’s already been collected through PAYE as you went. Worth considering once you’re providing the same benefit consistently year after year — it removes the year-end scramble entirely.
Class 1A National Insurance is also due on most benefits reported via P11D, separate from the income tax side. The employer pays this, not the employee, and it’s a real cost that’s easy to forget when budgeting for something like a company car.
What often goes wrong for small employers
Issuing a P60 to someone who’s already left, rather than correctly treating them as a P45 case, usually happens when a leaving date isn’t entered promptly and the employee’s still showing as active when the year-end run happens.
Not realising a benefit needs reporting at all is more common than you’d expect. A company car, paying for an employee’s private health insurance, an interest-free loan over the threshold — these all create P11D obligations that some small business owners only discover when an accountant flags it, sometimes after the fact.
Missing the 6 July P11D deadline happens because it sits later in the year than most payroll deadlines and is easy to lose track of if you’re not used to treating it as a recurring annual task separate from your normal monthly routine.
And treating P45 and P60 as interchangeable “leaving” or “year-end” paperwork, rather than understanding they serve different audiences — HMRC, the employee, and their next employer all use these slightly differently.
How software can help
P45 and P60 generation is standard in essentially every UK payroll tool, free or paid. If something doesn’t produce these automatically, it’s not really viable as payroll software for an employer with ongoing staff. The trigger events — marking someone a leaver, hitting tax year end — generate the relevant forms with minimal input from you.
P11D handling is less universal. Some tools include it or offer payrolling of benefits; others don’t, leaving you to manage a separate process or lean on your accountant if you’re providing reportable benefits. If you already know you’ll be offering company cars, health insurance, or similar, it’s worth checking whether your payroll software handles P11D reporting before you actually need it, rather than discovering the gap at year end.
For more on how these forms connect to the wider reporting cycle, our guide to RTI covers the ongoing submissions that run alongside these annual and event-triggered documents. For software that handles year-end forms reliably, see our guide to the best payroll software for UK small businesses.
