ALL EMPLOYEES SHOULD should receive their 2015 P60 by Monday, 15 February.
Every employee is entitled to receive a P60 from his employer if he or she was employed on the last day of the year, i.e. 31 December. If an individual leaves employment during a tax year they will receive a P45 when leaving and will not receive a P60 from that employer.
Most people reading this will think, “Oh yeah – I get them… wonder what they are for? Wonder where I’ve put mine”. From our experience people receive their P60 and it’s “filed” in a drawer never to be seen again. However, a P60 is actually an important document and it is worthwhile knowing what it’s for and how you as a tax payer might use it.
People might be interested to hear that by ensuring your P60 is correct you could also ensure that you are not overpaying tax and that you are getting the correct tax credits available to you.
Every employer is obliged to deduct tax based on the tax credit certificate issued to them by Revenue regardless of any other information they may have. The tax credit certificate issued by Revenue is based on the information they hold in relation to you i.e. they may not be aware that you are entitled to certain additional credits if they have not been informed of this.
Not an assessment
It is important for all employees to understand that the P60 is not a Revenue assessment of your position and is not an indication of your final tax liability for the year. The P60 merely provides a summary of the tax, PRSI and USC deducted by your employer in the tax year.
Some important terms
Tax Credits – these are used to reduce your income tax liability. The amount of credits available to you depends on your personal circumstances as you will see below. Not all tax credits may be factored into payroll and in some cases additional tax credits may be claimed after the year end resulting in a refund.
Tax credits represent euro for euro the actual money in your pocket i.e. a tax credit of €100 means a tax saving of €100 meaning €100 more in your pocket.
Tax Bands – there are currently 2 rates of tax in Ireland, the standard rate of 20% and the higher rate of 40% (as of 01 January 2015).
The first portion of your income is taxed at the standard rate and once you have earned a certain amount everything after that is taxed at 40%.
Your tax band confirms the amount you can earn before being taxed at 40%. The band is allocated on an annual basis but it is divided out into months to help spread your tax evenly.
PRSI class – this is determined by factors such as your level of earnings, whether you are an employee or self employed and whether you are a private or public sector worker. Your PRSI class will determine the rate at which you pay PRSI and the amount of income you can earn without incurring the charge.
PPS Number – this is your unique identification number for all dealings with the Public Service (i.e. Revenue, Department of Social Protection, health and education services)
Each P60 may be divided into various sections as follows:
Top portion – this part of the P60 contains your personal details i.e. your name, address, PPS number, tax credit and rate band information.
Again. It is important to remember that the tax credit and band here is merely a summary of what has been applied via the payroll. Also, it is important to look into this top section of the P60 to confirm which year the P60 relates to. This information is found at the very top of the P60.
Section A – this part of the P60 confirms your gross taxable pay for the year. The figure here will be after the deduction of any pension contributions you will have made via the payroll. This may explain any difference when you compare this figure to the gross pay per your contract. If you changed employment during the year your pay details in this section will be subdivided into the salary paid to you by your previous employer (s) and that paid to you by your current employer. Also included will be any taxable Illness Benefits payments received.
Section B – this part of the P60 confirms the total tax deducted in the year. Again, if you changed employment during the year the tax paid details will be subdivided into that paid in your previous employment (s) and that paid in your current employment. Thus giving a total summary for the year.
Section C – this section confirms the amount of Local Property Tax (LPT) deducted in the current employment via payroll during the tax year.
This section does not record any LPT payments made through any mechanism other than payroll – so you shouldn’t expect to see any direct debit payments recorded here. This figure will appear as 0.00 unless you have elected (or your employer has been mandated) to pay LPT in this way.
Section D – This section confirms the amount of pay subject to USC in this and previous employments in the year. This figure may not be the same as the amount of pay subject to tax, as it will be prior to the deduction of pension contributions.
Section E – This section confirms the amount of USC deducted from you in this employment and previous employments.
Section F – This part of the P60 provides details of the PRSI paid in your current employment. This section is different to the last two sections in that PRSI paid in previous employments is not recorded here. The first item in this section is the employee PRSI for the year i.e. the PRSI that was actually deducted from your salary.
Prior to 2011 this amount would also have included health levy and this made the calculation a little more complicated, but now that the health levy has been abolished this part of the P60 is a lot easier to understand.
The second item in this section is total PRSI i.e. employer and employee PRSI. If you deduct the figure from the first item from this total figure you will have the total PRSI paid on your behalf by your employer in the year. Section C also contains details regarding your PRSI class etc.
The bottom of the P60 will show details of your employer’s name, registration number and address.
You should keep this document safely as evidence of your pay and tax details for 2015. Should you believe you may be entitled to a tax refund, you may be required to submit the document for review.
Barry Flanagan, Senior Tax Manager at www.taxback.com.