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What Is A HMRC Statement of Earnings?

hmrc statement of earnings

All employers are required to submit a statement of earnings to HMRC for every employee in their business. The document gives a detailed overview of an individual’s earnings, deductions and allowances for the tax year just gone. This submission enables the accurate calculator of each employee’s tax liability.

The statement of earnings is also known as the L17 form and acts as a reference point for HMRC to check that the right amount of income tax and national insurance contributions have been made during the tax year. This prevents under or over payments.

For employees, this document is an important reference document that could be required when applying for mortgages, loans or other benefits as it provides proof of income and employment history.

This article explains the HMRC Statement of Earnings, the requirements to become eligible to submit one and what information the document requests. We also discuss the available allowances and deductions claim, the process of submitting the statement to HMRC and policies regulating the protection of personal data.

What is a Statement of Earnings?

A statement of Earnings is a document that helps to calculate an employee’s tax liability for a given financial year. It contains information about their gross pay, deductions made, and any entitled allowances. This statement is a vital document since it allows the employee and employee to correctly calculate their tax so that nobody pays excess tax or a lower amount.

Who Needs to Submit a Statement of Earnings?

Every employer is required to submit a statement of earnings for each of their employees. This policy includes self-employed individuals and any staff earning below the personal allowance threshold.

HMRC uses the information submitted to correctly calculate the amount of tax owed to prevent issues with paying the wrong amounts. As an employer, this statement is an important one to prevent tax compliance problems.

What Details Should be Included in the Statement?

A comprehensive statement of earnings document contains the names, national insurance numbers, and payroll reference numbers of your employees. The statement should also include the gross pay, deductions made and entitled allowances of employees. It must clearly indicate the total money earned for the financial year and every claimed deduction.

Possible Allowances and Deductions

Individual circumstances can impact the number and amount of allowances and deductions available to an employee. An example is the personal allowance – the amount of money you are allowed to earn before you start paying taxes. There is also the married couple’s allowance that married couples and civil partners can claim as tax deductions.

How to Submit the Statement to HMRC

Submission of the statement of earnings is done by the employer to HMRC. An employer can choose to submit the statement either online, by post, or through the PAYE online service. The deadline for submission is the end of January following the tax year for which those earnings were paid. For example, an employer will submit a statement of earnings by 31st January 2023 for earnings within the 2022/2023 tax year.

Why Might You Need a Copy of Your Statement?

There are many reasons to have a copy of your statement of earnings as either an employer or an employee. Firstly, it can serve as proof of employment when applying for a mortgage or loan. The self-employed can also present it as evidence of income when applying for certain benefits like tax credits.

Ensure you always keep your copy of the statement of earnings in a safe place that is easily accessible too. You should also take proper care to protect the information on the document from getting into the wrong hands.

How to Get Your Statement from Your Employer

It is expected that your employer provides you with a copy of the statement of earnings within 14 days of submitting it to HMRC. failure to do so grants you the right to request a copy from them directly. For self-employed individuals, endeavour to check the HMRC website to download an electronic copy.

What if the Information on the Statement is Incorrect?

Contact your employer immediately if you observe any discrepancy or misinformation on your received copy of the statement of earnings. Promptly getting them informed allows sufficient time for your employer to make the necessary amendments and submit them again to HMRC. You should also consider reaching out to HMRC for rare cases where your employer could not resolve the issue.

When contacting HMRC, backup your request with additional information such as your P45 or P60. These documents show proof of your earnings and deductions for the tax year under review. They also help HMRC to calculate the correct tax you should pay.

What is the Legal Aid Agency?

The Legal Aid Agency is a government institution that offers financial assistance to individuals who cannot afford to pay legal representation. The scope of this agency includes help with criminal defence, family law and immigration cases. People on a low-income salary may be eligible for legal aid.

The Legal Aid Agency can sometimes request your statement of earnings document to assess your eligibility for financial assistance. You can directly submit it if you have one or reach out to HMRC for the document.

How is My Personal Data Protected?

The Data Protection Act 1998 protects your personal data from being used for any other purpose other than intended. That means your employer must keep your statement safe and not share the information with anyone else. An employer is only allowed to use your information for other purposes after receiving due consent from you.

There is also the Government’s National Security Promise that protects every employee’s information kept by HMRC. The policy ensures that all records with HMRC are kept safe and secure.

What is the Difference Between a Statement of Earnings and a P45?

There is a clear difference between a statement of earnings and a P45 document. The statement is a document that an employer issues during the tax year to HMRC containing every gross pay, deductions made and entitled allowances of their employees. It summarises the details of how much money was earned for a given tax year and a list of all deductions claimed.

A P45 is a document that an employer issues to an employee who leaves their organisation. It is a financial record of the employee earnings and deductions for the stated tax year and proves how much tax was paid for that period. The P45 is important for every employee to claim any unused tax allowance from HMRC.

What is the Difference Between a Statement of Earnings and a P60?

The P60 is also different from the statement of earnings as it is a document issued to an employee by their employer at the end of a tax year. A comprehensive P60 record must contain details of all the employee earnings and deductions for that tax year. It should also indicate the total amount paid as tax.

The P60 and P45 documents are quite similar in the information they contain but have the following differences:

  • A P60 document is issued at the end of the tax year while a P45 is only issued when an employee leaves their present job
  • A P60 document shows all records of deductions for the tax year, while a P45 contains only deductions till the date the employee left the job

Why are P45 and P60 Important?

The P45 and P60 documents are very important to every employee since they serve as proof of all tax records for the financial year. Hence, you must keep them safe especially since they contain personal information that can prove your identity, employment history and earnings.

Past or present employees of an organisation can also use their recent P45 and P60 documents to claim any unused tax allowance from HMRC. The information on the documents can help to get a refund on any overpaid tax.

What is PAYE?

PAYE stands for Pay As You Earn. It is a system utilised by employers to collect income tax and National Insurance from their employees. As the name implies, the employer deducts the tax from employee wages before paying them.

The PAYE system mandates that all employees be duly registered by their employer and must provide their National insurance number during the process. The benefit of PAYE is in ensuring that all employees pay the correct amount of tax. It also prevents cases like defaulted payments since the tax is automatically calculated and removed by the system.

PAYE is also linked to the statement of earnings since it is the system through which income tax and National Insurance are deducted from employee wages. The correct amount of tax owed is calculated using the statement of earnings while PAYE is the system for deducting the tax from the employee wages.

What is Self Assessment?

Compared to PAYE’s taxation system for people in traditional employment with defined wages, the self-assessment tax return is a method of declaring earnings that HMRC does not know about.

Self-assessment is a system that HMRC uses to collect income tax from the self-employed or those with additional income sources like business profits. It is a way of declaring your income to the HMRC to help them calculate the correct amount of tax to pay. A self-assessment tax return is a document that contains details of such earnings and must be submitted to HMRC.

While filling out the form, ensure that all records and financial information provided are accurate and up-to-date. There are serious penalties and subsequent legal actions for people who try to manipulate their tax records. There is also a fine for late payment or missing deadlines. It is recommended to contact HMRC when in doubt about the self-assessment tax return.

Why and How to Get Proof of Employment from HMRC

Certain circumstances might warrant you to get proof of employment from HMRC such as a need to prove your identity – perhaps for a new job, passport or mortgage application. Individuals can also use it to apply for mortgages or loans, and claim work benefits.

The process of obtaining proof of employment from HMRC is simple. The first step is filling out the form and submitting it to HMRC. Subsequently, you would receive a letter from them that confirms your employment. The letter must also contain other vital information about your identity and records at work.

While HMRC is obliged to provide you relevant copies of your records when required, they are also restrained by the Data Protection Act to not use your information for non-intended purposes.

The personal data you provide on the forms submitted to them is only accessible by authorised personnel. Moreover, you have every right to immediately contact HMRC if you have substantial reasons to believe that your data was accessed without your permission.

Tips for Dealing with HMRC

Many self-employed people and employees feel anxious about dealing with HMRC but there is nothing to be scared about provided you only submit accurate and honest records. The only time you can have problems with HMRC is if there are discrepancies in your reports or if it appears you are evading taxes.

Here are some tips to follow when dealing with HMRC:

  • Be honest – HMRC is only concerned with ensuring that you pay the correct tax amounts and that you do not pay less or more than you owe. Honesty is therefore the best policy when reporting to them. Do not attempt to play smart or submit inaccurate self-assessment tax returns.

HMRC withholds the right to investigate your records if they feel you are deliberately dishonest or see proof of significant errors in your tax returns. Self-employed people or employees found guilty will have to pay a fine or even face prosecution.

  • Keep good records – proper record keeping of every important document is essential when dealing with HMRC. You need to keep track of all the information you submit to them and any previous correspondence you had.

Good record keeping also includes having details of every transaction in a safe place to help when filling self-assessment tax returns. These simple practices can help to avoid confusion or mistakes with submitted information.

  • Be polite and professional – dealing with HMRC can sometimes be frustrating especially when they are strict with required documents or certain procedures. You must understand they are only doing their jobs and making sure there are no mistakes

It is easy to get their assistance when you are equally polite and patient. Patience also involves checking that you provided every information requested of you.

  • Immediately report issues or observations – do not hesitate to contact HMRC if you think there has been a mistake during the process of filling and submitting necessary documents. 

Early reports on mistakes or issues with the information provided make it easier to resolve such concerns. It also lets them know you have honest intentions in situations where a mistake was made.

Final Thoughts

The HMRC statement of earnings is an important document for both employers and employees. The statement helps to calculate the correct amount of tax owed and prevents problems of paying less or excess tax.

Employers should take care when submitting these records to HMRC and ensure their accuracy. They must also respect data protection laws concerning the personal information of their employees.

As an employee, you should not hesitate to report any problem or mistake to HMRC. let them know if you think your privacy rights were violated or if there is a mistake in self-assessment tax returns.

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