What is a P45?

Intro

A P45 is a crucial document issued by an employer to an employee when they leave a job. It provides essential information about the employee's salary and taxes paid during the tax year.

Purpose of a P45

The primary purpose of a P45 is to show the amount of tax paid on an employee's salary so far in the tax year. This information is vital for the employee's new employer to accurately calculate their tax code and ensure they are paying the correct amount of tax.

Structure of a P45

A P45 form consists of four parts:

• Part 1: Sent by the employer to HMRC (Her Majesty's Revenue and Customs)
• Part 2: Given to the employee, showing their tax code and payment details
• Part 3: Also given to the employee, providing a summary of their tax deductions
• Part 4: A spare copy for the employee's records

Employee Responsibilities

When an employee leaves a job, they should automatically receive a P45 from their employer through the company payroll system. If an employee does not receive a P45, they should:

• Contact their former employer to request a P45
• Provide relevant financial details to their new employer or HMRC if they do not have a P45
• Check how much tax they paid last year if they think they may have paid too much

Alternative Scenarios

In cases where an employee does not have a P45, their new employer will need to work out their tax code based on information provided by the employee. This may involve completing a Starter Checklist, which helps the new employer determine the correct tax code.

Employer Obligations

Employers are responsible for issuing P45s to their employees when they leave the company. They must also:

• Send Part 1 of the P45 to HMRC
• Keep accurate records of P45s issued
• Ensure P45s are accurate and complete

Additional Information

P45s are valid throughout the tax year and should be retained for record-keeping purposes.

If an employee spots errors on their P45, they should contact their employer or HMRC.

In the event of a lost P45, employees should provide relevant financial details to their new employer or HMRC.

By understanding the purpose and structure of a P45, employees and employers can ensure a smooth transition when an employee leaves a job, and accurately calculate tax codes to avoid any potential issues.