Whether you’re an employer or an employee, it’s important to be familiar with the ins and outs of the P45.
It’s a legal requirement to issue them at the right time, and it makes life a lot easier if you know what your responsibilities are or how and when you should go about securing your P45.
A P45 follows you throughout your working life, through each career change and ultimately to retirement.
We explore everything you need to know about your P45 below. From what it is, how to get one and what it's actually used for.
What is a P45 and how does it work?
Every time you leave a job, your employer must issue you with a P45.
The form contains details of your salary and the taxes you’ve paid during the tax year.
It’s always an employer’s responsibility to make sure an individual receives their P45.
What does a P45 look like?
There isn’t a standard format for the P45. Each one may be slightly different, but essentially they are forms containing vital information such as your title, full name, national insurance number, tax code and salary details.
The form is divided into four parts — 1, 1A, 2 and 3. Part 1 is sent to HMRC, 1A you keep for your records, and both 2 and 3 are given to your new employer.
How is a P45 issued?
If you’re an employer, it’s your responsibility to issue employee P45s, and often your payroll software will be able to do this for you. If you don’t run payroll software, you can use HMRC’s free PAYE tools. These solutions can help you to calculate tax and National Insurance, as well as helping you to issue forms such as the P45.
Companies with fewer than 10 employees can use HMRC’s free payroll software that you can find here.
How and when do you get a P45?
As an employee, your P45 is issued and given to you by your employer. It should be generated automatically through the company payroll system. You will receive your P45 when you finish working, but if for some reason you don’t, you can ask your employer to provide it. Traditionally the P45 has been a paper form, but it is now more likely to be electronically generated.
What do you do if your employer won’t issue your P45?
Firstly, you should probably check with your previous employer. They might simply have forgotten to send your P45, or there might have been a delay. If they don’t sort things out quickly then, it could be wise to seek legal advice through an employment solicitor. In the meantime, your new employer can get you going with a new starter checklist. This will simply ask about any other jobs you may have, whether you have a student loan, or anything else that could affect your tax status and salary. Your new employer will now be able to work out your new tax code before your first payday.
If nothing seems to be working, you should contact HMRC. Employers will not want to risk a penalty from HMRC, so this should resolve the issue.
What if your P45 contains incorrect information?
It’s always a good idea to check the information on your P45 when you receive it from an employer. If you spot anything that’s wrong, you should firstly contact your employer’s HR department and ask them to change the details that are wrong. If you think that the tax code you’ve been given is wrong, you should contact HMRC.
As we mentioned above, you’ll probably need to complete a starter checklist in your next job until your P45 is all up to date.
What happens if you lose your P45?
You can’t replace a lost P45. Your employer will probably give you a starter pack as mentioned above and ask you for all the relevant details about your finances. Essentially they need to make sure that HMRC have all the correct information, so that you’re on the right tax code in your new job.
If there isn’t enough information available, you may be put on an emergency tax code until HMRC has everything they need.
How long does a P45 last?
A P45 is valid throughout the tax year in which it was issued. This means if the tax year changes between you leaving a job and starting a new one, you’ll need to use the starter checklist instead.
Even though a P45 is only valid for a year, it’s a good idea to hold onto them. HMRC can conduct tax investigations up to 20 years after a given tax period, so keeping your records complete is a sensible move.
What happens when you retire?
When you leave your last job and retire, your employer will issue you with a P45. When you receive it, you should pass the information to your pension provider. This ensures that you’re on the right tax code when you start making withdrawals from your pension.
Where can you find help with P45s?
Whether you’re an employee or an employer, it’s essential to make sure that all P45 details are correct and up to date for each tax year. Problems can and do arise, so for definitive information on what to do if you’re having issues, visit the government website.