What is a p45? A Complete Guide

Ryan Patrick

• 5 min read
What is a p45? A Complete Guide

Employing new staff means your company is growing and improving but even as easy as it is, the paperwork can be a little hectic. As an employer, it is very important to keep track of your employees and all their taxes as long as they work with you and when they are no longer working for you, you can hand them the paperwork of their taxes.

One important paperwork for the Pay As You Earn (PAYE) is the form P45. You must have heard about this form in cases where people leave their jobs and in cases when people get employed by new employers. Well, it is a very important document that must be available for every employee in the UK.

What is Form P45?

The P45 is an important form for PAYE which is the document that an employer must provide an employee with during the time the employee leaves the company or during termination of the contract. The reason for them leaving does not determine this form even if they quit, were sacked or made redundant or chose to leave themselves. As an employer, you must issue this form to your employees when they are leaving.

The only case where you don't have to prepare the P45 form for an employee is in the unfortunate instance of an employee passing away. This is according to the UK's guidelines.

The main purpose of the P45 form is to give the employee a vivid and clear explanation of their payroll information alongside the taxes they have paid during their service as your employees. It also provides the new employer the tax information of the employee which is necessary to get the tax code of the employee.

If an employee does not have the form P45, they may be paying a high amount of tax higher than what they are supposed to pay, or they can be allocated an emergency tax code which will most times give them a problem.

Also, the form P45 is very important when the employee (who has already left the previous employer) is filling out their annual tax returns or needs to claim some tax refunds or tax benefits.

Who Issues Form P45?

As the current employer, you should remember to electronically send the information about your employee needed for the form P45 to HMRC as soon as possible. It is important to do this fast to avoid delays in processing and issuing the form P45 to your (ex) employer.

When the employee is receiving their last pay slip, you can then proceed to hand a copy of the form to the. The copy could be paper or electronically sent. In no case should you ask an employer, to wait for the employee to request the P45 from you.

Although some payroll software can help you in preparing your P45, for those that do not prepare the form, you have to use the HMRC'd Basic PAYE Tools which is a free payroll software by HMRC and provides services to businesses with less than 10 employees.

However, if at that moment, you are not able to fill out electronic forms with HMRC, you can also directly contact HMRC to order the paper version of the form P45 from them.

As an employer employing a new member, you should ask for their P45 form. If the employee can provide you with this document, then you can input the necessary tax information into your payroll software. In case you don't know how to input this, you should contact someone experienced with doing jobs like this.

However, if your employee does not have access to a recent P45, then you must register them for the HMRC starter checklist (this starter checklist, replaced the p46 form which is no longer in use). After completing the HMRC starter checklist, you can then use the necessary information to enter into your payroll and system or software.

The starter checklist is also important for first-time employees who have never worked with any employer and who do not have the P45 form.

The Form P45?

Now that we know what the form P45 is and what it is used for, it is important to know the different sections of the form. The form is not a one-page form but consists of different pages which serve different purposes. The following is a breakdown of the components of a P45 form. The P45 form is made up of four different sections:

Part 1

As the previous employer of the employee, you are responsible for providing the following information to HMRC to ensure that your (ex) employee's P45 form is prepared. The following information should be present in part 1 of the P45 form:

  1. Your PAYE reference office number as the employer
  2. National Insurance Number of your employee
  3. Employees name in the order of title, surname and first name
  4. The date the employee is leaving your organisation
  5. Signify if there are any student loan deductions
  6. The employee's tax code at the leaving date
  7. Total payment of the employee to date
  8. Total tax paid by the employee to date
  9. Total pay from you as the employer
  10. Total tax from the payment received from this employment
  11. Work number, payroll number and the department or branch where the employee was working
  12. The employee's gender
  13. Date of birth of the employee
  14. Private address of the employee
  15. Name of the employer
  16. Address of the employer
  17. Date

Part 1a

This is a copy of all the information present in part 1 of this form and must be given to the employee to keep in their possession.

Part 2

This is more of a summary of all the information contained in part 1 of this form and is to be given by the employee to their new employer.

Part 3

The part 3 is to be completed by the new employer and be passed on to HMRC. The following information should be present in part 3 of the P45 form:

  1. PAYE reference office number of the new employer
  2. The National Insurance Number of the employee
  3. Name of employee in the order of; title, surname and first name
  4. The date the employee left their previous employment
  5. Any student loan deductions
  6. The tax code of the employee as of the leaving date
  7. Total pay of the employee to date
  8. Total tax of the employee to date
  9. Date of new employment
  10. Work number of payroll number, department or branch at new employment
  11. Indications if the new employer has any payment within the day of employment to the next 5 April
  12. The tax side of the employee is different from the previous one
  13. The tax figure of different from that of the previous employer
  14. New employee's job type, title and description
  15. Private address of the employee
  16. Employee's gender
  17. Name of employer
  18. Address of employer
  19. Date

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Conclusion

The P45 form is a very important form that should be given to employees once they stop working for a particular employer. The P45 contains all the necessary tax information of the employee and a copy should be given to the new employer of the employee (if the employee still wants to work).

The tax information will be used by the new employer to get the tax code of the employee to help them input the employee's information into their payroll software. If as an employee, you have never worked, therefore do not have a P45, you have lost your P45 or your P45 can no longer be used, you have to register with the HMRC starter checklist.

The tax year ends on 5 April and once your P45 exceeds that tax year, it can no longer be used. You have to register for the HMRC starter checklist. Even if the P45 was issued a week before April 5, then after April 5, your P45 is no longer valid and cannot be used. If you have any questions on p45, don’t hesitate to contact us here, and we’ll do everything we can to help.