I haven’t done a payroll post for a little while and so I thought I would discuss P45’s today!
A P45 form is which is given by an employer once you leave a company (provided you were on their payroll and not paid cash in hand). This is a legal obligation and you must be provided with a P45 if you have had earnings with the company through their payroll. (Click here to see an example P45 – link to HMRC site)
The P45 represents;
– How much you have been paid in the current tax year and how much tax has been deducted.
– What tax code you were on at the time of leaving.
The P45 also comes in 3 parts – Part 1A, 2 and 3. All parts are labelled as to what needs to be done with them next! Part 1A is your personal copy to keep for record maintenance (You should always keep these along with your P60’s (P60’s I will discuss in a later post). Part 2 and 3 are to be given to your new employer. There is also a Part 1 but this is given directly from your employer to HMRC to notify them that you have left and these were your total pay and tax deductions.
Why pass Part 2 and 3 to the new employer you ask?
Let’s say you worked at your old job between April and left in November, you have worked 8 months of that tax year. If you start a new job in the same tax year, they will not know you have had another job and may tax you incorrectly. The P45 notifies your new employer that yes you have had a new job, these were your earnings and final tax code which is then applied to your current record at your new employers to make sure you continue to pay the correct tax throughout the remainder of the tax year.
There will be cases where you receive your P45 after you have already started your new job due to different paydays between companies. In this case you can complete a New Starter Checklist (previously known as a P46 form) to put you on a temporary tax code until you receive your P45 which you can then supply to your new company to amend the tax code and correct your record.
I hope this all makes sense! I try to write them as if I don’t work in payroll so I can make sure it’s too overly technical.
If you have any questions please feel free to ask!
Until next time..