The form ‘P45’ is titled ‘Details of Employee Leaving Work’ and is given to an employee when they leave a job. There are multiple parts to the form (Part 1, 1a, 2, and 3) and slightly different uses for each.
When an employee leaves a job, their (former) employer is legally obligated to provide them with a P45. If the employer fails to do this, the employee should contact HMRC, who will contact the employer to get the P45 from them.
If this happens, the Tax Office may also issue a ‘tax credit certificate’ to stop an employee from being unnecessarily placed on ‘emergency tax’ – which happens if they don’t have enough information on someone’s income and tax liabilities (the idea being that it’s better to pay too much tax and have it refunded later, than not pay enough and have a deficit to pay back later).
The information contained on the P45 will include the former Employers PAYE Reference Number, the Company address, and the name of the responsible individual for filling out the form. Then relevant personal data about the employee, including:
National Insurance Number (NINO)
Gender (if appropriate)
Date of Birth
Works or Payroll Number (if applicable)
Student Loan Deductions
Tax Code (at leaving date)
It might look as if each page contains the same information (and for the most part, it does), but these parts will go to different people and places as required.
Part 1 of the P45 is sent (by the employer) to the Tax Office, where the information will be processed, and the information added to the individual’s PAYE record.
Part 1A is the copy that the employee keeps for their records – it’s important to keep hold of this, because it contains information about how much tax has been paid, and if there’s an issue with over or underpayments of tax, this form shows the tax code that was being applied, as well as the amount earned and the tax paid.
Part 2 and Part 3 will need to be provided to the employees next employer, or the job centre if appropriate. These copies are important, as Part 2 is the copy for the employer’s records – and will also provide them with the details they need and Part 3 (the one part with different information to the rest) has to be filled in by them and submitted to the tax office.
If the employee has lost, or not been supplied with, a P45 – the new employer will need to fill in the New Employee Checklist (which replaced the form P46) and submit the details to HMRC using the online service or speaking directly with their local tax office.
For individuals who are using the Job Centre, the P45 form is one of the documents required in order to claim certain benefits, as it contains income details and tax details – and will allow the Job Centre to work out how much a person is eligible for, and to ensure that their stated income matches the information submitted to the tax office.
A P45 only contains information about the tax year in which it was provided and is only valid for that specific year – however it’s important not to immediately dispose of the form once the year is done. It’s advised to keep records for at least 22 months after the end of the relevant tax year (in case there are any issues or if the individual needs to make any claims or adjustments) – but it should be pointed out that HMRC has the ability to carry out tax investigations for up to 20 years (in some circumstances) and holding onto important documents could provide vital information down the line.
Changing jobs can be stressful at the best of times, so having the tools in place to make the taxation side simpler is definitely recommended. The last thing someone wants to deal with, is finishing a job and starting a new one – and then finding out they’re being charged Basic Rate (BR) at 20% because the Tax Office hasn’t been informed and considers the new employment to be a second job!
If you’re not sure about your PAYE tax affairs or want to find out more about the important documents you should be keeping, our expertly qualified advisors are on hand with the tools and services to determine your individual tax affairs and give you the best personally focused advice for your own tax situation.
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