Understanding the P45: Key Information for Employees
When leaving employment, it is essential to ensure that all administrative and tax matters are correctly managed. One of the most important documents in this process is the P45.
What is a P45?
A P45 is an official tax form issued by an employer when an employee leaves their role. It details the employee’s earnings and tax contributions for the current tax year. The document is required for subsequent employment, tax refunds, or benefit applications.
Timing of Issuance
Employers are obligated to provide the P45 to an employee on their final working day or shortly thereafter. Timely receipt of the P45 is critical to maintaining accurate tax records.
Contents of a P45
The P45 includes the following information:
Total earnings to date in the current tax year
Tax paid
Employee’s tax code
Employment end date
Employer details This information ensures proper taxation in any subsequent employment.
Validity
The P45 is valid for the duration of the current tax year only. Previous years’ P45s are not applicable for current tax calculations.
If the P45 is Not Received
Employees who do not receive a P45 must complete a “starter checklist” (previously known as a P46) for their new employer to determine the correct tax code.
Replacement or Lost P45
Your employer should be able to provide a replacement P45, particularly if the original was issued electronically.
If your employer uses a digital payroll system, you may be able to access and download your P45 online. It is advisable to contact your HR or payroll department to confirm whether this option is available.
In some cases, a replacement may not be possible, particularly if your employment ended some time ago and the original P45 was issued in paper form, which is now less common.
Employers are not permitted to alter or duplicate P45s due to the sensitive personal information they contain. Nonetheless, it is still worth reaching out to confirm your options.
Errors on a P45
Any discrepancies must be addressed directly with the previous employer, who is responsible for corrections.
Applicability to Self-Employed Individuals
P45s are relevant only to employees under the PAYE system. Self-employed individuals report their income through self-assessment and do not receive a P45.
Record Retention by Employers
Employers are required to maintain P45 and other payroll records for several years to comply with regulatory requirements.
P45 vs. P60
P45: Issued upon leaving employment, reflecting earnings and tax to date.
P60: Issued at the end of the tax year to current employees, summarizing annual earnings and tax contributions.
Multiple P45s in a Tax Year
Employees who leave more than one job in a tax year will receive a P45 from each employer. The most recent P45 is typically the most relevant for subsequent employment.
Submission to New Employer
Employees must provide Parts 2 and 3 of the P45 to their new employer to ensure accurate tax code application and proper payroll processing.
Expert Payroll Support for Your Business
The P45 is a crucial document for ensuring accurate tax reporting and compliance. Understanding its purpose, contents, and proper handling is essential for both employees and employers. At Mascolo & Styles, we are committed to providing clarity on payroll and tax matters, ensuring a seamless transition between employment and safeguarding compliance with statutory requirements.
Contact our team today to discuss payroll support for your business
