What is a P45? Everything You Need to Know

​A P45 is an important document for ensuring you're taxed correctly when moving between jobs, but there are a few common questions and issues that can arise surrounding it. Whether you've lost your P45, received one by mistake or are wondering about your rights, understanding the ins and outs of this form can help you avoid tax complications. In this guide, we’ll cover everything you need to know about P45s, including what to do if you run into any problems.

What Is a P45?

A P45 is an official document an employer provides when someone leaves their job. It serves as a summary of earnings and tax deductions for the current tax year, covering the period from April 6 to April 5.

By law, employers must issue a P45 when employment ends. While it should be provided automatically, individuals have the right to request it if it isn’t received. The document includes essential details such as:

• Tax code

• Total earnings

• Tax paid during the year

• Employer’s details

A P45 is important for ensuring that tax records remain accurate when starting a new job, claiming benefits or accessing pensions. Without it, a new employer may place the individual on an emergency tax code, leading to potential overpayments that would need to be reclaimed from HMRC.

If someone is between jobs, their P45 can be used to apply for a tax refund if they meet certain conditions, such as being made redundant, having paid tax through PAYE or currently being unemployed. The amount they can reclaim depends on their total earnings and tax contributions during the tax year.

For those transitioning into retirement, a P45 should be passed on to pension providers to ensure that tax is calculated correctly on withdrawals.

Keeping a P45 safe is crucial, as it may also be required for self-assessment tax returns, claiming benefits or pension-related matters.

The Components of a P45 Form

A P45 is divided into four sections: Part 1, Part 1A, Part 2 and Part 3. Each section serves a specific purpose and is handled by different parties to ensure accurate tax reporting and smooth job transitions. Your employer submits Part 1 directly to HM Revenue and Customs (HMRC), while you receive the remaining sections. Parts 2 and 3 should be given to your new employer (or Jobcentre Plus if you're currently unemployed), and Part 1A should be kept for your records.

Part 1 – Employer Submission to HMRC

Part 1 is sent to HMRC by your previous employer, usually through payroll software. It ensures that tax records are updated with accurate information about your earnings and tax contributions.

Part 1A – Employee’s Copy

This section is for your personal records. It provides a summary of your earnings and tax paid during your employment, which may be useful when completing a self-assessment tax return, applying for benefits or discussing tax matters with HMRC.

Part 2 – New Employer’s Copy

When you start a new job, you’ll need to provide your new employer with Part 2 of your P45. This helps them apply the correct tax code to ensure that you are taxed appropriately from your first paycheck.

Part 3 – Employer Notification to HMRC

Your new employer sends Part 3 to HMRC to confirm your start date and tax details. This prevents any delays or errors in your tax code, reducing the risk of being placed on an emergency tax code.

Key Information on a P45

Every P45 contains essential details including:

• Your employment start and end dates

• Your tax code

• National Insurance number

• Total earnings during your employment

• Total tax paid

• Student loan deductions (if applicable)

If you don’t have a P45 when starting a new job, your employer can still determine your tax code using alternative methods, such as a starter checklist from HMRC. However, providing a P45 ensures a smoother transition and helps prevent potential tax overpayments.

How and When to Use a P45

When an Employee Leaves

When an employee leaves their role, the employer must issue a P45 without unreasonable delay. While there is no specific legal deadline, it is generally expected that the P45 be provided on the employee’s final working day. If this isn’t possible, for example, if the employee is on annual leave, it should be sent as soon as possible, either as a physical document or electronically.

Starting a New Job

When an employee starts a new job, their new employer will ask for their P45. This document ensures the correct tax code is applied, preventing the employee from being placed on an emergency tax rate, which could result in overpayment of tax.

Claiming a Tax Refund

If an employee leaves partway through a tax year and has overpaid taxes, their P45 can be used to claim a tax refund. This is particularly relevant if the employee was dismissed, made redundant or left the workforce for other reasons.

Claiming Benefits

In the case of unemployment, an employee may need to submit their P45 to Jobcentre Plus when applying for benefits. The P45 will show their earnings and tax history, which helps determine their entitlement.

Retirement

Employees retiring may need to provide their P45 to their pension provider to ensure that the correct tax is applied to their pension withdrawals.

Employers should ensure they provide the P45 promptly, as employees must have this document to avoid unnecessary tax complications in the future. Similarly, employees should keep their P45 safe and submit it when necessary to ensure their tax records remain accurate

Why do I Need a P45 to Start a New Job?

A P45 is essential for starting a new job as it provides details of the tax you’ve paid during the current financial year. Your new employer uses this information to ensure you are placed on the correct tax code, preventing overpayment or underpayment of taxes when your salary is processed.

Employer Obligations and Employee Rights

Employer Responsibilities with the P45

As an employer, you are required to send the necessary information for the P45 to HMRC promptly once an employee leaves your company. After this, you must provide the employee with a copy, either digitally or on paper, alongside their final payslip. This should be done automatically and without the employee having to request it. If your payroll software doesn’t generate a P45, HMRC’s Basic PAYE Tools can help, or you can contact HMRC to order a paper form if needed.

Employee Rights Regarding the P45

Employees are entitled to receive a P45 when they leave a job, whether through resignation, redundancy, termination or retirement. If an employee misplaces their P45, they can request a replacement from their employer. Employers must provide this document without delay, as failing to do so could result in penalties from HMRC. It’s an employee's legal right, and failure to comply may lead to an investigation.

When Should Employers Issue a P45?

Employers must provide the P45 on the employee’s last day of work or without “unreasonable delay.” If this is not possible due to annual leave or other absences, the P45 should still be issued promptly, potentially through email or other alternatives. Payroll software typically generates the P45 automatically or employers can obtain the form from HMRC.

How Long is a P45 Valid For?

A P45 is valid only within the current tax year (6th April to 5th April). If an employee is unemployed during the year, a P45 will not be issued, and the new employer will submit other information to HMRC for tax calculations.

What Happens If a P45 Isn’t Provided to a New Employer?

Without a P45, the new employer will place the employee on an emergency tax code, which may result in overpayment or underpayment of tax. Although HMRC will adjust the tax code later, this could lead to a tax refund in the future.

What If an Employer Refuses to Provide a P45?

Since the P45 is a legal entitlement, an employer who refuses to issue one could face legal consequences. Employees should first request the P45 in writing, giving a reasonable deadline for delivery. If the employer still doesn’t comply, the employee can contact HMRC, which may initiate an investigation into the employer's payroll practices. If necessary, legal assistance may be sought to resolve the issue.

Common Issues and Resolutions

There are a few common issues people face when dealing with P45 forms. Below, we cover some of these problems and provide resolutions to help make the process smoother.

Lost P45

If you lose your P45, don't panic! While HMRC doesn’t provide replacement copies, you can resolve this by filling out a 'Starter Checklist' with your new employer. This form will help determine your correct tax code for the new role and ensure you’re not overpaying on taxes.

Errors on the P45

Errors on a P45 can occur, such as incorrect personal details or tax information. If you notice any discrepancies, it's crucial to notify your employer as soon as possible. They can correct the issue and issue a new P45 or they can contact HMRC directly to resolve the error. It’s important to get this sorted to avoid any tax complications.

Starting a new job without a P45

Starting a new job without a P45 can lead to paying too much tax, as your new employer won’t have the necessary details to apply the correct tax code. In this case, you’ll be placed on an emergency tax code, and you may end up overpaying taxes. You will typically have to wait until the end of the tax year to receive a refund for the excess tax. To check if you’re paying the correct amount, you can use a salary calculator.

If you don’t have a P45 or if this is your first job, you’ll fill out a P46 form (or Starter Checklist). This form asks for details about your previous employment and helps determine your tax code. It ensures that your new employer applies the right tax code before your first pay date, even if you don’t have a P45.

What Happens if I don’t get a P45?

If you don’t receive a P45, your new employer will likely place you on an emergency tax code, meaning you could end up paying too much tax initially. Over time, adjustments will be made, and HMRC may process a tax rebate for you.

A P45 is a legal requirement, so if your employer refuses to issue one, you can take action. First, contact them directly to request the form, clearly stating that they are legally obligated to provide it. Give them a reasonable deadline, like 7 days and inform them that you will contact HMRC if the P45 is not provided.

If they don’t comply, get in touch with HMRC. They will contact the employer to resolve the issue, and if necessary, they may launch an Employer Compliance Investigation to assess PAYE and National Insurance contributions. Employers who fail to issue a P45 do not meet legal requirements.

Do You Get a P45 for Temporary Work?

Yes, if you stop working for a temporary job or an agency, you should receive a P45 form to take to your next employment. This ensures your new employer uses the correct tax code. If you’re employed at the end of the tax year, you’ll also receive a P60 detailing your tax payments.

For temporary workers, the P45 is essential for managing tax codes between jobs, ensuring you don’t end up on an emergency tax code and overpaying. The P60 is provided when employment ends at the close of a tax year and outlines your total earnings and tax paid during that year.

Do You Get a P45 if You Are Self-Employed?

No, self-employed individuals do not receive a P45 as they are not considered employees. Instead, self-employed people must complete an annual Self-Assessment tax return to calculate their tax liability. Unlike employees, self-employed workers are responsible for managing their taxes through the Self-Assessment process.

Self Assessment allows HMRC to determine how much tax and National Insurance you owe, as there is no automatic tax deduction like in PAYE employment. Self-employed individuals must submit their tax return by the 31st January deadline each year, reporting all earnings from the previous tax year.

Why Have I Been Sent a P45 When I'm Still Working?

Receiving a P45 while still employed is usually a mistake by your employer, often due to a payroll error or miscommunication. It’s essential to contact your HR or payroll department to clarify the situation and ensure your employment status is correctly updated in their system.

Common causes for receiving a P45 while employed include payroll errors, misunderstandings within the company or glitches from transitioning to a new payroll system. To resolve the issue, review the P45 for mistakes, communicate with HR or payroll and keep records of any correspondence. If the issue isn’t resolved, you can reach out to HMRC for further assistance.

Whether you're dealing with a lost P45, an error on the form or have concerns about receiving one while still employed, knowing your rights and the steps to take can save you time and frustration. If you’re still unsure about anything, don’t hesitate to contact your HR department, HMRC or a professional tax advisor for assistance. Stay on top of your tax situation and ensure a smooth transition into your next role.

Need further assistance with your P45 or any other tax questions? Reach out to our expert team today for guidance!

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