Starting a new job can be exciting and nerve-wracking, and there’s typically lots to think about and organise.
Among all the paperwork involved, your P45 is one of the most important documents you’ll deal with.
However, despite how important it is, many people aren’t entirely sure what their P45 is for, when they should receive it, or what to do with it when they get it.
Whether you’re changing jobs, have been made redundant, or are just planning ahead, understanding your P45 is essential for managing your tax affairs properly.
Getting it wrong can mean paying too much tax, dealing with emergency tax codes, or facing delays in starting your new role.
Here’s our guide to your P45 and everything you’ll use it for.
What is a P45 and Why Does it Matter?
A P45 is an official tax document that records your earnings and tax payments during the current tax year.
It forms part of PAYE (Pay As You Earn) – the system that employers use to deduct tax and National Insurance from your wages.
It’s automatically created when you leave a job and contains vital information about your tax situation that your next employer will need.
Many people think of a P45 as just another piece of paperwork, but it’s actually an essential link between your old job and your new one. It helps ensure you’re paying the right amount of tax from the start of your new role, and prevents issues that could affect your take-home pay.
When you change jobs, your P45 helps transfer all your tax information smoothly from one employer to another.
Thus, without it, you might face complications with your tax code or end up paying emergency tax rates until things get sorted out.
When You’ll Need Your P45
Starting a new job is the most common reason you’ll need your P45. Your new employer needs the information it contains to set up your tax correctly from day one.
Without it, they might have to use an emergency tax code, which could mean you pay too much tax initially.
If you need to claim benefits after leaving a job, your P45 proves your employment has ended and shows your recent earnings. This helps ensure you receive the correct amount of benefits you’re entitled to.
You might also need your P45 when dealing with HMRC about tax matters or if you need to prove your employment history and earnings for other purposes, like mortgage applications.
When Do You Get a P45?
By law, your employer must provide you with a P45 when your employment ends. This isn’t something you need to request – it should happen automatically.
The timing depends on the circumstances, but typically, you should receive it on your last day or very shortly afterwards.
Specifically, you’ll get a P45 in these situations:
- Leaving your job for a new position elsewhere
- Being made redundant from your role
- Getting dismissed from your position
- When a fixed-term contract comes to an end
- Taking early retirement from your job
- Reaching normal retirement age and stopping work
However, there are some situations where you won’t receive a P45. You don’t get one if you’re staying with the same employer but changing roles internally, continuing to work after your company has been taken over, taking temporary leave, or leaving only one of multiple jobs.
This brings us to what’s actually included in your P45 and how to make sense of it.
Understanding Your P45’s Information
Your P45 contains detailed information about your employment and tax situation. While it might look complicated at first glance, each piece of information serves a specific purpose in helping manage your tax affairs correctly.
Your P45 includes several key pieces of information that your new employer needs:
- Your personal details, including full name, address, and National Insurance number
- Your tax code at the time you left your job
- Your leaving date
- Total pay and tax paid in the current tax year
- Your previous employer’s PAYE reference number
The document is divided into four parts, each serving a different purpose. Part 1 goes to HMRC, Part 1A is for you to keep, and Parts 2 and 3 go to your new employer.
Each part contains identical information – it’s just the way it’s distributed that differs.
What to Do When You Get Your P45
First, check all the information on your P45 is correct. Look particularly at your personal details, leaving date, and final salary figures.
If you spot any errors, contact your former employer immediately to have them corrected – don’t wait until you start your new job.
Store your Part 1A safely – this is your personal copy, and you might need it later for tax returns or benefit claims.
Many people keep it with other important documents like their passport or National Insurance card. It’s worth making a digital copy – e.g. taking a photo of it – as a backup.
Giving Your P45 to Your New Employer
When you start a new job, your employer will ask for Parts 2 and 3 of your P45. Try to provide these as soon as possible – ideally on your first day. This helps ensure your tax is calculated correctly from the start.
If you’ve lost your P45 or haven’t received one yet, don’t worry too much. Your new employer can still process your pay using what’s called a ‘starter checklist’ (previously known as a P46).
However, this might mean you temporarily pay emergency tax until HMRC confirms your correct tax code.
Special Situations and Common Problems
Sometimes, P45s can introduce confusion and complications. Here are some common situations you might encounter:
Starting Work Before Getting Your P45
When starting a new job before receiving your P45, your employer will need you to complete a ‘starter checklist’.
This document helps determine your correct tax code and ensures proper tax deduction from day one. Without a P45, you might be put on an emergency tax code until your correct code is confirmed.
Once you receive your P45, give it to your employer immediately. They can then adjust your tax code if needed and ensure any over- or under-paid tax is corrected in your next payslip.
Multiple Jobs
Multiple jobs require careful tax code management. Your main job typically uses your tax-free personal allowance. Additional jobs usually get BR or D0 codes to ensure enough tax is deducted.
Check payslips from all jobs to verify your tax codes are correct. If they seem wrong, contact HMRC directly as incorrect codes could mean paying too much or too little tax.
Self-Employment
When leaving employment for self-employment, your P45 shows your employment income and tax paid in the current tax year. You’ll need these figures for your first Self Assessment, which must include both employment income up to leaving and self-employed earnings after.
Keep your P45 safe – it’s essential for calculating your first year’s tax liability and proves tax already paid through PAYE.
Returning to Work After a Break
The starter checklist process helps establish your tax position when returning to work without a recent P45. Your employer will ask about:
- Your previous employment this tax year
- Any other current income sources
- Whether you’re receiving state benefits
- Student loan or postgraduate loan status
If you’re put on an emergency tax code initially, HMRC will usually adjust this automatically once they have your up-to-date employment information. Any over-paid tax will be refunded through your payslips.
P45 vs P60: Understanding the Difference
Many people confuse P45s and P60s – understandably, as they both deal with your tax and income.
However, they serve different purposes and come at different times.
P60: Your Annual Tax Summary
While a P45 marks the end of a job, a P60 marks the end of a tax year. Your employer must give you a P60 by the end of May each year if you were employed on the last day of the tax year (5 April).
A P60 shows your total earnings for the tax year and how much tax you’ve paid. Think of it as an annual summary, whereas a P45 is more like a mid-year checkpoint when you change jobs.
Key Differences
- Timing: P45s come when you leave a job; P60s come annually
- Purpose: P45s help manage tax between jobs; P60s provide an annual summary
- Who gets them: P45s are for people leaving jobs; P60s are for anyone employed on 5 April
- Usage: P45s are mainly for starting new jobs; P60s are often needed for mortgage applications or tax returns
You might need both documents at different times. For example, if you’re applying for a mortgage, lenders often want to see your P60s to verify your income over several years. But if you’re changing jobs, it’s your P45 that matters.
How Double Point Can Help
Managing your tax documentation can be complex, especially when changing jobs or dealing with multiple sources of income.
At Double Point, our team of chartered accountants can help ensure your tax affairs are handled correctly during employment transitions.
We can assist with:
- Checking your P45 and P60 details are correct
- Helping resolve issues with incorrect or missing documentation
- Ensuring you’re on the right tax code
- Dealing with HMRC on your behalf if problems arise
- Managing your broader tax affairs, including Self Assessment if needed
Don’t let tax paperwork cause you stress. Book a consultation with our friendly team today, and let our experienced team help you understand your employment tax matters.