Definition
A document that an employer must provide to an employee when they leave a job. It shows the total pay and tax deducted in the current tax year up to the leaving date. The employee gives it to their next employer to ensure they are taxed correctly.
UK Context
P45s are required under HMRC's Pay As You Earn (PAYE) regulations. The employer must issue a P45 when the employee leaves, and report the final payment to HMRC in real time through Real Time Information (RTI). If a new starter does not have a P45, they must complete a starter checklist for tax coding.
Best Practices
- Issue the P45 promptly when the employee leaves, ideally on or before their last day
- Ensure the details on the P45 are accurate, as errors can cause incorrect taxation in the next employment
- Keep a record of issued P45s and report the leaver to HMRC through your payroll system
Frequently Asked Questions
What information does a P45 contain?
A P45 shows the employee's tax code, total pay received in the current tax year up to the leaving date, total tax paid in the current tax year, the leaving date, and the employer's PAYE reference.
What happens if a new employee does not have a P45?
If a new starter cannot provide a P45, they must complete a starter checklist (formerly P46). The employer uses this to determine the correct tax code. The employee may be placed on an emergency tax code until HMRC issues the correct one.