A helpful guide to P45s for HR and business owners
According to a 2024 study from CIPD, three in 10 UK workers leave a role to join a new organisation every year. Most of these will require a P45—and as employer, it’s your job to provide them.
But first, you’ll need a solid handle on what they are. In short, a P45 is a way of passing on payroll information from one employer to another. It contains important employee data and informs the new employer what tax code they should be on.
But they’re important for you too. As an employer, you’re legally obligated to issue a P45. If you don’t, you may face consequences.
While we can’t give direct advice on P45s, you can read on to learn what a P45 form is, how and when to issue one, what information needs to be included and more. We’ll also look at what to do when onboarding an employee who has a P45 from a previous job, and provide answers to some of the most frequently asked questions.
What is a P45?
A P45 form is given to an employee when they leave a job. Its purpose is to provide the employee, their new employer, and HMRC, with the relevant information to set up a new tax code. It also acts as a record of any taxable earnings and tax paid within the current financial year. HR professionals can also use a P45 form to confirm details of the new employee’s identity.
What is the difference between a P45 and a P60?
A P45 form is issued to an employee at the point when they leave a job, summarising their taxable income and taxes paid from the start of the financial year to the date the employment terminated. It also provides new employers and HMRC with the PAYE code of their former employer, and the individual’s former tax code.
A P60 contains much of the same information but is issued to every employee at the end of each tax year, as a summary of the entire financial year. Each P60 relates only to one job, so employees who work for more than one company will be issued a separate P60 form for each position.
How do you issue a P45?
Issuing a P45 is essential whenever an employee leaves—regardless of the reason. There are three main ways you can issue a P45 form:
- Using your own payroll software
- Accessing HMRC PAYE Tools
- Requesting a paper form from HMRC
You should use your own payroll software to generate P45 forms. But if your software doesn’t have this capability, you can use the HMRC software listed above instead. Or if you’re exempt from filing online, you can request a paper copy to fill in and return.
What information should a P45 provide?
A P45 provides all the relevant information about an employee’s taxable income.
It should include the following information about the business:
- PAYE reference number
- Tax Office reference number
It should include the following information about the employee:
- Full name and current address
- Tax code at the time of leaving employment
- National Insurance Number
- Date employment was terminated
- Total taxable income received since the start of the tax year
- Total tax already deducted since the start of the tax year
- Details of other deductions, such as student loans
How long should it take for my employee to receive their P45 after leaving?
Employers are required to issue a P45 as soon as possible after an employee leaves.
It’s good practice to issue a P45 form to the employee on their last day of employment or as soon as possible. If the former employee does not have their P45 by the time they start a new job, they could end up overpaying on tax.
What should you do when you get a P45 from a new employee?
When you receive a P45 form from a new employee, you should have all the information you need to get them set up on your payroll system, and with the correct HMRC tax code. A P45 provides a link between your payroll system and the PAYE system from the previous employer.
Once you have your employee’s information from their P45, you can use HMRC’s online tool to:
- Work out what their tax code and starter declaration is.
- Find out if there’s anything else you need to do before you pay them for the first time.
P45s FAQs
Now you know the basics of what a P45 is and what information it contains, here are the answers to some of the most frequently asked questions asked about P45s by employers and HR professionals.
Can I pay an employee after issuing their P45?
There may be certain cases where you continue to pay an employee after issuing them with a P45, like if you’ve entered the wrong date in your Full Payment Submission (FPS). If you’ve already issued a P45, you’ll need to assign your employee a new payroll ID and update your payroll records to reflect the correct leaving date.
Do employees have to have a P45 to start their job?
No—there are several reasons why a new employee may not have a P45, including if:
- It is their first job
- They’ve lost their P45 form
- Their former employer hasn’t issued a P45 yet
If this is the case, they will have to complete a Starter Checklist. But they should be aware that their tax code may not be accurate.
How long is a P45 valid for?
A P45 details taxable income and tax paid in the current financial year. So, each P45 is valid until the 5th of April following termination of employment. If an employee leaves one role before the 5th of April and starts their next role on or after the 6th of April, they’ll need to complete the Starter Checklist instead.