All employees are required to pay Income Tax on their eligible earnings. The amount of tax that you pay will depend on your annual salary, which will be summarised in your tax code. Your employer will use your tax code to make sure that the correct amount of tax is deducted from each payslip so that you don't end up over or underpaying tax.
When you start a new job or apply for benefits, your next employer or Jobcentre Plus will need relevant information, such as how much tax you should be paying, whether you are entitled to benefits and if you are currently a receiving state or occupational pension. This information will be contained in a document that will be based on your previous employment.
In this article, we'll take a look at what a P45 is and why it is an important document to keep. We'll talk you through the various sections included in the document and how they are relevant to your tax status.
When you leave a job, your former employer will issue you with a P45 form detailing your salary and the taxes that you have paid up until that point in the financial year. Your former employer is legally required to give you a P45 at the end of your employment.
The P45 is broken into four sections: Part 1, Part 1A, Part 2 and Part 3. The first part is sent to HMRC so that they can retain the information on their records. You should keep Part 1A safe in your personal records for future reference. Part 2 and Part 3 are intended for you to give to your new employer or the government agency Jobcentre Plus if you are not currently working.
Each of the sections will include information on how much gross pay you have earned at your previous job, as well as the taxes that you have paid. The form will also include your tax code, which will help your next employer to know how much tax you should be paying in your subsequent job. Your P45 can also help benefit agencies to calculate how much you should be paid in benefits.
A P45 is an important document as it will tell your new employer how much tax you should be paying and to make sure that you are on the correct tax code. An incorrect tax code could mean that you pay too much or too little tax or that you have to be put on an emergency code.
You will also need a P45 if you are not working and want to claim tax refunds and social welfare benefits. Your P45 also contains the necessary information that you can use when filling out a tax return if required. The form can help to ensure that you are not overpaying tax when you are withdrawing funds from your pension provider.
Whilst you can reclaim the tax that you have overpaid, this can take time and effort to pursue. The tax refund will take time to process and be transferred to your bank account, which can be avoided if you are already on the right tax code and paying the correct amount of tax. It will also mean that you will avoid underpaying tax, which you will have to repay as soon as you or HMRC becomes aware of the mistake.
You will be sent a P800 if HMRC notices that you have under or overpaid tax. This will include details of how you can pay the amount you owe or how you can claim a refund.
You can check your current Income Tax, as well as an estimate of how much tax you will pay in the financial year on your Government Gateway account. You can also see if your tax code has changed, as well as manually update your employer details if you start a new job.
The P45 contains a lot of information, including the following:
- Your tax code and PAYE references
- Your personal details (including full name and home address)
- Total pay that you've received at the job to date
- Total tax paid to date
- An indication of whether you need to make student loan payments or not
Your P45 may feature an M1 or W1 tax code. This means that you haven't been charged a tax amount that increases over time. Instead, each payment will be taxed as though it is your first payment of the tax year or month. If this section is ticked, it means that your tax code isn't cumulative, and the P45 won't feature any information on the total tax that you have paid to date.
A P45 won't show your pension or National Insurance deductions. For this reason, it's a good idea to keep your last payslip in your records so that you can retain this information. Your new employer will use your P45 to input your information onto their payroll system so that they can ensure that they deduct the correct amount of tax from your salary each month.
You will receive a P60 on an annual basis if you have been working for an employer on 5 April of any tax year. You will be given a P60 for each of the jobs that you work at any given time as you will earn a separate salary and therefore pay separate tax.
A P45 is similar to a P60, as they both contain tax information based on your salary. You will need a P60 to claim back any tax that you have overpaid, as well as apply for tax credits. As with a P45, you can also use a P60 to apply for loans and mortgages. If you are not given a P60, you can view the information that it would have contained on your personal tax account. You can also contact HMRC and ask that they provide you with the information that would have been included on your P60.
A P45 is only valid for the tax year that it has been issued. However, you should retain the P45 for at least 22 months after the P45 has been issued in case you need to provide it to claim tax credits, apply for a loan or to give it to a new employer. HMRC can pursue Income Tax investigations up to 20 years after the tax year, so it may be worth keeping your P45 in your records for an extended length of time.
Your P45 will cease being valid if you haven't been employed for over 12 months. This means that you may need to complete a starter checklist when you become employed at a new company.
Your employer should issue you with a P45, but if they don't, you will have to complete a starter checklist when you start a new role at another company. This form will ask you to include the relevant information to make sure that your employer knows what tax code you should be put on and how much tax should be deducted from each payslip.
Can I get a replacement P45?
Your previous employer should provide you with a P45 at the end of your employment with them. You cannot get a replacement P45 if you have lost your original copy. When you start at a new job, your new employer will likely give you a starter checklist, which is often referred to as a P46. You should print off this form, complete it and hand it to your employer if they fail to provide you with one.
The starter checklist will ask whether this is your first job since 6 April and whether you have been claiming Jobseeker's Allowance or not. It will also ask whether you have been the recipient of Employment and Support Allowance, a State Pension or an occupational pension. The form will also ask if this is your only job and have been employed since 6 April. It will also ask if you were receiving benefits such as Jobseeker's Allowance, Employment and Support Allowance or taxable incapacity benefit whilst you were employed. However, you cannot select this option if you receive a pension (either state or occupational).
The third option that you will be given on the starter checklist is if you have another job or are currently claiming your state or occupational pension.
Your employer will base your tax code on the option that you select. This will help them calculate how much tax should be deducted from your first payslip. Your employer will give you an emergency tax code if you do not pick one of these options. This code is 0T, which indicates that your employer does not have the necessary details to give you another tax code.
You need to keep a record of your starter checklist so that you can refer back to it if there is a problem with your tax in the future.
What should I do if my P45 is wrong?
You need to check over your P45 when you first receive it to make sure that all the details are correct. If any of the details are incorrect, you will need to contact your new company's HR department so that they can update your information. You will also need to contact HMRC directly if you think that your tax code is wrong.
You may be asked to fill out a starter checklist when you begin a new job, which will ensure that you can provide the correct and up to date details for your next employer.
A P45 is an important document that your employer will issue to you when you leave a job. It will state how much tax you pay, your tax code and whether you need to continue paying back a student loan or not. You should retain a copy of the P45, HMRC should receive a copy and the final two parts of the P45 can be given to your new employer of Jobseeker's Plus.
Your P45 is similar to a P60, which you will be given at the end of each financial year. It will help ensure that you are not over or underpaying tax and will help you to apply for loans, mortgages and benefits.
If you are not given a P45 or lose your copy, you will have to complete a starter checklist so that your new employer knows what tax code to put you on. You will be placed on an emergency tax code if your new employer isn't given the necessary information, which will mean that you will overpay tax until HMRC is able to issue you with a correct tax code.