What is a P45 ?

The P45 is an important form one must know about as an employee. The P45 is the form that your employer gives when you terminate your employment with them. The form details the employee's income and the amount of tax they have paid. 

P45 is a tax document the employer provides to employees when they stop working. It contains the salary and taxes paid to date in the tax year. 

At the start of a job, one may have to give the P45 to the employer, which shows they can deduct the right amount of tax from the salary. 

Without this form, one may be on an emergency tax basis. By law, you should ask the employer to get the contract P45 explained, where the employer sends details of part 1 to the HMRC, and Parts 2 and 3 are given to the new employer.

What is a P45 Form? How Can You Get a P45?

What is a P45 Form? The P45 is the statement of your pay and deductions for the tax year up to the date you leave the job. The deductions mentioned in P45 are PAYE (pay as you earn), PRSI (pay-related social insurance) and USC (Universal social charge).

From 2019 onwards, you no longer need to get a P45 when you leave a job. Instead, the employer enters your leaving data and details to get your final pay and deductions. The data is updated in the Revenue's online system, and you can access the details online through the Revenue's myAccount service. 

When generating an employee's final payslip, one must be able to generate a P45 using the payroll software. If the company does not have a payroll system, they can use the HMRC's Basic PAYE tools, and if you are exempt from filing online, you can order paper forms from the HMRC. 

An employee needs to do some paperwork when changing jobs, like they must provide the bank details to the new employer and a valid form of ID, for instance, the full driver's license or utility bill or the bank statement and the National insurance number.

The employer should be proactive and provide a P45 to the Employee leaving the job, but some people are unaware of the change in circumstances of the Employee and may not give a P45 document.  

What Is A P45 Used For?

P45 Meaning - The document is passed from the previous employer to the new employer; once you leave the company, the employment is terminated; when you leave the job to move to another company, when you are moving to another role, or have retired, or the employment has been terminated for some other reasons. 

The P45 has several other uses; they are not just important when you start a job; it is needed to fill in a tax return and claim benefits and refunds. So when you mention the P45 details, you will not be overcharged when you try to withdraw money from your pension.  

Though a P45 is valid throughout the year, you must keep a record for at least 22 months after the end of the relevant tax year. You can retain the P45 longer, as HMRC has the right to conduct tax investigations for up to 20 years.

The P45 provides employee identification, tax codes, taxable earnings of the tax year and the amount, if any, paid and the old employer's PAYE tax references.

P45 may not show the National Insurance deductions or the pension contributions, and it is useful in case you want to know about the last payslip, especially if you want to trace details when you retire.

You can use the information from the P45 when you join an organisation and need to enter the new Employee's information for correct tax deductions. 

What Is A P45 And P60?

Two types of PAYE (Pay as you Earn) forms are given to employees: The P60 and P45. P45 is used when the employee changes jobs, and the P60 is used to summarise the employee's tax information at the end of the tax year. 

P45 holds the employees' tax records, where HMRC can carry out various checks. In contrast, a P60 form is for continuing employees. It summarises employment and tax information for an individual working with an organisation as of 5th April, the end of the UK tax year. 

At the tax year's end, those with two jobs will have a separate P60 for each current job. The information you need to provide on P60 includes – Employee Identification, the tax year, taxable earnings for the tax year and any tax paid (for the current employment and the total for the year if there was a previous employer in the same tax year), national insurance (paid for the end of the UK tax year from 6 April to 4 April), the tax code and the employer's PAYE tax references.

It is required by the law that you give the staff a physical copy or an electronic copy of P60 promptly after April 4 of each year. P60 is considered more reliable by many as it provides tax breaks on loans and mortgage applications, though it does not show the pension contribution; so, one must keep the last payslip if one needs to trace the details later.  

The payroll software will often generate a P60 for each Employee, and you can also give the Employee an electronic or a paper document. So you must not forget that you require a P60, even when you get a salary from your company.  

If you are an employer, it is a legal obligation to provide every employee with a payslip and a P60 by 31 May each year, and the employee and the employer must hold the P60 copy for at least six years.

You must give each employee a copy of the P60 to keep their tax records and submit a copy electronically to the HMRC through the usual payroll software. 

From 2019 onwards, you are no longer required to get the P60 at the end of the year only; you can get an end-of-the-year statement anytime at the Revenue website.  

What Is A P45 Document?

A P45 is the form which an employer provides when the employee is about to leave the job. It provides a way to pass tax and payroll information from the old employer to the new and keep a tax record related to the employee.

The paper is sent to the HMRC, and the process of tax calculations works through the RTI (Real time information) electronic payroll reporting. 

A P45 requires you to enter multiple details about the last drawn payslip, and if a new employee does not have a P45, they must get a copy from the former employer to work out the temporary tax codes.  

What Is A P45 UK?

In most countries, employee exit forms are a standard part of the registration process, filled for tax purposes and final settlements. The documentation required by the local labour differs in many situations from one country to another, making document management complex.  

Many companies use payment distribution platforms to automate document submission and meet deadlines. One can navigate the local documentation and check the forms are filled appropriately. 

In the UK, P45 is the reference code of the "Details of the employee leaving work" tax form and is an essential Pay As You Earn (PAYE) form. Employers issue the P45 form to the employee once their tenure is completed or at the termination of the employment contract. 

What Is P46?

P46 can be used as a replacement for a P45 when someone is entering their first role. So when you do not get a P45 upon leaving the job, a p46 can be used where the employee will be asked to fill out a new starter checklist form.

The form asks for personal details and information about previous employment, and it also helps to determine which tax code one must use before the first pay date.

What Is A P45 Form UK?

P45 means UK. One of the reasons for issuing a P45 is that each employee must get the correct tax code. As the HMRC provides, an employee's tax code helps you determine how much income tax must be deducted from the pay. A P45 form comprises parts 1, 1a, 2 and 3. 

The details in each part depend on whether you are the employer leaving or hiring a new employee. For instance, if your employee is leaving, you must fill out the form's part 1 and 1a sections. 

Part 1: You will be required to fill in part 1 and send it to the HMRC to show and put on record that an employee is no longer working with you.

Part 1a: You must give the section to the Employee who requires it for their records.

Parts 2 and 3 are for employees who can give them to the new employer or the Jobcentre. 

Part 2: This is a copy of the completed P45 form the former employee must pass on to their new employer.

Part 3: This copy helps former employees to register with the HMRC in the new job place. 

There is some information you must fill in on a typical P45 form; for instance, for Part 1 and 1a – You must fill in the Employer PAYE reference number, the Employee's National Insurance Number, Name, title and details of the company/job they are leaving, the Employee's leaving date, the employment total pay received and the tax deducted (this is left blank if the tax code is cumulative), records of student loans and the Tax code at the leaving date. 

Parts 3 and 4 are for new employer data; you need to fill in the New employer PAYE reference, date when the new employment started, Employee works or payroll number, tax code, "P" when you will not pay the new Employee up to next 5 April, personal details of the employee and the declaration of P11 deductions working sheet.

How To Get P45 Online?

When hiring, employers must ask the newly hired employee to produce Parts 2 and 3 of the P45 form, which they get from their previous employers. The form is valid only when issued within the same tax year when you hired the new Employee, and it must be issued by the latest from the previous workplaces.

So, how do I get p45 online? You can register on the Revenue website, where all your earnings and deductions details are uploaded. You can register and check your details at myAccount if you are a PAYE taxpayer or LPT taxpayer business customer with an active digital certificate from a new taxpayer.

There are many tools provided by the HMRC to generate the P45 form. Online tools automatically produce and issue P45 forms once the Employee's job tenure at the company ends.

So you do not need to worry about processing the employee termination, even when you have less than ten employees and do not have payroll software; you can use the HMRC's free PAYE tools to generate the P45 form.

What Is The Difference Between A P45 And A P60?

P60 vs P45: P45 and P60 contain the details of your pay and taxes paid to Revenue. Nowadays, these documents are available online on the Revenue's myAccount.  P60 is the form issued by the employer every year for all employees, and it includes information related to the national insurance contributions and the total earnings for the tax year.

P45 is used when the employee is leaving the company. The form contains details about the earnings and contributions to date. Before 2019, a P60 was given at the end of each year by the current employer and is often referred to as an end-of-the-year statement.

P11D is a form submitted to the HMRC that includes information related to the taxable expenses and benefits the employer provides to the employee during the tax year. 

How To Get A P45 From Previous Employer?

You may not be provided P45 in some conditions when you leave the job in unforeseen situations. However, P45 is an official document which you have a right to get when leaving the firm.

The company must provide you with the document, but if they do not send it to you or if you lose the document, then you have the right to ask for P45 to be sent to your address or the new employer's address, and they must provide it. It contains details related to tax codes, employer details, gross pay, and the amount of tax paid in the previous year.

And where can I find my p45? In 2018, the plans to get rid of the traditional P45 and P60 paper forms were announced, and in the latest revised system, you can access P45 online, where you no longer require paper documents. 

Can A P45 Be Issued Before Final Pay?

The employer must provide the P45 form to the employee with the final paycheck, and failure to provide your employee with a P45 on time could result in reporting the case to the HMRC. 

How Long Does An Employer Have To Issue A P45?

An employer is expected to issue the employee the form P45 at the date of termination; if it is not practicable, one must issue without unreasonable delays, or the employee job agreement could be left until the final payment of wages is calculated and paid.

The employer has to issue a P45 within 14 days of the Employee leaving the job. If the Employee is not provided with P45 in a reasonable period (within 1 to 2 weeks), they can contact the local HMRC to explain the situation and ask them for help.  The HMRC will immediately contact the former employer and request them to issue the P45.

What Happens If You Don't Give Your New Employer Your P45?

Without the P45 document, the employer may be unable to determine if you are assigned the correct tax code. If you are not linked to the current tax code, you may pay more or be assigned an emergency tax code.

You can reclaim the extra tax paid by contacting HMRC later, but it will require additional admin tasks, which can be avoided by using the right tax code at the start. 

Do You Need A P45 To Start A New Job?

When hiring a new employee who does not have a P45 or if it is their first job, you must ask them to fill in the HMRC's starter checklist.

When starting a new job, the employer will ask you to fill in the PPS number to record your PSRI contributions and your P45- if you do not have it, you will have to pay emergency tax. To avoid emergency tax, get a P45 and register your employment with the revenue department. 

In case you have lost the P45 form, the employer cannot legally give you a second copy, but you can get the new employer's tax registration number and call Revenue to get information related to your PPS no. and the start date. The department will send tax credit statements to your present employer so you are not put on emergency tax.