P45 Guide

What is a P45?

All employees must be given a P45 when they stop working at a place of employment. It is a certificate which provides details of their tax code, gross pay and the amount of tax that they paid that year. This will then be passed on to their next employer or a benefit agency. Employers can either use their own payroll software to create a P45, or order the form from HMRC if your software cannot create them.

Why is a P45 necessary?

In order for a new employer to tax an employee correctly, they must have an accurate tax code. Without a P45, you may be ’emergency taxed’ at the highest rate until HMRC can find your correct tax code.

Starting new employment

Once you have received your P45 form, the appropriate page should be passed to your new employer. Occasionally, the issue of a P45 from your former employer can be delayed, which means that the new employer will have to use an emergency tax code. People who are returning to work after being on benefits may receive a P45 from the Job Centre. The tax code needs to be checked on this type of P45, in particular if it is a Month 1 or Week 1 code, as these are temporary codes which could mean that you pay too much tax.

If you do not have a P45, because you were on a career break or previously self employed, your employer can complete a starter checklist to see which type of tax code is best to use.

As an employer

You must give your employee a P45 when they stop working for you. If you have to pay an employee after they leave, use tax code 0T on a week 1 or month 1 basis.

If you have any questions about the P45, for example if you think you may be paying too much tax, call HMRC for assistance.