Leaving a Job or Starting a New One? Make Sure You Understand the P45 Form
When you leave a job you will be given a P45 form which shows how much you have earned and how much tax and national insurance you have paid.
It’s your former employer’s job to send you a P45 when you leave. You will then have a copy to keep for your records, one to give to your new employer, and a copy will be sent to HMRC.
A P45 is important as it gives your new employer the details it needs to tax you correctly.
Most workers are paid via the Pay As You Earn (PAYE) tax scheme whereby their tax and national insurance contributions are automatically taken from their wages before they receive them.
It’s important that you are paying the right amount of tax and the P45 is one way to make sure you’re not under or overpaying.
Here we explain everything you need to know about the P45 form.
What is a P45 form?
A P45 form is a document which is sent to you by an employer when you leave a job. It shows how much you have earned plus any tax or national insurance you have paid.
There are four parts to a P45 form and each part goes to a different place.
- Part 1: This is sent to HM Revenue & Customs (HMRC) by your employer
- Part 1A: You keep this for your records
- Part 2 and 3: These parts go to your new employer
What’s the difference between a P45 and a P60 form?
These are probably the most common tax forms but they do different jobs. A P45 is only sent when you leave a job while the P60 is sent every year. The P60 is automatically created by HMRC and then given to workers via an employer or to retirees via their pension provider.
» MORE: What is a P60?
Why is a P45 important and why do you need one?
It’s important to keep your P45 in a safe place because it shows your new employer how much you have earned and how much tax you have paid. Crucially it includes your tax code and it will tell your new employer how much to tax you.
You may also need a P45 if you fill out a self assessment tax return, if you are claiming benefits, or to give to your pension provider.
How to get a P45
Your former employer needs to send you a P45 when you leave the job. If it doesn’t, your new employer will need to calculate how much tax to pay you.
There can be a delay when this happens and it can mean you start your new job paying too much tax, which you will need to claim back at a later date.
How long it takes to get a P45
When you leave a job it’s the law for your employer to give you a P45. This will happen if you get a new job, if you’re sacked, or you retire.
If you haven’t received it contact your old employer to request it. If you aren’t moving onto a new job you will need to give your P45 to the Jobcentre.
What is included in a P45?
A P45 is a very standard document and each one you receive will include the following details:
- The date your employment started and ended
- Your tax code
- Details of student loan repayments if applicable
- The total amount you’ve earned while you were employed
- The total amount of tax you paid while you were employed
What if you don’t have a P45?
If you don’t have a P45 you can’t get a new one. However, your employer can use a ‘starter checklist’ to help calculate your tax code.
Where to go for help with tax
There are lots of helpful guides on the HMRC website and you can also call it directly if you need help. Charities such as Citizens Advice can offer free advice on all financial matters while if you contact an accountant it can also help, although you’ll have to pay for the service.
Image source: Getty Images
Rebecca Goodman is a freelance journalist who has spent the past 10 years working across personal finance publications. Regularly writing for The Guardian, The Sun, The Telegraph, and The Independent. Read more