What Is the P45 Form? Meaning, Purpose, and Key Details Explained

The P45 form is a key document for UK employees when leaving a job. It records earnings and tax paid, ensuring accurate tax calculations for future employment or benefit claims. Without it, individuals may encounter tax code issues and potential overpayments.

When It Is Issued

A P45 is issued when employment ends, whether due to resignation, redundancy, dismissal, or contract completion. UK employers are legally required to provide it, typically on or before the employee’s final payday.

Employers generate the P45 after processing final payroll and confirming tax deductions through HMRC’s PAYE system. If an employer fails to issue one, the new employer may apply an emergency tax code, leading to higher deductions until the correct tax information is available.

If an employee receives post-employment payments, such as bonuses or accrued holiday pay, the employer may need to issue a revised P45 or provide a separate statement of earnings. The timing depends on when the final taxable payment is processed.

Details Found in the Form

The P45 contains sections summarizing an employee’s earnings and tax contributions, with copies provided to the employee, their new employer, and HMRC.

Personal Data

The form includes the employee’s full name, National Insurance (NI) number, and tax code. The NI number ensures tax and National Insurance contributions are correctly recorded. The tax code, issued by HMRC, determines income tax deductions.

For the 2024/25 tax year, the standard tax code is 1257L, reflecting a Personal Allowance of £12,570. Employees with taxable benefits, such as a company car, may have adjusted tax codes. Any errors in personal data should be corrected promptly to prevent tax miscalculations.

Gross Pay to Date

This section details total earnings from the employer during the tax year up to departure, including salary, bonuses, and overtime but excluding deductions like pension contributions.

For instance, if an employee earned £30,000 by October, this amount appears on the P45. This allows the new employer to apply the correct tax code and ensures the employee does not exceed their tax-free allowance prematurely. If an individual has multiple jobs in a tax year, total earnings across all employments determine tax liability.

Tax Deducted

The form specifies total income tax deducted under PAYE, helping HMRC assess whether a refund or additional payment is needed.

For example, if an employee earned £30,000 and was taxed at the standard 20% basic rate, their total tax deducted might be around £3,486, assuming no other deductions or allowances. If too much tax was withheld due to an incorrect tax code, the employee may be eligible for a refund. If too little was deducted, additional tax may be owed. The P45 ensures correct tax deductions at the new job, preventing unexpected tax bills.

Employer Responsibilities

UK employers must ensure payroll records are accurate before issuing a P45. Errors can lead to tax miscalculations, so all earnings, deductions, and adjustments must be finalized before submission. Employers must provide the P45 promptly, typically by the final payday. Delays can complicate tax matters for the departing employee.

Employers must also submit a final payroll report to HMRC, confirming the employee’s departure. This is done through a Full Payment Submission (FPS) via HMRC’s Real Time Information (RTI) system. If errors occur, corrections must be made through an additional FPS or an Earlier Year Update (EYU), depending on when the mistake is identified. Failing to report an employee’s departure correctly can result in continued tax liabilities for the employer.

Consequences of Not Having It

Without a P45, starting a new job can lead to tax complications. Employers use this form to determine an employee’s tax code, and without it, they may apply an emergency tax code, leading to higher tax deductions. While HMRC eventually corrects the issue, the process can take weeks or months, reducing take-home pay in the meantime.

The absence of this document also complicates benefit claims. Those applying for Universal Credit or Jobseeker’s Allowance may need proof of past earnings and tax contributions. Without a P45, they might have to request alternative evidence, such as payslips or a Statement of Earnings, delaying their application.

For those with multiple sources of income, failing to provide a P45 increases the risk of incorrect tax treatment. If HMRC lacks updated earnings data, secondary income might be taxed at higher rates, such as the 40% higher rate threshold starting at £50,270 for the 2024/25 tax year. This can result in unnecessary deductions, affecting cash flow and financial planning.

How to Replace or Correct It

If a P45 is lost, incorrect, or never issued, resolving the issue quickly is important to prevent tax complications. Since HMRC does not provide replacements, the only way to obtain a new copy is through the former employer. Contacting the payroll or HR department and requesting a reissued form is the first step. Employers must maintain payroll records for at least three years, so they should be able to provide a duplicate. If they refuse or no longer exist due to business closure, alternative documentation, such as a Statement of Earnings, can be requested instead.

Errors on a P45, such as incorrect earnings figures or tax deductions, must be corrected by the issuing employer. Employees should review the form carefully upon receipt and report discrepancies immediately. If the employer is uncooperative or unable to amend the document, HMRC can be contacted directly to rectify tax records. Providing recent payslips or a P60 (if available) can help HMRC verify the correct figures and ensure tax codes and deductions are adjusted. If an incorrect P45 has already been submitted to a new employer, they should be informed so payroll records can be updated accordingly.