What Is a P45?
A P45 is a PAYE document that an employer provides when an employee stops working for them.
According to GOV.UK, the P45 shows information including:
- The employee's leaving date
- Total pay from 6 April to the date they leave
- Total Income Tax deducted during that period
- The employee's tax code
- Personal details such as their National Insurance number
The employer must provide a P45 when the employee leaves. The information is important because the employee's next employer can use the P45 when setting them up on their new payroll. This helps the new employer determine the appropriate tax code and take account of earnings and tax already recorded during the tax year.
When Must an Employer Issue a P45?
An employer must give an employee a P45 when they stop working for the business. Employers will normally produce the P45 through their payroll software after processing the employee's final payroll information. The employer should also report the employee's leaving date and relevant payroll information to HMRC through a Full Payment Submission, commonly known as an FPS.
HMRC's employer guidance states that when an employee leaves, the employer should:
- Process the employee's final payment
- Record the correct leaving date
- Include the leaver information on the FPS
- Send the payroll information to HMRC
- Produce the P45 for the employee
These steps should form part of the standard employee leaving process.
What Information Is Included on a P45?
A P45 provides a summary of relevant PAYE information at the point an employee leaves.
It will normally include information such as:
- Employee name
- National Insurance number
- Payroll details
- Leaving date
- Tax code
- Total taxable pay
- Total Income Tax deducted
The information allows the employee and their next employer to understand their tax position during the current tax year. For example, if an employee leaves one employer in September and starts another job in October, their P45 provides their new employer with information about earnings and tax already recorded since 6 April. This can help reduce the risk of the wrong amount of Income Tax being deducted.
What Should Employers Do With Final Pay?
Before producing the P45, employers should calculate the employee's final pay correctly.
Depending on the circumstances, final pay may include:
- Normal salary or wages
- Outstanding overtime
- Commission
- Bonuses
- Holiday pay
- Other contractual payments
- Relevant deductions
The employer should apply PAYE and National Insurance where required and include the correct information in the payroll records. Where a taxable payment is made on or before the employee leaves, HMRC says the employer should include it in gross pay, operate PAYE normally, report it on the FPS and complete the P45.
Employers should therefore try to identify outstanding payments before completing the employee's final payroll whenever possible.
What Happens If You Pay an Employee After Issuing Their P45?
Sometimes an employer discovers that an additional payment is due after the employee has already left and received their P45.
Examples might include:
- Unexpected bonus payments
- Outstanding holiday pay
- Additional commission
- Certain redundancy-related payments
There are special payroll rules for payments made after an employee leaves. HMRC states that employers should generally use tax code 0T on a week 1 or month 1 basis for a payment after leaving. Scottish taxpayers use S0T and Welsh taxpayers use C0T where appropriate.
The payment must also be reported through the FPS using the original leaving date and the appropriate payment-after-leaving indicator. Importantly, the employer should not issue another P45. Instead, HMRC requires the employer to give the former employee written confirmation showing relevant information about the additional payment and deductions. This is why employers should be careful about simply producing a second P45 whenever an additional payment is discovered.
How to Get a P45
The keyword how to get P45 is commonly searched by employees who have recently left a job. The normal process is straightforward. The former employer should provide the P45 after the employee leaves. Employees can then use it when starting their next job. If a previous employer has not provided a P45, the employee should contact them and request it. However, if the employee loses their P45, HMRC states that they cannot obtain a replacement P45. Instead, they can complete a starter checklist when joining a new employer. They can also access historical pay and tax information through their Personal Tax Account or the HMRC app. Employers taking on a worker without a P45 should therefore follow HMRC's starter procedures rather than delaying payroll.
What Should a New Employer Do With a P45?
When a new employee joins the business, the employer will normally ask for their P45 from their previous employment. The new employer can use the information to establish the employee's PAYE record and determine the appropriate tax code.
HMRC confirms that an employer normally uses a new employee's P45 to work out their tax code. If the employee does not have a P45, the employer may need the employee to complete an HMRC starter checklist.
This can happen where the employee:
- Has lost their P45
- Has not received one
- Is starting their first job
- Has another job
- Was previously self-employed
- Cannot provide appropriate previous employment information
Employers should not simply guess an employee's tax code.
P45 vs P60: What Is the Difference?
P45 vs P60 is another common area of confusion. Although both documents contain PAYE information, they serve different purposes.
P45
A P45 is normally issued when an employee leaves their job. It records pay and tax information up to the point at which the employment ends.
P60
A P60 is an annual document given to an employee who is still working for the employer at the end of the tax year. The UK tax year runs from 6 April to 5 April. Employers must provide eligible employees with a P60 by 31 May following the end of the tax year.
Put simply:
- P45 = employee leaves
- P60 = employee remains employed at the tax year end
An employee can receive different P45s when leaving jobs during the year, while a P60 summarises pay and tax for employment held at the end of the tax year.
What If an Employer Forgets to Report the Employee as Leaving?
Mistakes can happen when payroll records are updated. If an employer fails to report an employee leaving in the correct payroll period, HMRC provides a process for correcting the information.
Where the employee left during the current tax year, the employer may need to include them in the next FPS with:
- Their correct leaving date
- Zero pay and tax for the current period
- Previously reported year-to-date figures
- The appropriate payment date and late-reporting information
The exact correction can depend on the circumstances and payroll software used. Employers should correct errors promptly to reduce the risk of inaccurate PAYE records.
Common P45 Mistakes Employers Should Avoid
Processing a leaver incorrectly can create payroll problems for both the employer and former employee.
Common mistakes include:
- Failing to issue the P45
- Recording the wrong leaving date
- Producing the P45 before final pay has been calculated
- Forgetting outstanding holiday pay
- Failing to report the leaving date through the FPS
- Issuing a second P45 after a payment after leaving
- Using the wrong tax treatment for post-leaving payments
- Leaving former employees active on payroll unnecessarily
A clear payroll checklist can help reduce these errors.
Employee Leaving Payroll Checklist
When an employee leaves, employers should generally review the following steps:
- Confirm the employee's final working date
- Calculate final salary or wages
- Calculate outstanding holiday pay
- Add any bonuses, commission or overtime due
- Apply relevant PAYE deductions
- Process the employee's final payroll
- Record the correct leaving date
- Submit the correct information through the FPS
- Produce the P45
- Give the P45 to the employee
- Update internal payroll and HR records
- Deal correctly with any later payment
Businesses using outsourced payroll should provide the payroll provider with the employee's leaving information promptly.
Why Correct P45 Processing Matters
A P45 is more than an administrative document. Incorrect information can potentially affect the former employee's tax deductions when they start another job.
For employers, accurate leaver processing also helps ensure that PAYE records match information reported to HMRC. A reliable payroll process should therefore cover both employees joining and leaving a business. Employers should maintain accurate records throughout employment rather than attempting to correct incomplete information only when someone leaves.
Final Thoughts
A P45 is an essential part of the UK payroll process when an employee leaves a business. Employers must provide employees with a P45 when they stop working for them and report the relevant leaving information to HMRC through payroll. The document records important information such as the employee's leaving date, taxable pay, Income Tax and tax code.
Employers should also ensure that final salary, holiday pay, bonuses and other outstanding payments are correctly processed before completing the leaver payroll. Understanding what is a P45, how it differs from a P60 and how post-leaving payments should be handled can help employers maintain accurate payroll records and reduce PAYE errors.
For businesses managing several employees, professional payroll support can help ensure starters, leavers, P45 forms, PAYE submissions and regular payroll responsibilities are handled accurately and on time.