A P45 is an official HM Revenue and Customs (HMRC) form provided to employees in the United Kingdom when they cease employment with an organization. This document serves as a comprehensive record of the employee's earnings and the income tax deducted during their tenure with that employer. The P45 contains critical information including the employee's tax code, total pay to date for the tax year, and total tax paid.
The form is divided into four parts: Part 1 is sent directly to HMRC by the employer, while Parts 1A, 2, and 3 are given to the employee. For example, when Sarah leaves her marketing role in June, her employer issues a P45 showing she earned £18,000 and paid £2,400 in tax since April. She provides Part 2 and 3 to her new employer to ensure correct tax deduction, while keeping Part 1A for her records. This prevents emergency tax rates from being applied at her next job.
The P45 is essential for maintaining accurate tax records and ensuring employees pay the correct amount of tax when transitioning between jobs. Without providing a P45 to a new employer, individuals are typically placed on an emergency tax code, which often results in overpayment of tax that must later be reclaimed through HMRC. The document also serves as proof of employment history and income, which is valuable when applying for mortgages, loans, or claiming benefits. For employers, issuing P45s correctly and promptly is a legal obligation that helps maintain compliance with UK tax regulations and supports smooth workforce transitions.
- Issue promptly upon termination: Employers must provide the P45 to the departing employee on or before their last working day, ensuring all earnings and tax deductions are accurately calculated up to the final payment date.
- Complete all sections accurately: Fill in the employee's full name, National Insurance number, tax code, leaving date, total pay, and total tax deducted for the current tax year. Verify all figures against payroll records before issuing.
- Distribute parts correctly: Send Part 1 to HMRC electronically through your payroll software, give Parts 1A, 2, and 3 to the employee, and retain copies for your records as required by law.
- Provide guidance to employees: Explain that they should give Parts 2 and 3 to their new employer and keep Part 1A safe for their personal tax records or for claiming benefits if needed.
Key Statistics & Benchmarks
- Four-part structure — Part 1 to HMRC, Parts 1A/2/3 to employee for different purposes.
- Legal requirement in UK — Employers must issue P45s on or before employee's final day.
- Emergency tax code applied — Without P45, new employers use temporary code causing potential overpayment.
- Valid for entire tax year — Shows cumulative earnings and tax from April 6th to leaving date.
Common Mistakes to Avoid
- Delaying issuance: Issue the P45 immediately upon termination to prevent tax complications for the departing employee at their next role.
- Incorrect tax calculations: Double-check all figures against payroll records before issuing to avoid HMRC penalties and employee tax issues.
- Not keeping copies: Retain digital or physical copies of all P45s issued for at least three years to meet legal record-keeping requirements.
Frequently Asked Questions
What should I do if I lose my P45?
If you lose your P45, contact your previous employer immediately to request a replacement copy. If they cannot provide one or you've left on poor terms, inform your new employer who can use an HMRC Starter Checklist instead. You can also contact HMRC directly with your National Insurance number to obtain your tax information. While not ideal, these alternatives prevent you from being placed on an emergency tax code unnecessarily.
How do I read the information on my P45?
Your P45 displays your full name, National Insurance number, and leaving date at the top. The key figures include your tax code (showing your tax-free allowance), total pay in the current tax year up to your leaving date, and total tax deducted. It also shows your employer's PAYE reference. Parts 1A, 2, and 3 contain identical information but serve different purposes—1A for your records, 2 and 3 for your new employer.
Do I need a P45 if I'm starting my first job?
No, you won't have a P45 for your first job since you haven't been employed before. Instead, your new employer will ask you to complete an HMRC Starter Checklist (formerly called a P46) which collects your personal details and National Insurance number. This allows your employer to set up your payroll correctly and assign the appropriate tax code. The same process applies if you're returning to work after a break and no longer have your previous P45.
Can I have multiple P45s in one tax year?
Yes, you can receive multiple P45s in a single tax year if you change jobs more than once between April 6th and April 5th. Each P45 will show cumulative earnings and tax from the start of the tax year up to each leaving date. When starting a new role, always provide your most recent P45 to ensure your new employer has the correct year-to-date figures. This prevents tax code errors and ensures accurate deductions throughout the year.