P45 (UK)
A UK tax form given by employers to employees when they leave a job, showing their pay, tax deducted, and tax code for the employment, used by the next employer to set up PAYE correctly.
What Is a P45?
Key Takeaways
- ✓A P45 is a four-part tax form that UK employers must give to employees when they leave employment, showing the employee's tax code, total pay, and total tax deducted in the current tax year.
- ✓Part 1 is sent to HMRC (automatically via RTI since 2013), Part 1A is for the employee's records, and Parts 2 and 3 go to the new employer.
- ✓The new employer uses the P45 to set up PAYE correctly, applying the right tax code and continuing the cumulative tax calculation without a break.
- ✓Without a P45, the new employer must use a starter declaration, which often results in emergency tax being applied until HMRC issues the correct tax code.
- ✓Employers face penalties of up to GBP 3,000 per employee for failing to provide a P45 or providing one with inaccurate information.
A P45 is the document that connects one employment to the next for tax purposes. When you leave a job in the UK, your employer must give you a P45. It's essentially a summary of what you've earned and what tax you've paid during that employment in the current tax year. The form has existed since 1944, when PAYE was introduced. Before RTI went live in 2013, the paper P45 was the only way to transfer tax information between employers. Now, HMRC receives the data electronically through the leaver's final FPS submission, but the employee still gets the physical (or digital) P45 to hand to their next employer. The P45 matters because UK income tax works cumulatively. Your tax-free allowance is spread across the year. If you change jobs mid-year, the new employer needs to know how much allowance you've already used and how much tax you've already paid. Without that information, they can't calculate the right deduction and you'll likely overpay tax until HMRC sorts it out. The phrase "getting your P45" has become British slang for being fired or leaving a job. It appears in political commentary, sports coverage, and everyday conversation. But the actual form is a straightforward tax document with a practical purpose.
The Four Parts of a P45
Each part of the P45 serves a different recipient and purpose.
Part 1: HMRC
Part 1 goes to HMRC and notifies them that the employment has ended. Since RTI, this information is sent electronically through the final FPS with the leaving date marked. The paper Part 1 is no longer posted to HMRC. However, the employer's payroll system must still generate it as part of the P45 process. HMRC uses this data to update the employee's tax record and, if needed, issue a new tax code to the next employer.
Part 1A: Employee's personal copy
Part 1A is the employee's own record. It shows the same information as the other parts: employer name and PAYE reference, employee's name and National Insurance number, leaving date, tax code at leaving, total pay in the tax year, and total tax deducted. Employees should keep Part 1A for their records and for completing any Self Assessment tax return. If the employee doesn't start a new job (e.g., they retire or become self-employed), they may need Part 1A to claim a tax refund.
Parts 2 and 3: New employer
The employee gives Parts 2 and 3 to their next employer. The new employer enters the information into their payroll system to continue the PAYE calculation on a cumulative basis. Part 2 is kept by the new employer. Part 3 was historically sent to the new employer's tax office, but under RTI, this information is reported electronically. The new employer must not accept a P45 with an issue date more than the current tax year. A P45 from a previous tax year can't be used; the employee must complete a starter declaration instead.
Information Shown on a P45
Every P45 contains the same standard fields. Understanding each field helps prevent payroll errors when processing a new starter.
| Field | Description | Example |
|---|---|---|
| Employer PAYE reference | The leaving employer's HMRC reference number | 123/A456 |
| Employee's National Insurance number | Unique NI number for the employee | QQ 12 34 56 C |
| Leaving date | The employee's last day of employment | 15 March 2025 |
| Tax code at leaving date | The tax code in use when the employee left | 1257L |
| Week 1/Month 1 indicator | Whether cumulative or non-cumulative basis applied | Blank (cumulative) or X (non-cumulative) |
| Total pay in this employment | Gross taxable pay from April 6 to leaving date | GBP 28,450.00 |
| Total tax in this employment | Income tax deducted from April 6 to leaving date | GBP 3,176.00 |
| Student loan deduction indicator | Whether student loan deductions were being made | Plan 2 |
Employer Obligations When Issuing a P45
Employers must follow a specific process when an employee leaves to ensure P45 compliance.
- Process the employee's final pay, including any outstanding salary, holiday pay, and contractual entitlements. Deduct the correct tax and NI on the final payment.
- Generate the P45 through your payroll software after the final pay run. Don't issue a P45 before the last payment is processed, as the figures must include all earnings up to the leaving date.
- Report the employee's leaving date on the FPS for the pay period in which they leave. This automatically sends the P45 Part 1 data to HMRC.
- Give Parts 1A, 2, and 3 to the employee on or very soon after their last day. There's no statutory number of days specified, but "without unreasonable delay" is the legal standard. Best practice is to provide it with the final payslip.
- If you make a payment after the P45 has been issued (e.g., a bonus or commission earned before leaving), you must deduct tax at the basic rate (20%) and report it on a separate FPS. Do not reissue the P45.
- Keep records of all P45s issued for at least 3 years after the end of the tax year to which they relate.
How to Process a P45 as the New Employer
When a new employee hands you their P45, the information it contains determines how you set up their PAYE.
Using the P45 information
Enter the tax code, total previous pay, and total previous tax from the P45 into your payroll system. The software uses this to continue the cumulative tax calculation. If the P45 shows tax code 1257L with GBP 15,000 of previous pay and GBP 486 of tax paid, your payroll system picks up from that point. The employee's personal allowance allocation continues seamlessly, and their first payslip with you should show the correct tax deduction.
When the P45 has a Week 1/Month 1 indicator
If the P45 shows a W1 or M1 marker, the previous employer was operating PAYE on a non-cumulative basis. This usually means HMRC was reviewing the employee's tax code. Enter the tax code with the W1/M1 indicator. Your payroll will calculate tax on each pay period independently, ignoring the cumulative totals. HMRC will typically send a corrected cumulative tax code within a few weeks.
What if the employee doesn't have a P45?
If the new starter can't provide a P45 (lost it, first job, returning to the UK), they must complete a starter declaration. The declaration has three statements: A (first job since April 6), B (only job now, not receiving a pension), C (has another job or pension). Statement A or B triggers tax code 1257L on a cumulative basis. Statement C triggers BR (basic rate, no allowance). HMRC usually sends the correct code within 4 to 6 weeks. Until then, the employee may be overtaxed. Any overpayment is corrected once the right code arrives.
Common P45 Issues and How to Resolve Them
P45 problems cause more payroll queries than almost any other PAYE issue. Here are the situations payroll teams encounter most often.
Employee lost their P45
Employers can't issue a duplicate P45. If the employee lost it, the new employer must use a starter declaration instead. HMRC will reconcile the records and send the correct tax code. The employee may be on emergency tax temporarily, but any overpayment will be refunded through subsequent payslips once HMRC provides the right code.
P45 from a previous tax year
A P45 from a previous tax year (before the last April 6) can't be used by a new employer. The cumulative figures relate to a different tax year. The new employer should treat the employee as a new starter without a P45 and use a starter declaration. The employee keeps the old P45 for their records and any Self Assessment filing.
P45 arrives after payroll has been processed
If you've already run the new employee's first payroll using a starter declaration and then the P45 arrives, update the payroll with the P45 information. The next pay run should use the P45's tax code and previous pay/tax figures. The cumulative calculation will automatically adjust for any over or underdeduction in the first pay period.
Multiple P45s from different employments
An employee can only provide one P45 to a new employer. If they left two jobs before starting with you, they should provide the P45 from their most recent or highest-paid employment. The other P45 is kept for their records. HMRC consolidates the tax information from both previous employments and adjusts the tax code accordingly.
P45 in the RTI Era
Before RTI (pre-2013), the paper P45 was the only mechanism for transferring tax information between employers. The employer physically posted Part 1 to HMRC and gave the rest to the employee. Delays, lost forms, and manual data entry errors were common. Under RTI, the leaver information goes to HMRC electronically through the FPS. HMRC updates the employee's tax record in near real time. When the employee starts a new job, the new employer can sometimes receive the correct tax code from HMRC before the employee even hands over their paper P45. Despite this, HMRC hasn't eliminated the P45 form. Employees still receive Parts 1A, 2, and 3. New employers still process them. The form provides a backup and gives employees visibility into their tax data. HMRC has discussed moving to a fully digital system where the P45 becomes redundant, but no firm timeline has been set. For now, employers must continue issuing and processing P45s alongside RTI reporting.
Penalties for P45 Non-Compliance
HMRC can penalize employers who fail to comply with P45 requirements, though enforcement is usually proportionate to the severity of the failure.
Failure to issue a P45
Not providing a P45 to a leaving employee is a breach of PAYE regulations. HMRC can impose penalties of up to GBP 3,000 per occurrence. In practice, penalties are usually lower for first-time or accidental failures. Repeated or deliberate non-provision attracts the higher end of the penalty range. Employees can also raise a complaint with HMRC, which triggers an investigation into the employer's PAYE practices.
Inaccurate P45 information
Providing a P45 with incorrect pay or tax figures is an inaccuracy in a PAYE return. If HMRC determines the inaccuracy was careless, penalties range from 0% to 30% of the potential lost revenue. Deliberate inaccuracies can attract penalties of 20% to 70%, and deliberate with concealment can reach 30% to 100%. These are the same penalty scales used for all PAYE inaccuracies under the Finance Act 2007.
Frequently Asked Questions
How long does an employer have to issue a P45?
Can I request a duplicate P45 from my old employer?
Do I need a P45 if I'm starting a new job in a new tax year?
What's the difference between a P45 and a P60?
Does a P45 show National Insurance contributions?
Written by Adithyan RK