P45 form: did you know?

14 March 2023

A P45 form is issued by an employer when an employee stops working for them. However are the previous pay and tax figures on the P45 still applicable on an employee record when a tax code notice from HM Revenue and Customs (HMRC) is received?

A P45 shows how much tax has been paid on an employee’s salary so far in the tax year (6 April to 5 April). An employer may also use the information on the P45 to apply the correct tax code for an employee, before the first payday.

However, previous pay and tax figures from a P45 should not be removed when these have been received and operated, prior to an employer receiving a tax code change (P6) from HMRC. If the tax code notice has ‘0.00’ or blank figures then this is not be entered and instead the figures should remain as per the P45. Though the new tax code received from HMRC should be operated.  

What happens with a late P45 received? Employers may need to update the payroll records if an employee gives a P45 after they have been registered with HMRC. If HMRC has sent a tax code, then use this tax code if the employee gives a P45 after they have first been paid. If HMRC has not sent a code, then use the employee’s P45 to work out their tax code and update their details in the payroll software.

If the employee has more than one P45, then the P45 with the latest date should be used. In addition, if the leaving date is the same then the P45 with the highest tax free allowance (or least additional pay for a K code) should be used.

Did you know? HMRC has a tool you can use to work out an employee's tax code based on The income Tax Regulations. 

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