Our guide to everything you need to know about P45s

Taxes can often be confusing with lots of complicated jargon to understand and mountains of paperwork to wade through. A P45 might sound familiar, but you may be uncertain about what it is, how to use it and if you really need it. Here, we discuss everything you need to know about P45s, from how to get one and what to do if you lose it.

What is a P45?

A P45 is a form which shows how much you have earned and how much tax you have paid on a salary to date in a tax year (which runs from the 6 April to 5 April).

When do I need a P45?

Our guide to everything you need to know about P45s

If you are leaving employment, whether due to resignation or termination, you will need a P45 form.  This is something you will be expected to present to your next employer or to Job Centre Plus if you are unemployed.

You will also need a P45 form when you retire to prevent you from being overtaxed when withdrawing money from your pension.

What does a P45 form look like?

The form is made up of four parts: part 1, part 1A, part 2 and part 3. However, your new employer will not need all sections. You should:

  • Send part one to HMRC
  • Keep part 1A in a safe place
  • Send parts 2 and 3 to your new employer, or to Job Centre Plus if you are unemployed

How do I get a P45?

Your employer should provide you with a P45 form when you leave their employment. It is a legal requirement for them to do so. If you have not received this form, then ask your employer for one.  

As an employer, you should use your payroll software to produce a P45 for your employees. If you are uncertain whether your payroll software can produce this form, you can contact the company who provide your software or check their website. Alternatively, speak to your bookkeeper or payroll provider for advice. Our highly qualified and certified team are Silver Xero Champions and can assist you with in-depth training for a wide range of bookkeeping software.

If your software is unable to produce a P45, then you can use HMRC’s Basic PAYE Tools.

Do I really need a P45?

Yes. A P45 is an important document for making sure you are taxed correctly. Without it you could be taxed too much or be put on an emergency tax code meaning you will have to contact HMRC to correct this.  To understand more about tax codes, take a look at our previous blog Our guide to tax codes.

What happens if I have lost my P45?

You cannot replace a P45 form. Instead, your employer will need to work out how much tax you should be paying, before your first pay day, and may require you to complete a ‘Starter Checklist’. Your employer might also obtain important information for calculating taxes, such as if you have another job or have an outstanding student loan.

How long do I need to keep my P45?

A P45 form is valid for the tax year it has been provided for but should be kept for 22 months after the relevant tax year has passed. This is the same for all documents relating to income tax. However, it is advisable to keep your P45 form indefinitely as HMRC can conduct retrospective tax investigations up to 20 years later.

What else do I need to show a new employer?

You might also be expected to show a new employer a valid form of ID, such as a passport or driving licence, proof of address, such as a bank statement or utility bill, and your National Insurance number.

Need more information? Get in touch!

If you want to find out more about P45 forms or other important tax documents, don’t hesitate to get in touch with our expert bookkeepers or payroll team. Please give us a call on 01892 559480 or contact our friendly team via our online enquiry form.

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