A P45 is a tax document provided by an employer when an employee leaves employment. It confirms important PAYE information, including:
- Your leaving date
- Your earnings during the current tax year
- The amount of income tax paid during the tax year
- Your tax code
An employer has to provide a P45 regardless of whether the reason was due to getting another job, retiring, or ceasing employment.
A P45 is generated through the employer’s payroll system when employment ends. Employees normally receive copies for their own records and to provide to another organisation if needed.
It is used to inform HMRC and make sure the correct deductions are made for both tax and National Insurance in the current tax year.
The details of salary and taxes paid so far in the current tax year ensures future employers pay the correct amount for the year’s balance.
Are Employers Legally Obliged to Provide a P45?
Yes, it is required by law for employers to provide a P45. If not, there is risk of investigation by HMRC and severe penalties that can be issued.
It should be an automatic process that is initiated as soon as employees have resigned, been made redundant, being terminated or retiring.
When Should Employers Issue a P45?
The Income Tax (Pay as You Earn) Act 2003 states that an employer must provide a P45 on the employees last day of employment or without “unreasonable delay”.
There is no specific timeframe, but it is understood that employers are expected to provide it on the employee’s last day of employment.
If this isn’t possible due to annual leave or sick leave, other ways of delivery should be looked into such as via email instead of a paper copy.
They can be generated via the employer’s payroll software or forms can be obtained from HMRC directly.
How Long is a P45 Valid For?
A P45 is used to make sure the current tax year is balanced and it is only valid for the current tax year (6th April – 5th April each year).
Unemployment during the current tax year means a P45 won’t be produced and new employers will submit other documentation to HMRC in order to calculate a tax code.
What Happens If You Don’t Give a P45 to a New Employer?
You can start a new job, but an emergency tax code will be generated without a P45.
This initially means a different amount of tax will be paid and adjusted later on by the employer contacting HMRC.
This may include submitting information to HMRC directly which could lead to a tax rebate being paid to the employee in the future.
Alternatively, your new employer will use alternative information from you, usually through a starter checklist.
This allows your employer to collect the information needed for payroll purposes and apply the appropriate tax code.
What Happens If an Employer Won’t Give a P45?
A P45 is a legal entitlement so, if an employer refuses to issue one, there may be legal consequences. There are some steps to take in order to remedy this:
Firmly Request It From the Employer
Reach out directly to the employer and request it in writing, in a letter or an email, which details that it is a legal obligation.
Issue a reasonable deadline to receive the P45, such as 7 days, and notify them that the next step is to contact HMRC directly.
Contact HMRC Directly
If the employer does not meet the deadline, contacting HMRC is the next step. By reporting the employer, HMRC will then get in touch with them.
If this doesn’t make any progress, HMRC can launch an Employer Compliance Investigation which assesses PAYE and National Insurance Requirements.
Not issuing a P45 means an employer has failed to follow a fair – and legal – procedure.
At Premier Legal, we provide employment law advice for employees dealing with workplace disputes and issues involving former employers.
If you need advice about a P45 issue, unpaid wages, discriminated against, or another employment concern, don’t hesitate to get in touch
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Author
sarahrobinson@premier-legal.co.uk
Sarah Robinson is the Managing Partner and has specialised exclusively in employment law since qualifying as a solicitor in 1996.
Sarah has considerable experience of representing clients in many different industry sectors including insurance and financial services, corporate finance, technology, legal services, automotive, hotel and catering and media as well as the public sector.
Areas of particular interest include restrictive covenants, TUPE and advising in relation to discrimination.