A P45 is a specific form that employers are required to issue to employees when they leave employment, no matter whether that was due to getting another job, retiring, or ceasing employment for another reason.
It is also used to inform HMRC and make sure the correct deductions are made, and both tax and National Insurance is paid for the current tax year. With details of salary and taxes paid so far in the current tax year, it 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, it still must be issued without unreasonable day, so 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?
As mentioned above, as it is used to make sure the current tax year is balanced, 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?
An emergency tax code will be generated without a P45. Although this initially means a different amount of tax will be paid, later adjustments will be made 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.
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 firmly, either in a letter or an email which details that it is a legal obligation. Issue a reasonable deadline to receive, 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 are employment law experts and are here to help. If you need to speak to someone due to issues with an ex-employer or you feel like you are being discriminated against, don’t hesitate to get in touch
