IF you’ve ever left a job they have probably given you a P45 along with a leaving card.
This document is one of the most important forms to keep safe when changing careers.
1
What is a P45?
A P45 is a document with the details of how much taxable salary you have been paid in the current tax year.
It reveals how much you paid in tax and what tax code you had when you leave a job.
There are three sections to the form:
- Part 1 (for your old employer)
- Part 1A (for you)
- Parts 2 and 3 (for your new employer)
When do you need a P45?
There are two main times you need a P45 – when you leave a job and when you start a new one.
You should give parts two and three of your document to your new employer when you begin working for them.
This will probably be requested by them along with other new starter forms and procedures.
If you do not have a P45 you may have to fill out a new tax form or be taxed on an emergency code.
How do you get a P45?
Your employer should send you a P45 when you leave your job without needing prompting.
If you retire or your employment is terminated they must still provide you with a P45.
If they have not sent you your P45 or you have lost your original copy you can contact your previous employer and request another.
Why do you need a P45?
A P45 tells your new employer and most importantly HMRC what tax code you should be given.
This ensures you are not taxed too much on an emergency tax code.
If this happens you might have to wait until the end of the tax year to be given your reimbursement.
The tax year runs from April to April the following year, for example this tax year started on April 6, 2021.
If you start your new work early in the tax year, you could be waiting a long 11months for your hard earned money back.
A P5 is also important for when you access your pension and if you need to claim benefits.
How long is a P45 valid for?
Your P45 will only be valid for the rest of the tax year in which it was provided.
It is sensible to keep it on record for at least another two years after this though for tax purposes.
Many people file their P45s away for years as HMRC has the right to investigate tax for up to 20 years.
If you can keep all P45 documents you receive safely it could save you tax tax problems in the future.
What’s the difference between a P45 and a P60?
While a P45 helps you when you move jobs, a P60 is a summary of the tax you have paid in that year.
At the end of the tax year, you will be sent a P60 document as proof of tax paid.
It will include your Pay As You Earn (PAYE) income tax and National Insurance contributions.
Once the tax year finishes in April it will take about a month for your P60 to arrive – normally May 31, at the latest.
What else do I need to do when changing jobs?
Changing jobs can be stressful, especially if you are unsure of what you need to provide to your new employer.
You will need to show or tell them:
- Your bank details
- Proof of address
- Your National Insurance number
- A valid form of ID
Most companies have a new starter form that you will need to fill out before your first payday.
