If you have been gainfully employed in the UK, you will have probably been given a P45. But what is a P45? This article answers this question.
What is a P45?
It’s a form that your former employer has to give you when you leave a job. You then need to give it to your next employer who will use it to make sure you pay the right amount of income tax.
One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.
The form is made up of four separate sections:
- Part 1: Your former employer sends this to HM Revenue and Customs (HMRC)
- Part 1A: You keep this for your records
- Parts 2 and 3: These should be given to your next employer or to Jobcentre Plus if you are unemployed.
Why is it so important?
Your P45 will include the following details:
- Your full name, address and date of birth
- The name and address of your previous employer
- Your National Insurance (NI) number
- The date your employment ended
- Your tax code on the date your employment ended
Without a P45, you could end up paying too much income tax as a result. If this does happen, you can claim it back, but it does take time. It’s better to avoid this situation if possible.
How do I get a P45?
Your former employer should send this to you soon after your contract finishes.
If you don’t receive your P45 by the time you start your new job, don’t panic. You won’t necessarily need to give it to your new employer on your first day. However, it might be worth chasing your former employer if you are still waiting after a week or two.
What if I was on benefits?
If you are starting a new job after a period of unemployment while on benefits, you will receive a P45 from the Jobcentre Plus to give to your new employer. The type of P45 will depend on the benefits you were receiving. They are as follows:
- P45U: If you were unemployed and receiving Jobseeker’s Allowance (JSA)
- P45ESA: If you were unemployed and receiving contributory Employment and Support Allowance.
Should I get a P45 when I retire?
Yes, you should. Your last employer will send one to you on retirement. You may need to send this to your pension provider to make sure you are on the correct tax code when you start receiving your pension. Contact your pension provider for further information.
What if I don’t have one?
There are a number of different reasons why you may not have a P45.
You won’t have a P45 when you start your first job. If you misplace your P45, your employer cannot give you a replacement. Also, if you experienced a period of unemployment but you were not receiving benefits, you won’t have a P45.
If you don’t have one when you start a new job, don’t worry. Your employer will ask you for specific details so that they can fill out a Starter Checklist. They will send this information to HMRC who will amend your tax code. Further information about the Starter Checklist is available from the gov.uk website.
If you have just started a new job, it is worth checking to make sure you have been assigned the correct tax code. Mistakes do happen, even if you submit your P45. You can do this by asking your new employer or by checking your payslip.
If you need further information about what a P45 is, visit the gov.uk website.
Please note that tax treatment depends on the specific circumstances of the individual and may be subject to change in the future.