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April 22, 2023
Starting a new job will mean plenty of paperwork to deal with. It’s important to get this all right at the start, as failing to get your new employer the right information could lead to you paying more tax than you need to.
The P45 is probably the best-known tax document, but not everyone knows what this is for. In this quick guide, we’ll explain what the P45 tax document is used for, why you need it, and what to do with it.
When you stop working for an employer, they will give you a P45 tax document as a summary of the tax year. This important document should be handed to your new employer so they have all of the relevant information they need to continue your tax contributions at the correct rate. Your P45 document will include:
This document is different from a P60, which is an end-of-year tax document that is issued once the tax year is complete. A P45 is issued when you stop working for an employer at any point in the tax year.
It is your employer’s responsibility to issue your P45 and you shouldn’t need to chase them for it. However, on some occasions, you may need to ask them to send it directly to your home address or to your new employer.
The most important feature on your P45 is your tax code. It’s important that your new employer gets your tax code in good time, as this will ensure they can get you set up in their payroll system with the correct details.
Without the right tax code, your employer will have to use an emergency tax code, which could mean you are taxed at a higher rate than you should be. This money can be reclaimed by HMRC, but it’s far better to ensure that you pay the right amount of tax from the start.
A P45 is only valid for the year that it is issued. But that doesn’t mean you should throw it away once the year is done. It’s a good idea to hang on to any tax documentation, as you could be investigated for up to 20 years after the point.
Your P45 also has some function outside of starting a new job. It can help you to claim benefits and tax refunds if you are unemployed. It can also help you to make sure you aren’t charged too much in tax when withdrawing from your pension.
While you might be excited to get started in your new role, there are a few simple tasks you need to focus on to ensure your new start goes smoothly. On your first day in a new job, your employer might ask for:
Your old employer should issue this document automatically on your final day of work, or they might post it to your address. Check with your employer that they have an up-to-date address before they send it so that it doesn’t get lost in the mail.
If your employer hasn’t provided one before your new job start date, you can request one. The P45 is a legal document that you are entitled to when you leave a role, so your employer cannot withhold this, even if they terminated your employment.
If you lose your P45, you should also be able to request a new one. It would typically be sent to your postal address, but you can also provide the details of your new employer and ask for it to be sent directly to them.
If you are unable to secure your P45 before you start your new role, there is a chance you will pay too much tax in your first pay cheque. You will then have to wait until the end of the year to receive a refund from HMRC.
After your first pay cheque, your employer should be able to update your tax code with the information from your P45. This will ensure you pay the correct amount of tax moving forward.
This is a document commonly used for new starters who do not have a P45 from their previous role. This could include those who are just starting their careers, and those who couldn’t secure a P45 from their previous employer for whatever reason.
In this case, your new employer should ask you for some basic details that will enable them to issue your P46.
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