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Your Guide to Understanding a P45

Your Guide to Understanding a P45

March 8, 2024

What is a P45 and why is it important?

Receiving a P45 when leaving a job is crucial for accurate tax records and financial planning. It includes important details like your tax code, earnings, taxes paid, and employer information.

The tax code on your P45 calculates taxes correctly in your next job.

Additionally, your P45 is needed for filing tax returns, claiming benefits, and managing pension withdrawals. Having your P45 simplifies these tasks and ensures financial matters are handled correctly.

It’s important to keep your P45 for at least 22 months as it’s valid for the tax year it’s issued for. If you lose it, you can ask your former employer for a duplicate.

What is a P46?

A P46 form collects tax information from employees in the absence of a P45 document. W

When an employee starts a new job without a P45 from their previous employer, they fill out a P46 form. This document helps employers determine the correct tax code to apply to the employee’s pay, ensuring accurate tax deductions from their salary. The details provided on the P46 are crucial for setting up the employee’s tax records until a P45 is provided. This process maintains compliance with HMRC regulations and ensures that the employee’s tax is in order.

To provide a clearer overview, let’s break down the key information related to a P46 into a table:

P46 Form Purpose Importance
Collects tax info Helps determine tax code for employee Ensures accurate tax deductions from salary
Required from new employees without a P45 Sets up employee’s tax records Facilitates compliance with HMRC regulations

The P46 form is a standard procedure in company payrolls, allowing employers to manage their employees’ tax responsibilities effectively and avoid emergency tax codes. It also aids in calculating the correct National Insurance contributions, ensuring smooth operations within the company’s payroll system.


How long is a P45 valid for?

As HMRC recommends, a P45 is valid for the tax year it’s issued for. Retaining it is crucial because HMRC can investigate based on its information up to 20 years later. This ensures accurate tax calculations and record-keeping, making it important for future tax returns, benefit claims, and potential investigations.

Additionally, HMRC advises keeping your P45 for at least 22 months after the related tax year. This helps you stay compliant with tax rules and have records for audits or inquiries. Keeping it for this period allows easy access to past job and tax details, smoothing job changes and financial planning. Following HMRC’s recommendation is wise to protect your tax records and comply with regulations.


Starting a new job without a P45

Starting a new job without a P45 can lead to tax and financial issues. Consequently, difficulties may arise in filing taxes, claiming benefits, and getting refunds. Therefore, you need to inform your employer if you lack a P45.

Challenges of Starting a New Job Without a P45
Incorrect tax code assignment Potential overpayment of tax Delays in payroll processing
Difficulty in filing tax returns Challenges in claiming benefits Tax-related issues
Overcharging on pension withdrawals

Having a P45 simplifies transitioning to a new job by providing tax information from the previous employment. This, in turn, avoids complications from not having a P45 ensures a smoother onboarding experience.

Planning your next career move

Careful planning and thoughtful decision-making are necessary for a smooth transition. When planning your next career move, make sure to consider the following:

  • Evaluate Your Skills and Interests: Assess your current skills, strengths, and interests to align them with potential career opportunities.
  • Research Industries and Job Market Trends: Stay informed about industry trends, job market demands, and emerging sectors to make informed decisions.
  • Network Effectively: Build professional relationships, attend industry events, and utilize online platforms to expand your network and discover new opportunities.
  • Develop a Personalised Action Plan: Create a detailed action plan outlining short-term and long-term career goals, steps to achieve them, and deadlines for monitoring progress.

Additionally, when transitioning between jobs, ensure you have your P45 document containing vital tax details and employer information. It is crucial for accurate tax code allocation, preventing financial discrepancies, and facilitating tax-related processes.

When joining new employers, provide necessary documents such as bank details, valid identification, proof of address, and National Insurance number promptly.

Remember, if you misplace your P45, request a new one as it is your right to receive this document upon leaving a company.



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