What is a P45?

P45 (definition)

A P45 is the form given to employees when they leave an employer. It shows their income for that year and the tax they’ve paid to HMRC.

It’s a legal requirement for an employer to provide their ex-employee with a P45 when their employment ends. The P45 needs to be provided whether they’re moving onto a new job, choosing to stop working, retiring or their employment is terminated.

What is a P45 form used for?

A P45 form provides a new employer with the tax and payroll information to use when setting up a new employee in their payroll. This ensures the new employee is being taxed correctly when they switch jobs.

If they’re out of work, the P45 form helps the ex-employee access certain benefits and tax refunds.

What does a P45 look like?

A P45 has four different parts:

  • Part 1 is for the employer to complete. They need to fill in details of the ex-employee such as their name and address, salary, tax code, tax paid to date, as well as including their own PAYE number as their employer.
  • Part 1a is for the ex-employee’s own records.
  • Parts 2 and 3 are for the ex-employee’s new employer or, if they’re no longer working, they’ll give it to their Jobcentre Plus in order to access any benefits they may be entitled to. The ex-employee is responsible for giving the job centre or their new employer the P45.

You can find an example of a P45 form here for reference.

Once they’ve filled in the P45 form, the employer gives their ex-employee an electronic or paper copy. HMRC should also receive a copy through their payroll software.

Where do you get a P45 form as an employer?

You should be able to produce a P45 form for your ex-employee through your payroll software. Contact your payroll software provider if you need help with this.

If you can’t create a P45 form through your own payroll software, you can use HMRC’s free Basic PAYE tools to produce one or contact HMRC for help getting a form.

If you have a new employee starting they should have a P45 to give you from their old workplace. If they don’t, they need to fill in HMRC’s starter checklist.

How long do you need to keep P45s as an employer?

As an employer, you need to keep a P45 for at least six years (from the end of the tax year it’s related to). This counts for both new employees joining your business, who bring a P45 from their old job, as well as keeping any P45s belonging to employees who have moved on.

It may be worth holding onto them for longer as HMRC can technically request to see any payroll documents for up to twenty years.

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Disclaimer

This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.