What is a P45?
If you have ever switched employment, you would know what is a P45. It is one of the most important documents that your last employer provides you with along with all final settlements. Many people are aware of what is a p45 but they do not realise why is it so important. P45 is the code of the form titled Details of employee leaving Work. Certax Fitzrovia Accountants can give you a detailed explanation about all important tax documentations including P45.
P45 is issued to all employees who ceased their jobs during the tax year. It is duty of the employer to provide this important document to you and the HMRC. If you are leaving employment in order to receive pension, make sure your pension provider informs you of your tax code to work out payments.
What is a P45 made up of?
This form will help your new employer by giving details of total taxable salary and total deductions paid in current on going tax year. It will also tell your tax code at the time of cessation of last employment. P45 has four parts:
1) part 1A; your previous employer sends it to HMRC.
2) part 1A; this is your copy. Keep it safe in your records
3) Part 2 and 3: these copies should be given to the new employer or Jobcentre Plus if you are looking for employment
Why do I need a P45 form?
To be honest, it is the new employer who needs the P45 more. The form will help your new employer determine how much tax you have already paid and thereby calculate your remaining free allowance claims and tax liabilities.
Contrary to what most people believe, you will still be able to start a new emplyment without P45. however, having a P45 makes things easier for new employers. If you have not been yet given P45 or you have lost it, your employer will instead ask you to fill out a starter checklist. You may still be asked to fill starter checklist even if you have a P45.
You will however need your P45 how to register for benefits with Jobcentre Plus if you do not have have any other job to move on to.
What is a P45 source?
P45 will be given by the employer with whom you are ending the employment with. You cannot ask HMRC on your own behalf to provide you with P45.However, you can complain to HMRC that your ex employer is not fulfilling legal duty of providing you with P45. HMRC has not given any timeframe to employers for providing P45. However, it instructs them to do so ‘without reasonable delay’.
What is a P45 Validity?
A P45 is valid only for the tax year in which it was provided. However, your are required to retain it till 22 months after the end of tax year. HMRC has legal rights to carry investigations as long as 20 years down the lane. It may be wiser to retain it for long.
Do I get P45 if I get sacked?
Regardless of how how your employment germinated your employer is bound to provide you with P45. This includes whether you were laid off, you quit or were terminated.
What is Difference between P45 and P60?
If you know what is a P45 clearly, answering the above question is fairly easy. P60 is the year end summary of all gross payments and deductions. It will be given to you by your employer at tax year end, even if you are not leaving.
On the other hand, P45 may not necessarily be given at year end. It will be given at any point in tax year when you leave the employment. It is also summary of gross payments and deductions but from tax year start uptill the point where you left the employment.
For further information on P60, read our blog here.
What is a P45 correction procedure?
It is your duty to check all the details on your P45 once you receive it. If there is is a mistake with your personal information your previous employer’s HR must be contacted to make the necessary correction. Any problems with your tax code can however be corrected by contacting HMRC.
If you have any further queries about what is a P45 or any thing related to it, you can contact our staff at email@example.com or call us at 020 8004 4608. If you want to see how P45 looks like, visit UK Government official website.