A P45 is a statutory form that UK employers must issue to a departing employee on or shortly after their last day of employment. It records the employee's National Insurance number, tax code, and the cumulative gross pay and income tax deducted from 6 April of the current tax year to the leaving date. The form is split into parts: Part 1 is submitted to HMRC by the employer, while Parts 1A, 2, and 3 are given to the employee.
When a worker starts a new job they hand Part 2 and Part 3 to their new employer. The new employer uses this information to apply the correct tax code from day one, avoiding the need to tax the employee on an emergency basis. If a worker does not produce a P45, the new employer must use a starter checklist to determine the appropriate code, which may result in higher initial deductions if the worker cannot confirm their previous earnings.
Employers are legally required to provide a P45 promptly; withholding or delaying it can cause financial hardship for the employee through incorrect tax deductions. Since the introduction of RTI, the leaving date and final pay details are also reported electronically to HMRC via the Full Payment Submission, meaning HMRC receives the data independently of whether the employee presents their P45 to a new employer.