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Top Ten Paye P45 Form Tax Questions and New Employees P45 Forms
When an employee leaves an employer during the financial year the employee receives a P45 stating details of that employment including the cumulative earnings and income tax paid to date. This article is about the most frequently asked questions regarding the P45 form when a new employer may or may not receive that P45.
1. Employee does not have a P45 If the new employee does not have a P45 on the day that work starts the employer should give the employee a P46 form to complete. The Inland Revenue P46 form is used to obtain the new employee details and should be sent to the local PAYE tax office on the date employment starts. If the new employee has ticked box A or B in the employee section of the p46 then the employer can hold the P46 and submit it when that employees earnings reach the lower earnings limit.
Click here to download the P46
2 What happens to the P45. P45 forms are in four parts, part 1 retained by the previous employer, the new employee retains part 1 A and should hand parts 2 and 3 to the new employer. The new employer cannot use the P45 tax details unless both parts are handed over. If either part 2 or 3 of the P45 form is missing then the employee must be asked to complete the Inland Revenue P46 form.
3. Which part of the P45 form is sent to the Paye Tax Office The employer retains part 2 of the P45 form and enters details of the new employee and previous earnings, tax deducted and tax code into the PAYE records. Part 3 is sent to the PAYE tax office
4. What To Do When 2 P45 forms received Occasionally the new employee may hand an employer two P45 forms in which case send both part 3 to the Paye tax office and use the P45 tax form showing the highest earnings for the paye records. If the employer is unsure then it is better to contact the PAYE tax office for advice.
5. Receiving the P45 late If a new employee does not produce a P45 form and a P46 has been submitted to the tax office the tax office will issue a P6 form which is the notice of tax code to be used for that employee. If the employee produces a P45 late, but before the notice of coding is received, then an employer should use the tax code, earnings and tax paid to date as shown on the P45, providing the P45 contains a leaving date in the current financial year. If the P6 form has already been received from the tax office then the P45 is irrelevant.
6. Time Gap Between The P45 Leaving Date And New Start Date If there is a time gap between the date of leaving and the new start date the first pay date may result in a tax refund. It is important to check that the previous income tax deducted was correct. The employer should also ask the new employee about any earnings since the P45 leaving date in case there has been other earnings, for example, the employee may have been registered unemployed and received social security payments which would reduce the tax refund required and the social services would be issuing an updated P45 showing the cumulative earnings to date.
7. Leaving Date and Week or Month Number Disagree If the leaving date is different to the week or month number shown on the P45 tax is calculated by using that week or month number for your employer PAYE records but also check that the income tax deducted is correct.
8. First Payment Same As Last Employment Week Or Month Number When an employee is paid by a new employer in the same pay period as the previous employer, which can happen for example when a previous employer paid weekly and the new employer monthly, the tax deducted may well be higher than normal due to the previous employer already taking account of the employee personal allowance.
9. Different UK Tax Code Applicable After 7 September 2008 The correct UK tax code to use is as stated on the P45 however there are circumstances in which a different tax code may be applicable. If the P45 was dated before the new tax code changes applicable from 7 September 2008 and the employee joins after 7 September then add 60 to the P45 tax code ending with the suffix L. For example tax coding 543L would be changed to tax code 603L. No change is required if the P45 was dated after 7 September 2008.
If the employees P45 is from the previous tax year the in addition to using the tax code stated that new employee should also be put on the emergency tax code, week one, month one basis using the tax code 543L prior to 7 September and 603L after.
10. Filing P45 forms Online It is possible to send the P45 forms to the PAYE tax office online. To do so the employer has to be registered with HMRC to file PAYE forms online. HMRC provide free online return services for this purpose.
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"The P45 form top tax questions and answers to new employee P45 tax code and earnings problems and when to ask PAYE tax office advice on P45 forms"
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