The introduction of Real Time Reporting (RTI) of PAYE for nearly all employers has led to changes in the use and issue of Form P45 and the abolition of Form P46. Paul Tew reports.

P45 Parts

HMRC retain the use of P45 for all employees. HMRC started a review of Form P45 in spring 2014 to bring it in line with RTI processes. The layout of the P45 will remain unchanged until at least April 2016 while HMRC consider how the P45 process can be improved. In the meantime, HMRC are due to start circulating an updated P45 in February 2015. Existing stocks of Form P45 are still valid and should continue to be used and accepted by employers. There is no need to replace any stocks of form P45 or update software.

Form P45 has four parts (Part 1, Part 1A, Part 2 and Part 3). Under RTI, Part 3 is no longer required, as the next employer is no longer required to return this form to HMRC. Employees continue to receive Part 1A for their records (completing a self-assessment tax return). Part 2 is to be passed to a new employer (or Jobcentre Plus). This procedure ensures that PAYE will be correctly operated by reference to the employee’s previous pay and tax details, where a cumulative tax code is in use and the figures relate to the current tax year.

The new employer is not required to send Part 1 to HMRC, unless, exceptionally, this action is requested by HMRC. This is because HMRC will normally already have details of the ‘old’ employment from the last Full Payment Submission (FPS) report sent by that employer covering the last payment of earnings. Relevant starter details should only relate to the taxable pay and tax paid year to date in the new employment on the first FPS sent by the new employer.

Using Form P45

Form P45 is to be issued to the leaving employee without unreasonable delay. If Part 2 is issued on the day the final payment is made, this is considered by HMRC as acceptable practice.

However, sometimes Form P45 is given to the new employer after the first FPS has been sent to HMRC for the relevant employee. If HMRC have already issued a tax code, employers should use the tax code that HMRC have sent. It is also necessary to compare the pay and tax details on the P45 with the detail, if any, included on the tax code notification received from HMRC. If there is a difference, make a positive or negative adjustment to the pay and tax details on the payroll record. If HMRC have not sent a tax code, use the employee’s P45 to establish the correct tax code and basis.

An employer must only give one Form P45 to an employee leaving the employment; a ‘second’ P45 must never be issued. If an additional payment is made after the P45 has been given to the employee, the correct procedure is that tax should be deducted on the additional payment using tax code 0T (on a non-cumulative week1/month 1 basis) for any ‘standard payments’ made; eg. final payment of salary or wages, holiday pay, week in hand payments, bonuses, arrears of pay, etc, and the payment and deductions reported on the next FPS. The employee must then be given written confirmation of the payment showing the gross amount and deductions made.

If the tax deducted on the P45does not match with the pay and tax established from the tax code shown using the taxable pay and pay adjustment tables, the correct values must be used in calculating the PAYE tax for the first payment to the employee. If the employee is unable to produce a P45 before their first pay date or the P45 produced is ‘out of date’, ie individual commences employment in tax year 2015/16 but the date of leaving shown on P45 is before 6 April 2014, the new employer should obtain details of the employee’s personal circumstances.

This information was obtained by the employee completing a Form P46. However, from April 2014, Starter Checklists replaced Form P46.

Starter Checklist

The Starter Checklist can be downloaded at This enables employers operating under RTI to collect necessary information from new employees who do not have a Form P45. Alternatively, the correct personal information for new starters can be gathered and stored by letter, email or on a form designed by the employer. The information recorded from the employee must be kept by the employer for the current and three previous tax years.

To complete the Starter Checklist, the employee needs to open and fill it in Adobe Reader version 9.0 or later and save it to email back to the employer, or print out a copy to post or give to the new employer. The Starter Checklist is a two-page form. Page one concerns an employee’s personal details and page two is for an employee statement.

From the employee statement it is necessary for the individual to give an indication of their employment situation or otherwise by selecting one of the three statements, A, B or C, in order to establish the tax code and basis to use on the first payment. The statements in brief are:

  • A – This is my first job since 6 April (use emergency code on a cumulative basis).

  • B – This is currently my only job (use emergency code on a non-cumulative basis).

  • C – I have another job or pension (use tax code BR).

For 2015/16 the emergency code is set at 1060L.

If a new employee has not provided the required information on the Starter Checklist before their first payday when the FPS must be sent, the employer must apply tax code 0T on a non-cumulative basis and enter statement ‘C’ on the FPS.

For 2015/16, if the leaving date on the P45 is 6 April 2014 or later the employer selects the starter statement when completing the FPS report to HMRC. If the P45 leaving date is 5 April 2014 or earlier the employee must provide a full starter declaration.

Other Form P46s

Forms P46 (Expat) and P46 (Pen) were also rendered obsolete for employers and pension payers operating PAYE under RTI. HMRC has similarly produced a Starter Checklist for employers to optionally use to gather the required information for seconded employees at

If a seconded employee selects `Yes’ to the “are you an EEA Citizen?” question, employers must use the emergency tax code on a cumulative basis, even if the individual has confirmed Statements 2 or 3 in the section ‘New Starter questions for your employee’.

If the seconded employee intends to live in the UK for 183 days or more, employers must use the emergency code on a cumulative basis. If the seconded employee intends to live in the UK for less than 183 days or will be working inside and outside the UK but will be living abroad, use the emergency code on a non-cumulative basis. Under RTI, if an employee does not give their employer information about their present circumstances before the first payday, code 0T on a non-cumulative basis must be applied.

Last reviewed 26 January 2015