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What is a P45 and why is it important?
When starting a job, you'll need to provide your new employer with a variety of documents and information and one of the most important forms is your P45. Practically everyone knows the name, but far fewer understand what it actually entails. Read on to find out what a P45 is, what information it contains, and why it's so important.
What is the definition of a P45?
The P45 provides your new employer with details of how much taxable salary you've paid over the course of the current tax year, along with how much has been deducted, and your tax code at the time of leaving your last job. It is made up of four parts, as follows:
- Part 1 - your previous employer sends this to HM Revenue and Customs (HMRC)
- Part 1A - your version of the form; keep it for your records
- Parts 2 and 3 - to be given to your new employer, or Jobcentre Plus if you are out of work
Your former employer is responsible for issuing your P45, although there is no legal timescale in which it must be issued. Instead, employers are instructed to provide it on your final day of employment, or “without reasonable delay” if this is not possible (for instance, if your leaving date coincides with a period of annual leave).
Why is the P45 so important?
Without your P45, your employer won't be able to make sure you're assigned on the correct tax code. This means you could end up paying more tax, or be put on an emergency tax code. Although this money can be reclaimed by contacting HMRC, no one purposefully wants additional admin tasks – especially when they can be so easily avoided.
The P45 also has a number of functions that aren't directly related to starting a new job. You'll need it to fill in a tax return, if required, and also to claim benefits and tax refunds if you are out of work. Further down the line, you may need to refer to your P45 to ensure you are not overcharged on tax when withdrawing money from a pension.
How long is a P45 valid for?
A P45 is only valid throughout the tax year in which it was provided, but that doesn't mean you should shred it straight after. You should keep it on record for at least 22 months after the end of the relevant tax year. However, you may wish to retain it for longer, as HMRC has the right to carry out tax investigations up to 20 years after the point.
What else do I need to do when changing jobs?
Other than getting your P45, you'll need to perform a few simple admin tasks when starting a new job. On your first day, expect your new employer to ask you for the following:
- Your bank details
- A valid form of ID - most commonly a full driving licence or passport
- Proof of address - such as a full driving licence, utility bill or bank statement
- Your National Insurance number - if you're not sure what it is, GOV.UK offers advice on how to find it
Landed a new job? Start off on the right foot by reading our article: 'The first day: a guide for experienced professionals.' For more career tips, browse all of our advice here or get in touch with one of our expert consultants to discuss your career options.