If you live in the United Kingdom and have recently got a new job, your new employer must have requested you for a lot of documents and P45 form must have been one of them. Practically every working individual in the UK knows the name, but very few understand what it actually entails.
Learn the basics of the P45 form and the important information P45 form carries and when you need to request one from your employer.
What is P45?
When you leave a job, your former employer should issue you a form called P45 form. This form has the details of your salary and the taxes you have paid to date in the tax year.
A P45 form acts as a statement or certification of how much tax you have paid on your salary so far in the tax year.
Why is a P45 form important?
You would need your P45 when you are changing jobs, as your new employer would use it to make sure you are working on the correct tax code.
Without a P45 form, your employer will have to put you on an emergency tax code which will then result in paying too much tax.
This form will also be useful when you fill out your tax returns as it contains information required for tax returns. This also helps in keeping your tax records up to date.
In the case of an individual who is not working, this form will help in claiming tax refunds and social welfare benefits.
P45 also helps in keeping a check when you withdraw money from your pension to make sure you are not charged too much tax.
What information does the P45 form have?
This form has the following information regarding your salary and tax
Total gross income during the employment period.
The total tax paid until the date of leaving employment.
The total gross income and the tax paid from the income previously received.
How Long is a P45 valid for?
A P45 is only valid for a tax year in which it has been provided. It is advisable to keep a record of a P45 for at least 22 months (about 2 years) after the end of the relevant tax year. However, one 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 would you need when changing jobs? Apart from the P45 form, you would also need to submit the following documents:
Your Bank Details.
A valid form of ID- most preferably driving license or passport.
A proof of address- such as a full driving license, utility bill or bank statement.
National Insurance number- you can find your NI number on the official gov.uk website.
Would you get a P45 form when you retire? Yes, when you leave your job to retire your employer would issue and generate a P45 through their pay roll system. According to law, your employer must provide you with a P45 when you finish working irrespective of how you have left the work.
What if my P45 is wrong? You are expected to check your P45 form for important details when it is provided to you. However, If the details on your P45 are wrong such as Tax Code, you should contact HMRC. If your personal information has been mentioned wrong, you can always contact your company’s HR to update it.
What if I’ve lost my P45? In the case of losing a P45, you would not get a replacement. When you start a new job without a P45, your employer may ask you to fill in a ‘Starter Checklist’, which would detail your personal financial information. The details on the Starter Cecklist form can be used to calculate your tax code, anyhow you may be put on emergency tax code if HMRC does not have enough information on your income and tax owing. What’s next? Have you landed a new job? Start off on the right foot taking the right advice from the experts. Read more blogs to keep yourself updated on all the tax basics. Sign up to get in touch!