P45 explained — what it is and what to do with it

A P45 is a critical tax document issued by your employer when you leave a job in the United Kingdom. It is one of the most important pieces of paper in the UK payroll system, serving as a financial handover between your old employer, HMRC, and your new employer. Losing it, or failing to hand it over to your next employer, can easily cost you hundreds of pounds in emergency tax.

The Four Parts of a P45

When you are handed a P45 (or emailed a digital PDF version), you will notice it is divided into four distinct sections, each serving a specific legal purpose:

• Part 1: Your old employer sends this part directly to HMRC to notify them that you have ceased employment and to report your final pay and tax details for the year.
• Part 1A: This is your personal copy. You should keep this safe for your own financial records. You may need it if you have to complete a Self Assessment tax return or claim a tax refund.
• Part 2 and Part 3: You must hand both of these sections to your new employer on your first day, or as soon as possible before their payroll cutoff date.

What Information is on a P45?

A standard P45 contains all the cumulative data your new employer needs to tax you correctly:

• Your National Insurance number and full name.
• Your leaving date from your previous job.
• Your Tax Code at the time of leaving (e.g., 1257L).
• Your total gross pay in the current tax year up to your leaving date.
• The total amount of Income Tax deducted in the current tax year up to your leaving date.
• Your old employer's PAYE reference number.

Why Your New Employer Needs It

The UK operates a cumulative tax system. This means your tax-free personal allowance (£12,570) is spread evenly across the 12 months of the year. To calculate exactly how much tax you should pay this month, your new payroll department needs to know exactly how much you have already earned, and how much tax you have already paid, since April 6th.

If you do not hand in your P45 Parts 2 & 3, your new employer has a legal obligation to put you on an Emergency Tax Code (such as 1257L W1/M1, or even BR). Emergency tax codes ignore your previous history. This usually results in you being overtaxed, as you may not receive your correct cumulative tax-free allowance. You will get the overpaid tax back eventually, but it causes immediate cash-flow issues.

What if you have lost your P45?

A common misconception is that you can just ask your old employer for a reprint. Unfortunately, HMRC rules dictate that a P45 can only be issued once. If you lose it, it is gone.

If you don't have a P45, you must ask your new employer for a Starter Checklist (which replaced the old P46 form). This is a simple form where you declare your current employment status (e.g., "This is my first job since April 6th", or "This is my only job"). By filling out the Starter Checklist accurately, your new employer can assign you the standard 1257L tax code, completely avoiding emergency tax, even without the P45.

P45s and Unemployment

If you are not starting a new job immediately and intend to claim benefits like Jobseeker's Allowance (JSA) or Universal Credit, you must give your P45 to the Department for Work and Pensions (DWP) or your Jobcentre Plus work coach. If you remain unemployed and have overpaid tax during the year, you can use Part 1A of your P45 to claim a tax refund directly from HMRC using form P50.