A P45 is a document that your employer must give you when you leave your job. It is evidence of the tax that has been deducted from your salary that year and notes your tax code. The P45 is made up of 4 sections:
A P45 is important because it ensures you’re put on the correct tax code when changing jobs. If you don’t supply your employer with this in time, you could end up paying too much tax. Or you could be put on an emergency tax code.
It’s also important if you’re self-employed, as you may need it when filing a Self Assessment tax return. If you’re unemployed and out of work, you’ll need a P45 to claim tax refunds on social welfare benefits from Jobcentre Plus.
A P45 is only valid for the tax year in which it was issued by HMRC. However, it’s worth storing it for at least 22 months after its validity has expired, like you would most tax records. Why? Well, HMRC can carry out income tax investigations for up to twenty years, so keeping records of your tax and documents like a P45 can help.
If you’ve been unemployed for more than a year, your P45 won’t be valid if you start a new job. That means you might need to fill out a ‘Starter Checklist.’
A P45 is not replaceable, so when you start a new job you’ll need to fill out a Starter Checklist. This enables HMRC to check your details and calculate your appropriate tax code.
In the UK, you must keep your tax records for at least six years from the end of the relevant tax year. Accounting software can help you to digitally store your records without taking up space in your office! However, remember that your P45 is only valid for the tax year in which it was issued, although it’s still worth keeping hold of.