P45 Form Guide for UK Employers

A P45 is one of the most recognised payroll documents in UK employment. It records an employee’s pay and tax information up to the point they leave a job and ensures their next employer or HMRC can apply the correct tax code. Although the P45 is a familiar form, employers often encounter issues with timing, accuracy and final pay calculations, particularly when a departure is unplanned or contentious. For HR teams, understanding how and when to issue a P45 is part of running a compliant payroll and reducing risk at the point an employment relationship ends.

What this article is about:
This guide explains an employer’s duties when issuing a P45, the legal requirements under the PAYE Regulations, and how the document interacts with final pay. It also covers common problem scenarios, including incorrect P45 information, employees who leave without notice and situations where payroll has already closed. The article is designed for HR professionals and business owners who need a practical and legally accurate understanding of P45 obligations when an employee leaves.

When an employment relationship ends, the P45 sits alongside other final pay matters such as outstanding holiday pay, deductions, unpaid bonuses and the proper calculation of taxable earnings. A failure to issue a P45 correctly can lead to tax code errors, temporary emergency tax deductions in the next employment and HMRC queries, which in turn can create operational and reputational issues for the employer. This article outlines the legal purpose of the P45, the steps employers must follow to issue it, and the risks of non-compliance.

Section A: Legal purpose of the P45

The P45 serves a statutory function within the UK’s PAYE system. When an individual stops working for an employer, HMRC requires accurate and timely reporting of their pay and tax position up to the final day of employment. The P45 is the mechanism through which this information is provided to the employee and transferred to their next employer or HMRC. The obligation to provide a P45 arises under the Income Tax (PAYE) Regulations 2003, in particular Regulation 36, which requires employers to provide leaver information without unreasonable delay. For HR professionals, understanding the legal purpose of the P45 is fundamental when managing employee exits, because payroll errors at this stage can cascade into tax problems, complaints and compliance failures.

1. What is a P45?

A P45 is the formal document issued to an employee when they leave employment. It confirms the employee’s taxable pay and tax deducted in the current tax year up to their leaving date, as well as the tax code operated by the employer. The form is split into multiple parts, historically labelled Parts 1, 1A, 2 and 3. Today, most employers issue the P45 electronically, but the information requirements remain the same. Part 1 is submitted to HMRC via payroll reporting, while Parts 1A, 2 and 3 are provided to the employee, who in turn gives the relevant parts to their new employer. HMRC does not require employers to use official HMRC stationery for the P45; an electronic or system-generated version is acceptable provided it contains all required information. The P45 is relied upon to ensure the correct tax code is used in the employee’s next employment.

2. When a P45 must be issued

An employer must issue a P45 when an employee stops working for them, regardless of the reason for leaving, including resignation, dismissal, redundancy or the expiry of a fixed-term contract. The duty arises immediately upon employment ending. There is no statutory “grace period”, and under the PAYE Regulations the employer is expected to provide the P45 information without unreasonable delay. In modern payroll systems the form is generated automatically once the leaving date is entered. Employers cannot withhold a P45 for reasons such as outstanding company property or unresolved disputes. HMRC does not require a paper version, so issuing an electronic copy is acceptable, as long as the employee can access and retain the information.

3. What information must be accurate

Accuracy is critical because a P45 forms the basis of the employee’s tax position in their next role. The form must correctly state:

• the employee’s tax code
• total taxable pay to date in the current tax year
• total tax deducted to date
• the employee’s National Insurance category
• the official leaving date
• the employer’s PAYE reference

Any mistake can result in incorrect tax deductions in the new employment, leading to overpayments, underpayments or HMRC interventions. HR teams should ensure final pay is fully processed before generating the P45, including holiday pay, contractual payments and statutory deductions. National Insurance contribution totals are usually confirmed through the employee’s payslips or a statement of earnings, rather than the P45 itself, so employers should be ready to provide supporting documentation where needed. If errors are later discovered, the employer must correct the payroll records and provide the employee with updated pay and tax information in line with HMRC guidance.

Section A summary
The P45 is a legally recognised document that transfers an employee’s tax information from one employment to the next. Employers must issue it promptly when employment ends and ensure the information provided is accurate and complete. Errors or withholding a P45 can lead to tax code problems, payroll disputes and HMRC involvement, making compliance an essential part of managing employee departures.

Section B: Employer duties when issuing a P45

When an employee leaves, the employer’s responsibility extends beyond issuing a final payslip. The P45 is an integral part of the exit process because it must accurately reflect all taxable earnings and deductions made up to the leaving date. HR professionals must ensure payroll processes are aligned with statutory requirements so the P45 is issued promptly and without errors. This section explains the practical steps involved in preparing the form, how final pay interacts with taxable pay-to-date figures and the relevant record-keeping rules.

1. Steps to prepare and issue a P45

The employer must begin by confirming the employee’s final working day and ensuring all pay due up to that date has been calculated. Payroll teams then enter the official leaving date into the payroll system, which triggers the generation of the P45. Most employers now use electronic payroll software that automatically creates the P45 in the correct format. Once generated, the employer must provide Parts 1A, 2 and 3 to the employee. Part 1 is submitted electronically to HMRC through the Full Payment Submission. Employers do not need to supply paper copies unless requested, but the information must be accessible to the employee and capable of being saved for their records.

2. How final pay interacts with the P45

The figures shown on the P45 must reflect the employee’s total taxable earnings in the current tax year. This includes basic salary, statutory payments, overtime, bonuses, commission and any untaken holiday paid on termination. Only the taxable portion of redundancy payments needs to be included, as any element up to £30,000 is tax-free and therefore excluded from the taxable pay-to-date figure. Employers must take care where final pay includes adjustments such as repayment of advances or deductions for training costs, as these can affect the accuracy of the tax calculation. A P45 must only be issued after all taxable pay for the employment has been processed; otherwise payroll corrections become necessary. Where payments are made after the employee has left—such as late bonuses or holiday pay—these must be reported using the “payment after leaving” indicator and tax code 0T on a non-cumulative basis unless HMRC instructs otherwise.

3. Deadlines and record-keeping

Although HMRC does not set a strict statutory deadline for providing the P45 to the employee, the form must be issued without unreasonable delay after employment ends. Payroll reporting deadlines still apply, including the requirement to submit the Full Payment Submission on or before the date final wages are paid. Employers should retain payroll records for at least three years after the end of the tax year, although many keep them longer for audit, HMRC review or employment law purposes. Records should include copies of P45 information and details of any amendments made. If errors are identified after issuing a P45, the employer should correct the payroll records and provide the employee with the updated pay and tax figures they will need.

Section B summary
Employers must issue a P45 promptly and ensure the document reflects all taxable pay and deductions made up to the employee’s final working day. Robust payroll processes, accurate record-keeping and timely reporting to HMRC are crucial in meeting legal obligations and preventing disputes or tax discrepancies.

Section C: Employee rights and employer risks

Employees rely on the P45 to ensure they are taxed correctly when starting a new job or providing HMRC with accurate pay and tax information. While a P45 is no longer required for most benefits claims, such as Universal Credit, it can still assist HMRC in updating tax records efficiently. From an employer’s perspective, delays or errors in issuing a P45 can trigger disputes, payroll complaints and potential HMRC attention. Understanding an employee’s entitlement to the form, and the risks that arise when it is not handled correctly, supports HR professionals in maintaining compliance and avoiding unnecessary conflict during the exit process.

1. Does an employee have a right to a P45?

An employee is entitled to receive a P45 when their employment ends. This is not a discretionary document; it forms part of the employer’s statutory payroll obligations under the PAYE Regulations. Employers must provide the employee with Parts 1A, 2 and 3 promptly, regardless of the reason for leaving or whether the departure is amicable. Withholding a P45 is unlawful, even when the employee has not returned company property or is the subject of a disciplinary process. Employers who refuse to issue a P45 may be in breach of statutory duty, particularly if the delay causes financial detriment such as emergency tax deductions in the employee’s next role.

2. What if an employee does not work their notice?

Even if an employee leaves without working some or all of their contractual notice, the employer must still issue a P45. The determination of the leaving date will depend on the agreed or enforced termination date, which may differ from the date the employee walked out. Where pay in lieu of notice (PILON) is given, the leaving date is the date employment legally ends, not the period the PILON payment covers for payroll purposes. Payroll teams must ensure the final pay reflects any contractual entitlements or deductions arising from the failure to work notice, but this does not affect the requirement to issue a P45. Delaying the form because the employee “left without permission” is a common compliance error and exposes the employer to challenge.

3. Risks for employers

Failing to provide a P45 or issuing one with incorrect information can cause immediate problems for the employee in their next job, potentially resulting in emergency tax codes and financial hardship. From an employer’s perspective, this can lead to grievances, HMRC queries and reputational damage. Serious or repeated non-compliance could prompt HMRC to review the employer’s payroll processes. Incorrect P45 details may also cause knock-on issues with tax overpayments or underpayments, which require time-consuming corrections by payroll teams. Employers may also face disputes where an employee claims the P45 was deliberately withheld or delayed, particularly if it affects their tax position.

Section C summary
Employees have a clear entitlement to a P45 when their employment ends. Employers who delay or provide incorrect information risk payroll disputes, HMRC involvement and operational difficulties. Ensuring accurate and timely issue of the P45 mitigates these risks and supports a clean transition for the departing employee.

Section D: Problem scenarios for HR

Even with established payroll processes, HR teams frequently face practical issues when issuing P45s. These situations often arise where the employee leaves unexpectedly, payroll has already closed for the month or historical information needs to be corrected. Addressing these scenarios correctly prevents disputes, ensures compliance and reduces administrative burden.

1. Lost or missing P45s

If an employee misplaces their P45, the employer cannot issue a duplicate. HMRC rules require employers to provide a statement of earnings instead, confirming pay and tax details for the relevant period. A new employer can still take the employee on without a P45 by using the starter checklist, and HMRC will update the employee’s records once payroll information is submitted. HR teams should advise employees to keep their P45 safe but provide support by issuing the appropriate documentation if a replacement is needed.

2. Incorrect P45 information

Errors sometimes emerge after the P45 has been issued, especially where final pay has been adjusted late or a tax code change was missed before the employee left. In these cases, the employer must amend the payroll records and, where necessary, submit an updated Full Payment Submission. Employers must not attempt to recreate or reprint an original P45; instead they should provide the employee with a statement of earnings reflecting the corrected totals. Employees may need to share the updated information with their new employer so the correct deductions can be applied. Introducing internal controls at the point of termination, such as a two-step payroll review, helps reduce the likelihood of errors.

3. Employee leaves before being paid

Occasionally an employee leaves before receiving any pay in the current tax year or leaves between payroll cycles. In these situations, a P45 must still be issued. The form may show zero taxable pay and zero tax deducted, which is correct where no payments have been made. If a final payment is later processed — such as holiday pay or a bonus — it must be reported using the “payment after leaving” RTI process, applying tax code 0T on a non-cumulative basis unless HMRC specifies otherwise. A P45 cannot be reissued once the employee has left, so employers must ensure that any later payments are handled entirely through RTI submissions.

Section D summary
HR professionals need to be prepared for situations where the standard P45 process does not run smoothly. Understanding how to handle lost documents, corrections and payments made after the employee has left ensures compliance with HMRC rules and reduces administrative complications for both the employer and the departing employee.

FAQs

Do employers still need to issue P45s in 2025?
Yes. Despite wider digitalisation of payroll systems, employers must still issue a P45 when employment ends. The form remains the standard way of transferring tax information to a new employer or HMRC.

Can a P45 be issued before final pay is processed?
No. A P45 must reflect the employee’s total taxable pay to date in the current tax year. Employers should only issue it after final pay — including holiday pay, bonuses and deductions — has been fully processed.

What happens if payroll has already closed for the month?
The P45 must still be issued promptly. If the payroll cut-off has passed, the employer may need to run a supplementary payroll or process adjustments in the next available cycle to ensure the P45 contains accurate figures.

Can an employer refuse to provide a P45?
No. Withholding a P45 is unlawful and may amount to breach of statutory duty. Even if an employee has outstanding property or ongoing disputes, the employer must issue the form when employment ends.

What if an employee has more than one job?
Each employment has its own P45. When an employee leaves a job, the P45 issued relates only to the pay and tax for that particular employment. HMRC reconciles tax across multiple roles through PAYE records.

Does an employee need a P45 to start a new job?
If the employee does not have a P45, their new employer will ask them to complete a starter checklist. This enables a temporary tax code to be applied until HMRC updates the employee’s records.

Can a new employer reject a P45?
Only if it appears incorrect or incomplete. New employers rely on the P45 to apply the correct tax code but may request clarification or updated information if discrepancies arise.

Do agency workers receive P45s?
Yes. Agency workers employed under PAYE by the agency are entitled to a P45 when their assignment or engagement ends.

Can a P45 be corrected after it’s issued?
A P45 cannot be reissued. Employers must instead amend payroll records and provide the employee with a statement of earnings showing the corrected totals. HMRC will update the employee’s tax records based on the RTI submissions.

Does leaving without notice affect the P45?
No. The form must still be issued based on the correct leaving date and final taxable pay. Contractual issues, deductions or disputes about notice do not change the requirement to provide a P45.

Conclusion

Issuing a P45 is a core employer responsibility when an employee leaves work. The form ensures HMRC and any new employer have an accurate record of the employee’s taxable pay and tax deductions to date, allowing correct tax treatment in the next role. For HR professionals and business owners, the focus should be on ensuring the P45 reflects all final payments, is issued promptly after the leaving date and contains accurate information supported by reliable payroll records.

Non-compliance — such as withholding a P45, issuing it late or providing incorrect information — can lead to tax code problems, employee disputes and unnecessary HMRC queries. By understanding the legal purpose of the P45 and implementing strong payroll processes, employers can manage exits efficiently and minimise risk.

The P45 should be treated as part of the broader final pay process, sitting alongside tasks such as confirming holiday pay, processing deductions and issuing the final payslip. When handled correctly, it supports a clean and compliant transition for both the employer and the departing employee.

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