A P45 is an official document you receive from your employer when you stop working for them. It summarizes the tax you've paid on your salary up to the end of the employment. This crucial document consists of four parts, each serving a specific purpose:
- Part 1 is sent directly to HM Revenue & Customs (HMRC) by your employer.
- Part 1A is for your personal records.
- Parts 2 and 3 are for you to provide to your new employer or the Jobcentre if you're claiming unemployment benefits.
Why is the P45 Important?
The P45 plays a key role in ensuring you're taxed correctly in your new job or if you're claiming benefits. Without it, you could be placed on an emergency tax code, potentially leading to overpayment of tax. It's also useful for self-employed individuals during the Self Assessment process and for claiming tax refunds if you're unemployed.
Validity and Retention
Your P45 is relevant only for the tax year it's issued. However, keeping it along with other tax documents for at least 22 months after the tax year ends is wise, as HMRC can investigate up to 20 years back. If you find yourself starting a new job after being unemployed for over a year, your P45 won't apply, and you'll need to complete a Starter Checklist for your new employer.
Lost Your P45?
If your P45 is lost, you cannot get a replacement. Instead, you'll fill out a Starter Checklist in your new job. This ensures HMRC can assess your tax code correctly. Always verify your tax code to avoid being on an emergency tax code unnecessarily.
