A P45 is a form used in the UK to record an employee’s details upon resigning from their role. Information in the document can include personal details as well as information about taxes, national insurance contributions, and salary.
P45 is filled out by the employer and is used to calculate the employee’s final payment and update HM Revenue & Customs about the employee’s change in employment status.
It’s important that an employer fills out the P45 when the employee leaves. Consequences of not filling out this form on time include difficulties in reclaiming overpaid or national insurance contributions, as well as potential fines and penalties.
What’s in a P45?
A P45 consists of three sections: one for the employee’s new employer, one for the employee, and one for the employer’s records.
The first section includes details about both the employee and the new employer, like national insurance number and the employee’s leaving date.
The second section is for the employee’s own records, pertaining to things like tax and national insurance contributions, deducted from their salary up until the date of leaving.
The third section is for the employer’s records. This includes the employee’s reference number and other payroll details. It’s important for the employer to have this information so that they can have a record of the employee’s leaving details and make sure that records are accurate.
Difference between P45, P60 and P11D
P45, P60, and P11D documents can sometimes get mixed up in meaning. Here’s a quick overview of what each of these document types mean:
P45 is used when an employee leaves the company and contains information about the employee’s earnings and contributions to date.
P60 is issued annually by the employer to all employees and includes information about national insurance contributions and total earnings for that tax year.
P11D is submitted to HM Revenue & Customs and includes information about taxable expenses and benefits the employer has provided the employee during the tax year.
Managing exit forms for a global workforce
For most countries, exit forms are a standard part of employees’ resignation process and are important for tax purposes and record keeping.
Still, documentation requirements and local labor laws are likely to differ for these forms, which makes the process of managing these documents much more complex.
A lot of companies, therefore, may choose to turn to a payment distribution platform. These service providers can help by automating the document submission and making sure deadlines are met. Additionally, they can navigate local documentation requirements and ensure that these forms are filled out accurately.