What is form P45?
When you leave an employment you will be issued with a form P45.
Form P45 shows your date of leaving, your tax code, the gross remuneration and tax paid to you in the tax year to date.
The P45 details are submitted electronically by your old employer to HMRC to notify them that you have left that employer, and a hardcopy P45 with parts 1A, 2 and 3 are passed to you. You should keep Part 1A for your own records and pass parts 2 & 3 to your new employer at the time you start to receive a salary (in this case pass to Competex, acting as your company’s agent). We use the information to set up a PAYE record for you and to continue taxing you on the same basis as your previous employer, if this is appropriate. We inform HMRC electronically so that they can update your records held with them. HMRC should then review your records and make any necessary adjustments to your tax code.
Form P45 & benefits in kind
It may be that when you leave your old employment, your tax code includes deductions that are no longer relevant to your new employment. For instance, it may include a reduction because you had a company car, and/or your previous employer paid for your medical insurance. In these circumstances, you will need to contact the HMRC Employee Helpline and bring them up to date; otherwise you will be paying more tax than you should be.
Form P45 & permanent employment
If, after working through your personal service company for some time, you decide to take up permanent employment again, please let us know and we can advise you. It is a requirement of Companies House that you remain as an employee of your company, but of course this can be a secondary employment. Upon leaving its employ and starting with a new firm, we have been advised by HMRC not to issue a P45. After commencing a new employment, complete the new starter forms, indicating that you have another employment. After submission to HMRC, please telephone HMRC Employee Helpline and request that your new employment becomes your primary one. HMRC will then switch the tax code, taking into account the previous pay and tax to date figures, to your new employment. Even though you have resumed permanent employment, you will continue as a director of your company until it is dissolved, and HMRC will therefore issue a second tax code that gives no tax allowances (normally a D0 code), to be used in the event of any further salary being paid through your company.