PAYE starter procedure: information for employers

Employee starts – with a P45

All employees who come to you from another job, or from a period on certain state benefits, should bring with them a completed form P45. The P45 contains:

• the employee’s personal details,
• details of the pay they have received to date in the tax year,
• the tax that has already been deducted since the start of the tax year to the date the employment (or period on certain state benefits) ended,
• the employee’s student loan deduction status,
• the employee’s leaving date, and
• the tax code operated by the previous employer.

These details are important as they provide a link for the operation of PAYE from one employer to another and mean that you can continue to deduct tax on the correct basis.

The information you will require from the P45 to set up your new employee in your payroll system is outlined on GOV.UK and includes:

• full name
• address
• date of birth
• gender
• National Insurance number
• leaving date from the previous employment
• total pay and tax paid to date for the current tax year
• student loan position (if applicable) – please note that if a new employee is repaying a student loan you may need to ask which plan type the employee is repaying. You can use the Starter Checklist to do this as the relevant questions are on it. Form P45 may only indicate whether a new employee is already repaying a student loan. It may not indicate the particular plan type.

You will need to work out whether you can continue to use the tax code on the P45 for your employee or whether you need to update it. This depends on when they left their previous employer and their starting date with you. See GOV.UK for a tool to help you work out the correct tax code to use for your employee (or see the heading directly below if you are a paper filer and need to work this out manually).

The tool will also help you decide what their starter declaration category is. This declaration just provides further clarification of your employee's employment position – for example, whether this is their only job or an additional one.

HMRC use three categories:

• This is their first job since last 6 April and since 6 April they have not been receiving taxable jobseeker's allowance, employment and support allowance, taxable incapacity benefit, a state, occupational or private pension.
• This is their only job, but since last 6 April they have had another job, or have received taxable jobseeker's allowance, employment and support allowance or taxable incapacity benefit. They do not receive a state, occupational or private pension.
• They have another job or receive a state, occupational or private pension.

Please note that where the employee left their last job before 6 April 2023, the employee must choose the starter declaration category themselves (rather than you doing it). This information from your employee needs to be recorded and kept safe for the current and following three tax years. You can use HMRC’s Starter Checklist to do this or the employee can provide this in a way that best suits you, for example in an email or on your own stationery. It is up to you to decide whether or not you wish to ask them for a signature. See our record keeping section for more information.

Paper filers – process P45 manually

HMRC have a help sheet for noting down all the employee information, called an RT11 deductions working sheet.

Where the details on the P45 relate to the current tax year, you should follow these steps (which have been extracted from HMRC guidance):

• The tax code and total pay to date figure from the P45 should be noted down on RT11 (although where the employee has a Week 1/Month 1 (W1/M1) tax code, ‘nil’ should be entered here in pay to date field).
• The correct amount of tax due to date based on the total pay to date figure from the P45 should be calculated again by you. You should not just copy it over from the P45 in case there has been a mistake by the previous employer which could then be made worse by you. Phone the employer helpline and ask them to check the 'Total tax to date' figure if you need help. (Again, where the employee has a W1/M1 tax code, ‘nil’ should be entered in tax to date field.)
• Once you have calculated the correct amount of tax due to date you should enter it on the RT11.

Where the P45 is for the tax year immediately preceding the current one, you should not automatically use the tax code shown on the P45 and may have to operate an ‘emergency’ tax code on a W1/M1 basis until a new code is issued. ‘Nil’ should be entered on the RT11 for the previous pay and tax details.

The table below shows you what tax codes to use in the different scenarios:

If the date of leaving on your new employee's P45 is 5 April 2023 or before, you will need to ask your employee to decide which of the starter declarations fits their current employment situation to help you work out what tax code to use.

The table below shows you what tax codes to use in the different scenarios. ‘Nil’ should be entered on the RT11 for the previous pay and tax details.

Employee starts – no P45

An employee may not be able to give you a P45 if, for example:

• they have lost it,
• this is their first job, or
• they are continuing in an existing job as well as working for you.

You can collect the information that you require to set your new employee up in your payroll system by asking them to complete HMRC's Starter Checklist. This checklist contains a set of starter declaration statements for your employee to select.

You should then use the information from the Starter Checklist and the tool on GOV.UK to help you work out which tax code to use. The answer to the question 'On their P45, when did your employee leave their last job?' will be ‘You do not have their P45'. See below if you are a paper filer and need to work out their tax code manually.

If your new employee has not completed the Starter Checklist before their first payday, you must use tax code 0T on a W1/M1 basis. Code 0T gives no personal allowance – for a basic rate taxpayer, this will produce the same result as a BR code (i.e. a flat rate 20% tax deduction).

It is a good idea for you to let your new employee know that this might mean they may pay more tax than necessary on their first payday – but they can avoid this by providing the information on time.

You are not required to send the Starter Checklist to HMRC, however you need to keep the information on it safe somewhere for the current and following three tax years.

Paper-filers – process Starter Checklist manually

If the employee certifies in the Starter Checklist that this is their first job and that they have not been receiving taxable state benefits such as jobseeker’s allowance (box A), you will operate the standard code of 1257L on a cumulative basis. This means that the employee will get the benefit of any unused personal allowance from the beginning of the tax year.

If the employee certifies that this is now their only job but that they have had another job since the beginning of the tax year, or has received a taxable state benefit (box B), then you should use the standard code of 1257L, operated on a W1/M1 basis, i.e. not cumulatively. This means that the employee will simply be given a proportion of the normal personal allowance as the tax-free amount each pay day, i.e. one month’s worth of personal allowances against one month’s pay.

If the employee certifies that they have another job (box C), you will operate code BR. This means that any tax will be deducted from earnings at the basic rate of 20% without any personal allowances being given.

If you are a paper filer, HMRC have a help sheet for noting down all this employee information, called an RT11 deductions working sheet.

You can use the table below to confirm what tax code to enter into your RT11:

Sending the information to HMRC

If you are an online filer, all the relevant information about your new employee will be extracted from your payroll system and sent to HMRC in a Full Payment Submission (FPS) the first time you pay them.

If you are a paper filer, HMRC have a help sheet for noting down all this employee information, called an RT11 deductions working sheet. You will include information from the RT11 about your new employee on form RT2 when you file your first quarterly submission.

Checking personal information from the P45 or Starter Checklist

When setting up your new employee in your payroll system, whether using software or on paper, you have an obligation to make sure your employee’s personal data is complete and accurate. This means you should not just use the information given to you on the P45 or Starter Checklist, but should try and verify it against an official document such as a birth certificate or passport.

In particular, you should make sure the date of birth and National Insurance number are correct and use your employee’s full name: forename, any middle names and surname in the correct order. Don’t abbreviate. For example Joseph Smith – do not abbreviate to Joe Smith.

Late P45 or Starter Checklist

A new employee may sometimes give their new employer a P45 or a completed Starter Checklist after a submission has been made to HMRC that includes them.

Per this GOV.UK guidance, the action needed will depend on whether the new employer has received a new tax code for the employee from HMRC:

HMRC have already sent you a tax code

Use the tax code that HMRC have sent you (although the instruction is to then destroy the P45 or Starter Checklist there is no harm in retaining a copy on the employee’s file). You should check whether there is a student loan indicator on the P45 or Starter Checklist, if there is you should commence deductions, if you have not already.

HMRC have not sent you a tax code

What action you need to take here depends on whether it is a P45 or the Starter Checklist that has been given to you late.

Late P45

Use the employee’s P45 to work out their tax code and update their details within your payroll system.

If your employee has previously given you an incorrect P45, but has now produced the correct one, you will need to overwrite the previous details with the new ones. 

Example – employee handing in the wrong P45 by mistake

Liz leaves a job in May 2024, takes a new job and then leaves that job in November 2024. When she starts her most recent job, she gives the employer the P45 from May by accident. She should give her new employer the P45 from November as soon as possible. 

Late Starter Checklist

Use your employee’s Starter Checklist to update their starter declaration within your payroll system. Keep using the original 0T tax code until HMRC send you a new one.

More information

Information on telling HMRC about a new employee, for example what to do if your employee has more than one P45, can be found on GOV.UK. There is more information to help you get things right in these employer resources:

• help card on collecting personal details,
• help card on the Starter Checklist and
• a resource pack.

Detailed guidance for paper filers can be found in booklet RT7 – Guidance for employers exempt from filing Real Time Information online.