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From 6 January 2024, the main rate of class 1 National Insurance contributions (NIC) deducted from employees’ wages is reduced from 12% to 10%. From 6 April 2024, the main rate of self-employed class 4 NIC will reduce from 9% to 8% and class 2 NIC will no longer be due. Those with profits below £6,725 a year can continue to pay class 2 NIC to keep their entitlement to certain state benefits. Our guidance will be updated in full in spring 2024.

Updated on 6 April 2023

Leaving a job

We look at the tax implications of leaving your job and what you might need to consider.

Content on this page:

Introduction

When you leave a job, your old employer should complete form P45 and provide this to you. The form P45 shows your total pay and tax to date in the tax year for that job, and the final tax code that your employer used.

A form P45 has four parts. Your employer sends the information in part 1 to HMRC immediately or as soon as possible after the last pay date. Your employer should give you the other three (parts 1A, 2 and 3) as soon as possible.

No new income

You may leave your job, but not have any other new source of income during the tax year – for example, you may not be starting a new job, claiming benefits or drawing a pension.

In this case, you may be able to claim a tax refund before the end of the tax year, because it is unlikely that you will have used your full personal allowance. There is information about how to claim a tax refund on our page PAYE tax refunds.

Starting a new job

If you start a new job in the same tax year that you left your old job, then you should hand parts 2 and 3 to your new employer.

Keep part 1A of form P45 for your own records.

Once you receive your new tax code from your new employer, you should check that any items relating to your previous job have not been carried forward into your new tax code. For example, if in your old job, you received an adjustment to your personal allowance in respect of flat rate expenses for cleaning work clothing, but this is no longer relevant to your new job, then make sure the adjustment has been removed from your tax code. If you do not, you may underpay tax on your new employment income and face an unexpected tax bill once HMRC discover the error.

Starting to claim benefits

If you start to claim benefits when you leave your old job, you should give parts 2 and 3 of form P45 to your Jobcentre Plus office.

Keep part 1A of form P45 for your own records.

Starting to study

You may have given up a job to return to education. Most courses start from September, but the tax year runs from 6 April to 5 April so if you have been working from April to September and then you stop, it could be the case that you have not used all your personal allowance. If so, then you may be due a tax refund.

If you are not going to work again during the tax year, you may be able to claim a tax refund before the end of the tax year. Alternatively, you can wait, and claim a refund after the end of the tax year. For more information see our page PAYE tax refunds.

Redundancy

It may be the case that you have been made redundant; if so, you will need to understand how any redundancy payment may be taxed. See our page Redundancy for more information.

National Insurance contributions

If you are taking a break from working, then you may want to consider your National Insurance contribution (NIC) position. By paying NIC you have been building up your entitlement to certain benefits, such as the state pension.  However, by stopping work you may find that you have not made overall sufficient contributions. You can find out how much state pension you are expected to receive at GOV.UK, and based on this you may decide to make voluntary Class 3 National Insurance contributions. There is more information on NIC in our Tax and NIC section. Do bear in mind you may be eligible for National Insurance credits if you are claiming child benefit, for example.

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