What is a P45 tax
A P45 is a tax form used in the UK. The employer gives the employee upon termination of the employment contract. The P45 is a part of PAIA (pay as you earn system). Under income tax, income tax and contributions to National insurance (NIC) and deducted from the wages of individuals and paid the income of Its Majesty and customs (hmrc) on behalf of the employee.
P45 provides a record of the amount of tax and insurance paid by the employee from the beginning of that current tax year up to and including dismissal. P45 usually requested a new employer, when a person is going to start work.
Breaking down the ‘P45 tax’
The contents and format of the P45
P45 gives information about the amount of income received and the total amount of tax paid from the date of the end of the tax year. It also includes information about existing Tax code of the individual. The employer uses the Tax code to calculate the amount of tax to be withheld from the employee’s salary.
Having the correct information ensures that the employee will not overpay or underpay their tax. In addition, it helps to facilitate assessment, the individual has the right to a tax rebate. P45 contains information about outstanding student loans.
The P45 is a four-part document that must be prepared by the former employer on termination. They represent Part 1 to Hm revenue and customs (HMRC). The other three parts are given ex-employee. The man who will keep part 1A and gives parts 2 and 3 to their new employer for reinstatement. The new employer then retains Part 2 and Part 3, to register new employee to hmrc.
Starting work without a P45
Given that the P45 is the document received upon completion of work, the man begins his work, most likely do not have this form. Instead, the form is called a starter checklist, which is available from HMRC will be used by the employer to gather the necessary information. The document allows you to register a new employee and evaluation of the correct Tax code for the employee.
The process described above can also be used in the case of an employee who has lost his P45 with a form, a replacement is not available.
The Importance P45
Having a P45 allows for smoother, more accurate fulfillment of tax requirements with your new employer. This form is also used in the process for applying for the Dole at the labour exchange (PE) in the case that the person does not immediately move to a new job. In addition, P45 is used to obtain tax refunds.
The employer is legally obliged to provide a P45 to the employee upon termination of the employment contract. In cases where the employer failed to do so, the employee should contact hmrc. HMRC will contact the employer to obtain a P45 on behalf of the employee and may issue a tax credit certificate to ensure that the employee is not set to a high Tax code, known as ‘emergency tax’.
Emergency tax is applied when the STC does not have sufficient information on the physical income and tax liabilities. Those people who have not received a P45 from the employer will be emergency tax emergency tax but changes will be made after the P45 is available.
Overall, the p45 is a document that is an integral part of the system for paye (pay as you earn) is the basis of effective management of taxation between individuals, employers and hmrc.