Employee leaving

What to do when an employee leaves under online RTI

If you are operating a manual payroll (paper) see our 'paper filing' section.

When your employee leaves you need to:

  • enter the date of leaving on the pay records
  • work out the final pay, tax and other deductions to be made
  • include the details in the Full Payment Submission you make to HMRC
  • give your employee a P45 (your payroll system will probably produce a P45 for you but if not, you can get one from HMRC).

The above list covers straightforward situations. However there can be more complicated issues such as when you have to make a payment AFTER your employee has left and you have given them a P45.

For more guidance on what to do in this scenario and others, see CWG2 Employer Further Guide to PAYE and NICs.

Essentially you:

  • use tax code 0T on a ‘week 1’ or ‘month 1’ basis and deduct National Insurance and any student loan repayments as normal – unless it’s an ‘irregular’ payment like accrued holiday pay in which case you treat it as a weekly payment.
  • report the payment and deductions in your next FPS, using the employee’s original ‘Date of leaving’ and payroll ID, and set the ‘Payment after leaving’ indicator
  • give the employee written confirmation of the payment showing the gross amount and deductions
  • add the additional payment in the ‘Year to date’ field if the payment is in the same tax year

The payment should be the only one in the ‘Year to date’ field if it is being paid in the next tax year.

You must never complete a further form P45 or amend a P45.

For more information on what to do when an employee leaves, see GOV.UK.

If you use HMRC’s Basic Payroll Tools payroll software (BPT), then you can find a guide that gives you step-by-step help on what to do when an employee leaves on GOV.UK. It contain examples of the screens you will see in BPT and simple to follow instructions.