Employee starting under RTI
What to do when an employee starts
The old system
The RTI system
What to do under RTI when an employee starts and they have a P45
What to do under RTI when an employee starts and they do not have a P45
Important note on personal information from the P45 or starter checklist
Late P45 or starter checklist given after the first pay day
More detailed information
Before RTI, when a new employee started, they would hand the employer a P45 from their previous employment. The employer would use the personal information on the P45 to set up a payroll record and use the tax code number on it, as well as the previous pay and tax details, to ensure as far as possible that the correct amount of tax and National Insurance continued to be deducted for that employee.
If the employee did not have a P45 they would complete a form P46 which would help the employer collect the personal information they needed to set up a payroll record and arrive at the tax code to be used.
The employer would then send the P45 or P46 to HMRC, or send the details electronically using the PAYE for employers online service.
Under RTI, a new employee may still bring a P45 with them from their previous job, however the employer no longer sends this (or a P46) to HMRC, but includes the details of the new employee on the next payroll “Full Payment Submission” (FPS) submission made.
The information you will require from the P45 to set up your new employee in your payroll records is outlined on GOV.UK and includes:
- full name
- National Insurance number
- leaving date from the previous employment
- tax code (including week 1/month 1, if appropriate)
- total pay and tax paid to date for the current tax year
- Student Loan deduction status (if applicable) – please note that if a new employee is repaying a student loan you will need to ask which plan type the employee is repaying under. Form P45 will only indicate whether a new employee is already repaying a student loan. It will not indicate a plan type.
You will need to work out which tax code to use for your employee. This depends on when they left their previous employer and their starting date with you. See the link on GOV.UK for a tool to help you work out the correct tax code to use for your employee:
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:
A. This is their first job since last 6 April and they have not been receiving taxable Jobseeker's Allowance, Employment and Support Allowance, taxable Incapacity Benefit, state pension or occupational pension.
B. 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 state or occupational pension.
C. They have another job or receive a state or occupational pension.
Please note that where the employee left their last job before 6 April 2015, the employee must choose the starter declaration category themselves.
You can collect the information that you require to set your new employee up in your payroll records by asking them to complete HMRC's new starter checklist.
Under RTI you are not required to send the new starter checklist to HMRC, however you need to keep the information on it safe somewhere for the current and following three tax years.
This information from the new starter checklist will help you work out which tax code to use and you can use the tool on GOV.UK. The answer to the question 'On their P45, when did your employee leave their last job?' will be ‘You don't have their P45'.
You will also need to find out if you need to deduct Student Loan repayments from their pay – there is a question about this on the new starter checklist. See our section on Student Loans for more information.
When setting up your new employee in your payroll software, you have an obligation to make sure your employee personal data is complete and accurate and so should no longer just use the information given to you on the P45 or starter checklist, but should try and verify it against an official document.
Essential personal data for RTI reporting includes:
Name – Use your employee’s FULL name: forename, middle name and surname in the correct order. Don’t abbreviate. For example Joseph Smith – do not abbreviate to Joe Smith.
Date of birth – Use the correct date of birth.
National Insurance number (NINO) – If, at the time of the payroll submission to HMRC you do not have their NINO, leave the field blank. See our guide here for more help on this.
Please note that if you assign a payroll ID to your new employee, the ID must be unique. So always use a different one each time, even if you re-employ someone, otherwise you could create a duplicate record and report payroll incorrectly.
A new employee may sometimes give their new employer a P45 or a completed starter checklist after their first pay day and so after an FPS submission has been submitted to HMRC that includes them.
The action needed will depend on whether the new employer has received a new tax code for the employee from HMRC:
If HMRC have sent you a tax code
Use the tax code that HMRC have sent you if your employee gives you a P45 or starter checklist after you have first paid them (although the instruction is to then destroy the P45 or starter checklist there is no harm in retaining a copy on the employee’s payroll 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.
If HMRC have not sent you a tax code
Use the employee’s P45 to work out their tax code and update their details in their employee record within your payroll software. If the employee left their last job after 5 April 2016, you should also update both the ‘Total pay to date’ and ‘Total tax to date’ fields in your payroll software for the first week you included this information. If your software finds errors, update the fields with the correct figures.
Late starter checklist
Use your employee’s starter checklist to update their starter information within your payroll software.
When you next pay your employee
Do not enter another start date on the Full Payment Submission (FPS), even if you have not reported a start date before.
Further information on telling HMRC about a new employee can be found on GOV.UK.