What to do when an employee starts under the Real Time Information (RTI) reporting system
Before RTI, HM Revenue & Customs (HMRC) were alerted to the presence of a new employee by the completion of a separate form. The key thing to note about RTI, is that new starters are notified to HMRC via the main RTI submission (whether online or paper) – there is no separate paperwork to send to HMRC.
What to do when an employee starts and they have a P45
Paper filers – How to process your employee's P45 manually
What to do when an employee starts and they do not have a P45
Paper filers – How to process your employee’s Starter Checklist manually
Important note on personal information from the P45 or Starter Checklist
Late P45 or starter checklist
More detailed information
All employees who come to you from another job, or from a period on state benefits, should bring with them a completed form P45. The P45 contains the employee’s personal details and details of the pay they have received to date. It will also show the tax that has already been deducted since the start of the tax year to the date the last employment/period on state benefits ended. The P45 also contains the employee’s Student Loan position, leaving date and, importantly, the tax code operated by the previous employer.
These details are important as they provide a link for the operation of Pay As You Earn (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 and address
- date of birth and 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 under. Form P45 may only indicate whether a new employee is already repaying a Student Loan. It may not indicate a 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 the link on GOV.UK for a tool to help you work out the correct tax code to use for your employee (or see 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:
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 2017, the employee must choose the starter declaration category themselves (rather than you doing it as explained above). This information from your employee needs to be recorded (you can use HMRC’s Starter Checklist on GOV.UK to do this or they can provide this in a way that best suits you, for example in an email, on your own stationery – it is up to you to decide whether or not you need a signature) and kept safe for the current and previous three tax years. See our record keeping section here for more information.
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.
Where the details on the P45 relate to the current tax year, you should follow these steps:
- The tax code and total pay to date figure from the P45 should be noted down on RT11 (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 dedicated Employer Helpline (0300 200 3205) 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:
|Employee's date of leaving on P45||Employee's start date with you||Tax code on P45||Starter declaration declared by employee||Starter declaration to be selected by employer||Tax code to use|
|6 April 2018 to 5 April 2019||On or after 6 April 2018||Code other than BR, 0T or D prefix||Not needed||B||Use the tax code on the P45|
|6 April 2017 to 5 April 2018||6 April 2018 to 24 May 2018||Code other than BR, 0T or D prefix||Not needed||B||Use the tax code on the P45 – add budget increase of 35 to any code ending in L – for example 1150L becomes 1185L (but do not carry forward any W1/M1 markings from the P45)|
|6 April 2017 to 5 April 2018||On or after 25 May 2018||Code other than BR, 0T or D prefix||Not needed||B||Emergency code 1185L on a W1/M1 basis|
|Any of above dates||Any of above dates||Code BR, 0T or D prefix||Not needed||C||Use the tax code on the P45|
If the date of leaving on your new employee's P45 is 5 April 2017 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's date of leaving on P45||Employee's start date with you||Tax code on P45||Starter declaration declared by employee||Tax code to use|
|Before 6 April 2017||On or after 6 April 2018||Tax code on P45 not to be used||A||1185L|
|Before 6 April 2017||On or after 6 April 2018||Tax code on P45 not to be used||B||1185L on a W1/M1 basis|
|Before 6 April 2017||On or after 6 April 2018||Tax code on P45 not to be used||C||BR|
|Before 6 April 2017||On or after 6 April 2018||Tax code on P45 not to be used||None||0T on a W1/M1 basis|
An employee may not be able to give you a P45 if
- 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 and complete your FPS or RT11/RT2 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 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 will 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.
If the employee certifies in the Starter Checklist that this is his first job and that he has not been receiving taxable state benefits such as Jobseeker’s Allowance, you will operate the standard code 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 his only job but that he has had another job since the beginning of the tax year, or has received a taxable state benefit, then you should use the standard code, 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 his 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 he has another job, 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.
You can use the table below to confirm what tax code to enter into your RT11/RT2:
|On the Starter Checklist||Tax code to use (2018/19)|
|Box A ticked||1185L cumulative|
|Box B ticked||1185L Week 1 or Month 1|
|Box C ticked||BR cumulative|
|No box ticked||0T Week 1/Month 1|
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 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 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, middle name and surname in the correct order. Don’t abbreviate. For example Joseph Smith – do not abbreviate to Joe Smith.
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.
The action needed will depend on whether the new employer has received a new tax code for the employee from HMRC:
If 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.
If HMRC have not sent you a tax code
Use the employee’s P45 to work out their tax code and update their details within your payroll system.
Late starter checklist
Use your employee’s Starter Checklist to update their starter information within your payroll system.
Further 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.
Detailed guidance for paper filers can be found in booklet RT7 – Guidance for employers exempt from filing Real Time Information online.