Tax when you leave a job: P45 and final pay

When you leave a job, your employer should give you a P45 showing your leaving date, your pay and tax from 6 April to that date, and your tax code. Your final payslip pays what you are owed, including unpaid wages and any accrued holiday, with tax and National Insurance deducted as usual. Give the P45 to your next employer so they can put you on the right code from your first payday.

What your final pay includes

Your last payslip is made up of the normal salary to your leaving date plus anything else you are owed. GOV.UK says you pay tax and National Insurance on unpaid wages, holiday pay and bonuses that form part of a termination payment, and on any pay you get instead of working your notice. If you are being paid in lieu of notice, pay in lieu of notice explains how that is taxed. Redundancy payments have their own rules in redundancy pay tax.

Your employer takes the tax in your final payslip through PAYE. If you receive a termination payment after you have been given the P45, the employer uses a 0T tax code, which assumes you have used up your Personal Allowance for the year. That may take more tax than you owe.

Unused holiday

During your notice period you may be able to take what is left of your statutory annual leave. How much depends on how much of the leave year has passed or how much you have accrued. The only time you can be paid instead of taking statutory leave is when you leave, and employers must pay for untaken statutory leave even if a worker is dismissed for gross misconduct. If your employer gives more than 5.6 weeks, the extra can be agreed separately.

If you have taken more leave than you were entitled to, your employer must not take money from your final pay unless that was agreed beforehand in writing. The rule should be in your contract, handbook or intranet. The pay for unused holiday is taxable and appears on your final payslip. Entitlements are in holiday entitlement.

The P45

Your employer must give you a P45 when you stop working for them. It shows your leaving date, total pay and tax so far in the tax year, and your tax code, plus your personal details. With a paper P45 you give your new employer Parts 2 and 3 and keep Part 1A. If you start a new job and give them the P45, HMRC should automatically correct your tax code after your first pay.

If the pay or tax amounts are wrong, ask your previous employer to correct them and send an amended P45. If they will not, tell HMRC through the check your Income Tax online service. If you did not get a P45, ask for one. You cannot get a replacement for a lost one, but you can fill in the starter checklist instead.

If you are moving between public sector bodies, P45, P60 and P11D explained sets out when you will and will not get one. Without a P45 or checklist you will probably be put on an emergency code, which is covered in emergency tax codes.

If you are not starting a new job straight away

If you have been out of work for 4 weeks or more and are not claiming taxable state benefits, you may be able to claim back Income Tax in the current tax year using form P50. The same applies if you have retired and do not get a pension from your old employer, expect not to go back to work, or have returned to full-time study.

You cannot claim if you are still registered with an agency. You do not need the P50 if you expect to start a new job within 4 weeks, because your new employer will repay through your salary, or if you get a works pension, where the pension provider will repay. Check you have had your final pay first, and have Parts 2 and 3 of your P45 to hand.

If your last pay was before 5 April, the previous tax year’s refund is claimed a different way, which is covered in claiming a tax refund.

Taking your tax code to the next job

A new employer uses your P45 or starter checklist to choose a code. The checklist asks you to pick the statement that matches your situation, and that choice decides which code payroll uses until HMRC replies.

For public sector leavers there are other things to check. Leaving the NHS and leaving teaching cover pension and notice points, and the take-home pay calculator shows what your next salary should look like after tax.