A P45 is the record your employer gives you when you stop working for them. It shows your leaving date, the tax code you were on, and the pay and income tax you have had from that job since 6 April. Its job is to let your next employer tax you on the year so far rather than on the new job alone, which is why handing it over promptly is the difference between a normal first payslip and an emergency-coded one.
What a P45 shows
A P45 is a snapshot of one employment at the moment it ended. It carries your name and National Insurance number, your employer's PAYE reference, the date you left, the tax code that was being used, and the total pay and total income tax for that employment in the current tax year.
It also records whether student loan deductions were being made, so your next employer knows to continue them.
It does not show your National Insurance contributions or your pension contributions. National Insurance is settled period by period and never carried forward, so there is nothing for the next employer to continue. The pay and tax figures are the year-to-date position rather than this job's alone, which is exactly why handing the form on lets the next employer pick the year up where it left off.
The parts, and where each goes
A P45 comes in parts, and they have different destinations. Your old employer sends the first part to HMRC. You are given the rest.
Part 1A is yours to keep. It is your own copy of the figures and is the one to hold on to, because a P45 cannot be reissued.
Parts 2 and 3 go to your next employer, who uses them to set up your record and to tell HMRC that you have started. If you are claiming benefits rather than starting work, they go to Jobcentre Plus instead.
Why it matters on your first payslip
PAYE is normally cumulative: each pay day your employer works out the tax due on everything you have earned since 6 April and deducts the difference from what you have already paid. That calculation needs the figures from your earlier job, and the P45 is what supplies them.
Without it, your new employer has no year-to-date position and has to start from a starter checklist or an emergency code. An emergency code gives you one pay period's allowance and no memory of the year, which usually means more tax to begin with and a correction later.
On £35,000 a year with code 1257L, a full tax year produces £4,486.00 of income tax and £28,720.12 of take-home pay. That is the figure the cumulative calculation is aiming at, and the P45 is what lets it aim correctly from your first pay day.
When you should get one
Your employer has to give you a P45 when your employment ends. It is a requirement of the PAYE regulations rather than a courtesy, and it applies however short the job was and however it ended.
In practice it usually arrives with or shortly after your final payslip, because the figures on it are only complete once that payment has been made. An employer who has to make a payment after the P45 has been issued taxes it under a separate rule rather than reissuing the form.
If it does not arrive
Ask your old employer first, and ask in writing if a reminder has not worked. A P45 cannot be duplicated, so an employer cannot send a second copy of one already issued, but they can provide a statement of earnings covering the same figures.
Meanwhile, fill in your new employer's starter checklist. It asks which of three statements describes your situation, and the answer decides the code you start on, so it is worth reading carefully rather than ticking quickly. The statement that says you have another job is what produces a BR code.
Once HMRC has your details from both employers, it issues a proper code and the year corrects itself through your pay.
What else a P45 is used for
It supports a claim for a tax refund where you have stopped working and have no other income for the rest of the year, because it shows what you were paid and taxed before you stopped.
It is asked for when you claim certain benefits, and when you take money out of a pension, because the provider needs to know your tax position for the year.
It is also the only contemporaneous record of the tax code your old employer was using, which matters if a code turns out to have been wrong.
P45 or P60?
A P45 covers one job and stops on the day you left it. A P60 covers a whole tax year at a job you were still in on 5 April.
If you changed jobs during the year, your P60 from the new employer should include the figures your P45 carried across, so the two documents together describe the whole year. Where they do not add up, that is a sign the P45 never reached the new payroll.
How long to keep it
Keep Part 1A at least until you have a P60 for that tax year that reflects it, and keep it longer if the year involved more than one employer, a refund claim or a code you queried.
Because it cannot be reissued, a lost P45 is genuinely lost. The figures can be reconstructed from payslips and from HMRC's own record of what your employer reported, but neither is as quick as keeping the form.