What to do when an employee leaves
When an employee leaves or retires, there are a few processes
you have to follow and forms to fill out to make sure you do
everything on the right side of the law.
- You have to fill out a P45 when an employee leaves
your company. It has four parts: 1,1A, 2 and 3.
- You need to fill in details of your employer and PAYE
reference, the employees' details, tax code, earnings and tax
deductions, their leaving date, and whether you've been making
student loan deductions for the employee.
- Once completed, you send part 1 to your local HMRC office
- You give parts 1A, 2 and 3 to the employee.
- You can fill out the P45 online, and if you have more than 50
employees you're legally required to do so. From April 2011, all
business will be legally required to fill out P45 forms
- Give parts 1A, 2 and 3 to employee and send part 1 to HMRC
Changes to their P11
- All you need to do to the employee's P11 when they leave is
enter their leaving date on it (unless they are exempt from needing
- You won't have any more information to enter into it after
- Keep the P11 and send the right info off to HMRC at the end of
the tax year as you would with any other P11.
Making final payments to an employee
- You need to apply normal PAYE rules to any standard payments
(final payments, holiday pay, bonuses, arrears of pay) as
- If you've already issued a P45 before these payments, you'll
need to use a special tax code - contact HMRC to find out which
- Deal with any expenses due as you normally would.
What to do if you are making an employee redundant
You need to charge income tax (through PAYE) on:
- Lump sums of more than £30,000.
- Any amount of more than £30,000 that an employee has won
through an employment tribunal (but not one any legal fees
- Any payment due to an employee who leaves under a restrictive
covenant such as not being allowed to work for a competitor.
- No NICs are due on redundancy lump-sums (although they still
are on other amounts, such as final wages due).
What to do if an employee is retiring
- If you're not paying the employee pension, you
simply fill out a P45 as you would for any other leaving
- If you are paying a pension, you don't fill out or
send a P45, as HMRC treat this situation as if the employee was
still on your payroll.
- You need to contact HMRC within 14 days to tell
them the employee's details, retirement date, the total pay they've
received from you in the current tax year up to their retirement
date, the tax deductions for them over the tax year, and the
pension you'll be paying them.
- You can use a P46 (Pen) to submit this info, or
you can use an email or letter, making sure you
provide all details needed.
- You need to give the employee a copy of either the
form or the correspondence.
- Any lump sums paid to a retiree may be exempt from
tax. Contact HMRC's pension schemes service enquiry line on
0115 974 1600 for advice.
P11: The worksheet form you use throughout the tax
year to record an employee's tax, pay and NICs.
What do I do if an employee has died?
Fill out a P45 for them and send all four parts to HMRC, giving
the name of their personal representative (if you know it) and
detailing how much money is owed to them. You owe any wages and
other payments you would as if they had left the company. You also
need to fill out details of any payments in their P11, as
What do I do if a former employee needs another copy of
their P45 or if I need to amend it at a later date?
You're not allowed to amend a P45 or complete another one for
someone once you've issued one so you need to contact HMRC.
What do I do if an employee leaves while I am paying them
statutory maternity, paternity or adoption pay?
You are legally obliged to continue paying them the required
amount until the end of their statutory leave, even if they decide
to leave the company before the end of this period. (See Resources
below for more help with this.)
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