Ensuring that a new employee pays the right amount of tax

As an employer you need to collect certain information from the new employee so that you can ascertain the correct tax code basis and deduct student loans where applicable.

The simplest way of doing this is for the new employee to either provide a part 2 and 3 of a P45 or complete a starter checklist.
The details of the new employee will be included on the Full Payment Submission (FPS) sent to HMRC. If a P45 is provided after the first FPS has been submitted, then we can only apply the tax code and previous pay/tax if we have not received a tax code update from HMRC.

It is therefore important, for a starter checklist is completed if the P45 is unavailable.

Employees obligations

Please ensure that the new employee has ticked one of the boxes; A, B or C as we often find no boxes are ticked which means we operate tax code 0T(x). This can lead to paying too much or too little tax.

Employers obligations

Furthermore, using the correct address on the first FPS is also important as HMRC use these details to verify the employee’s address. If the wrong details are supplied, this could result in HMRC systems being updated and correspondence being issued to the incorrect address. This could also cause issues with the Department of Work and Pensions when processing Universal Credit claims and issuing correspondence to claimants.

Get in touch

Should you have any queries relating to FPS or P45, please contact our dedicated payroll team, who have extensive expertise in employer and payroll matters.