If you work in payroll, you’ve probably dealt with P45 leaving date problems before. It’s one of those common headaches, but don’t worry, here are some simple tips for handling it.
Getting the leaving date right
Let’s start with the basics.
The leaving date on a P45 should be the employee’s last working day. This isn’t always the same as their last paid day, which can cause confusion.
For example, if someone leaves halfway through March but gets paid for the whole month, their leaving date is still the middle of the month when they last worked.
Tricky situations we often see
Garden leave can be confusing. If someone is on garden leave, use the date it ends, not their last day in the office.
When paying someone instead of having them work their notice period, we should use their last working day as the leaving date. This is true even if we’re paying them for weeks after that date.
For example:
Sarah has handed her notice in, but due to the seniority of her role and long notice period (6 months) she is placed on gardening leave. Her last day in the office is 25th March but her leave date for her P45 is 25th September.
Ali has been made redundant but is not being made to work his notice, and will receive PILON (Payment in Lieu of Notice) for his 3 months notice period. His last day at work is 19th of May and he is paid on this day (including the 3 months notice). His leaving date for his P45 would be 19th May.
How to fix a wrong date
If you find out a leaving date is wrong, here’s what to do:
First, find out the right date. Check the paperwork you have – things like their resignation letter or emails about their last day. Talk to HR if you need to.
Then go into your payroll system and find their record. You’ll need to create a new P45 with the correct date. Make sure you mark it as a replacement so everyone knows this is the corrected version. Keep both the old and new P45s in your records, and write a note explaining why you made the change.
Don’t forget to update any other records with the new date. Your payroll system needs to show the correct information, and you might need to tell HMRC through your RTI submission.
Preventing it from happening again
The best way to avoid these problems is to have a good process. Before you create a P45, check a few key things:
- Ask HR to confirm when the person’s last day will be.
- Make sure you know about any garden leave plans.
- Check if they’re working their notice period or being paid instead.
Using your payroll system
Your payroll software should help make this easier. Use it to keep track of any changes you make to leaving dates. Write notes in the system about any corrections – you’ll thank yourself later if you need to check what happened.
Working with HMRC
HMRC needs to know when people leave through your RTI submissions. When you fix a leaving date, make sure this is included in your next submission.
When employees get in touch
Sometimes employees will contact you about a wrong leaving date. When this happens, be quick to respond, but take time to check your records properly. Tell them clearly what you’re doing to fix things, and keep a record of your conversations.
Double-checking your work
Before you send out a corrected P45, take a moment to check everything:
- Does the new date match what’s in your other records?
- Are the tax calculations right for the new dates?
- Have you updated everything in your system?
What if an employee loses their P45
Employers must NOT issue another P45.
Doing so will create significant problems for both the employer and employee.
For the employer, additional amounts of tax will be payable to HMRC, and for the employee, they will have an underpayment of tax and potentially a duplicate employment issue.
If the employee cannot locate the P45, all the employer can do is provide a written statement for the employee of the gross pay, tax deducted and code number used at the date of cessation of employment.
Helping your team get it right
If you’re managing a payroll team, make sure everyone knows how important accurate leaving dates are. Show them how to fix mistakes properly and when they should ask for help.
Getting P45 leaving dates right matters for both employers and employees. It affects people’s tax and their records for their next job. By taking care with the details and keeping clear records, we can get it right most of the time. And when we do make mistakes, we know how to fix them properly.
Remember, if you’re ever unsure about a leaving date, it’s better to spend time checking than to rush and get it wrong.
