Tax when starting, leaving or retiring from work

Tax can seem complicated when your work situation changes or you start your first job. But taking time to get the paperwork right can help you avoid paying too much or too little tax.

On this page:

If you're starting your first job

If you haven't got a P45, your new employer may give you a Starter Checklist to complete, or ask you relevant information before your first payday to tell HM Revenue & Customs (HMRC) about you. This will help your employer allocate a tax code and work out the tax due on your first payday. HMRC will process the information you have provided on the Starter Checklist and where necessary, revise the tax code. It's important that you complete the Starter Checklist or provide the relevant information your employer has asked for as soon as possible before your first payday, so your employer knows what tax code to use. If you don't you could end up paying the wrong amount of tax. You can also complete and print a copy of the Starter Checklist by following the link below. Give it to your employer; do not send the checklist to HMRC.

Starter Checklist - to gather information about new employees

Your employer uses your tax code to work out how much tax to take off your wages through the PAYE (Pay As You Earn) system.

What tax you'll pay

For the 2014 to 15 tax year there are three main rates of Income Tax:

  • 20 per cent on income up to £31,865 (basic rate)
  • 40 per cent on income between £31,866 and £150,000 (higher rate)
  • 45 per cent on income of £150,001 or more (additional rate)

Nearly everyone who lives in the UK gets a tax-free Personal Allowance. This is the amount of income you can receive without having to pay tax on it. Your tax-free Personal Allowance is spread equally over the tax year.

Starting your first job - tax and National Insurance

Get basic information about Income Tax

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If you're changing jobs

When you leave a job where you've paid tax through PAYE, your employer will give you a P45. Give it to your next employer so they know what tax you've paid so far this year. It'll help them make sure you won't pay too much tax in the future.

If you've lost your P45, your employer may ask you to complete a Starter Checklist. The checklist will ask you relevant information before your first payday to tell HMRC about you, help your employer to allocate a tax code and work out the tax due on your first payday. HMRC will process the information you have provided on the Starter Checklist and where necessary, revise your tax code. It's important that you complete the Starter Checklist or provide the relevant information your employer has asked you for as soon as possible before your first payday, so your employer knows what tax code to use. Give the completed Starter Checklist to your employer. Do not send the checklist to HMRC.

A 'Starter Checklist' contains important details that affect the tax you'll pay, like:

  • your National Insurance number - HMRC use this to identify you
  • whether you've been claiming Jobseeker's Allowance, Employment and Support Allowance or Taxable Incapacity Benefit - or you started getting a pension since the beginning of the tax year
  • whether you've got a second job
  • whether you're paying off a student loan

If you change jobs often

It's really important to make sure you provide your employer with a completed Starter Checklist or provide the relevant information your employer has asked you for straightaway if you can't get a P45. If you don't you could end up paying too much tax.

If you're a student and you work part-time, see the section 'If you're a student and working'.

Employee tax and National Insurance

Find out what your tax code means

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If you've got more than one job

If you start a second job without giving up your other one you won't get a P45, therefore you should ask your new employer for a Starter Checklist to complete or provide the relevant information your employer has asked you for, but you must let them know you've already got another job. You don't have to tell them where you're working or how much you're earning. Your employer will send the relevant information to HM Revenue and Customs (HMRC) so they can set up a record for you and review your tax code. You must not send the Starter Checklist to HMRC yourself.

You'll have a tax code for each employer telling them what tax allowances you get. Your Personal Allowance will normally only apply to your main job.

To avoid paying too much tax you can ask HMRC to split your Personal Allowance between your jobs. For example, if you don't pay tax on your earnings from your first job you can use any spare Personal Allowances against your other job or jobs.

If you've got several sources of income that are taxed through PAYE it can get confusing. Check your payslips carefully to make sure you're paying the right amount of tax.

Find out how to check your tax if you get more than one tax code

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If you're leaving a job

Make sure you get a form P45 from your employer when you leave. Your employer should automatically give you a P45 when you stop working for them. If not, ask for it - you're entitled to it by law. If you start a new job you'll need to give your P45 to your new employer. They'll use it to work out your tax.

Employee tax and National Insurance

If you're claiming benefits after leaving a job

If you are starting to claim Jobseeker's Allowance or Employment and Support Allowance after leaving your job, you'll need to give your P45 to the Department for Work and Pensions (DWP). They'll use it to pay you any tax refund you're entitled to either when your claim finishes or at the end of the tax year if you are still claiming.

Claiming a tax refund when you start work

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If you're a student and working

If you're a student, from 6 April 2013 employers will no longer use the P38(S) process, your employer will operate PAYE (Pay As you Earn) to deduct Income Tax and National Insurance from your wages. Although the P38(S) process has stopped, nearly everyone who lives in the UK is entitled to an Income Tax Personal Allowance. This is the amount of income you can earn or receive each year without having to pay tax on it. The Personal Allowance for the tax year 2014 to 15 for someone born after 5 April 1948 is £10,000.

Personal Allowance - find out more

Reclaiming tax if you've overpaid through your job

Ways you pay Income Tax

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If you're starting self-employment

You must let HMRC know as soon as you become self-employed - even if you already fill in a Self Assessment tax return. If you don't do this you may have to pay a penalty.

You'll fill in a tax return each year, giving details of your earnings and any other income so HMRC can work out how much tax you have to pay.

You can register for self-employment and Self Assessment by calling our:

Newly Self-employed Helpline

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If you start working after claiming jobseeker's allowance

When you stop claiming Jobseeker's Allowance or Employment & Support Allowance to start work for a new employer, DWP will check the amount of tax paid against your taxable income including the amount of Jobseeker's Allowance or Employment & Support Allowance you've received. They will refund you any overpayment and issue a P45(U) or P45(ESA) if you've claimed Employment Support Allowance which you should give to your new employer.

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If you're retiring from work altogether

When you retire you must let HMRC know if you'll be getting a company pension.

If you're starting to get a company pension

Your employer will send HMRC a P46(PEN) Notification of Pension Starting form and give you a copy to keep. HMRC will use the information to give you a new tax code and make sure you pay the right amount of tax.

Look up form P46(Pen) (PDF 54K)

Read about pensions, benefits and your tax code

If you're not getting a company pension

Your employer will give you a P45. If you're starting to receive a personal pension (not from your employer) you should send your P45 to your pension company.

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More useful links

Employee tax and National Insurance

Staring your first job - tax and National Insurance

Get information about PAYE forms P45, P46 (Starter Checklist), P60 and P11D

Find out how to report changes which might affect your Income Tax

Check you're paying the right amount of Income Tax

Find out how to correct mistakes in your Income Tax

Redundancy - guidance for employees

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