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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.
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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.
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.
For the 2013-14 tax year there are three main rates of Income Tax:
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.
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:
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'.
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.
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. 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.
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.
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 2013-14 for someone born after 5 April 1948 is £9,440.
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', follow the link below.
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.
When you retire you must let HMRC know if you'll be getting 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.
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.