Tell HMRC about a new employee

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1. Overview

You must tell HM Revenue and Customs (HMRC) when you take on a new employee and be registered as an employer.

Before you pay your new starter follow these steps.

  1. Check you need to pay them through PAYE.

  2. Get employee information to work out their tax code - if you do not have their P45, use HMRC’s ‘starter checklist’ (which replaced the P46).

  3. Find out if they need to repay a student loan.

  4. Use these details to set up your new employee in your payroll software.

  5. Register your employee with HMRC using a Full Payment Submission (FPS).

You must also follow the same steps as when you start employing staff for the first time, for example checking they can work in the UK.

2. Check you need to pay someone through PAYE

You usually have to pay your employees through PAYE if they earn £123 or more a week (£533 a month or £6,396 a year).

You do not need to pay self-employed workers through PAYE.

Working out if someone is an employee or self-employed

As a general rule, someone is:

  • employed if they work for you and do not have any of the risks associated with running a business
  • self-employed if they run their own business and are responsible for its success or failure

You must check each worker’s employment status to make sure they’re not self-employed. If you get it wrong you may have to pay extra tax, National Insurance, interest and a penalty.

Temporary or agency workers

You need to operate PAYE on temporary workers that you pay directly, as long as they’re classed as an employee.

You do not need to operate PAYE if a worker is paid by an agency, unless the agency is based abroad and does not have either:

  • a trading address in the UK
  • a representative in the UK

There are special rules for harvest workers or shoot beaters employed for less than 2 weeks.

Employees you only pay once

You operate PAYE differently for employees you only pay once.

Set up a payroll record with their full name and address. If you give them a payroll ID, make sure it’s unique.

When you send your Full Payment Submission (FPS):

  • use tax code ‘0T’ on a ‘Week 1’ or ‘Month 1’ basis
  • put ‘IO’ in the ‘Pay frequency’ field
  • do not put a start or leaving date

Give your employee a statement showing their pay before and after deductions, and the payment date, for example a payslip or a letter. Do not give them a P45.

Volunteers

You do not need to operate PAYE on volunteers if they only get expenses that are not subject to tax or National Insurance - check if their expenses are affected.

Students

Operate PAYE on students in the same way as you do for other employees.

3. Get employee information

You need to get certain information from your employee so you can set them up with the correct tax code and starter declaration on your payroll software.

You’ll usually get most of this information from the employee’s P45, but they’ll have to fill in a ‘starter checklist’ (which replaced the P46 form) if they do not have a recent P45.

You’ll need your employee’s:

  • date of birth
  • gender
  • full address
  • start date

From your employee’s P45, you’ll need their:

  • full name
  • leaving date from their last job
  • total pay and tax paid to date for the current tax year
  • student loan deduction status
  • National Insurance number
  • existing tax code

You must keep this information in your payroll records for the current year and the 3 following tax years.

If your employee does not have a P45

Ask your employee for this information if you do not have their P45, or if they left their last job before 6 April 2023.

The P46 form is no longer used.

Get the information by asking your new employee to complete HMRC’s new starter checklist.

If your employee has more than one P45

You should use the P45 with the latest date and give the other one back to the employee.

If they have the same leaving date use the P45 with the highest tax free allowance (or least additional pay for a K code) and give the other one back to the employee.

Work out your employee’s tax code

When you’ve got your employee’s information you can use a tool to:

  • work out their tax code and starter declaration
  • find out what else to do before you pay your employee for the first time

Work out your employee’s tax code

Employees you only pay once and secondments from abroad

There’s a different way to work out tax codes for employees who you only pay once or who are seconded from abroad.

4. Student loan repayments

You should make student loan deductions if any of the following apply:

  • your new employee’s P45 shows that deductions should continue
  • your new employee tells you they’re repaying a student loan or a postgraduate loan, for example on a starter checklist
  • HM Revenue and Customs (HMRC) sends you form SL1 or form PGL1 and your employee earns over the income threshold for their loan

What you need to do

You should follow these steps even if your employee has a P45 from their last job.

Ask your new employee if they have a student loan or a postgraduate loan - they may have both. If they finished their studies after 6 April in the current tax year, they will not start to repay their loan until the next tax year.

Record their answer in your payroll software. You do not need to calculate their loan recovery repayments - your payroll software will do this for you.

If your employee has a student loan, ask them to sign in to their repayment account and check which plan to use for deductions. They can contact the Student Loans Company if they’re still not sure.

If they cannot tell you, use Plan 1 in your payroll software until you get a student loan start notice (SL1).

Where the employee is on more than one plan, start deductions for the plan with the lowest recovery threshold until you get an SL1. Check the student loan recovery thresholds.

Report these deductions to HMRC when you pay your employee.

Special rules

In some cases there are special rules for making student loan deductions. Examples include:

  • you’re sent a court order to collect a debt directly from your employee’s earnings
  • you change how often you pay your employee, such as from weekly to monthly
  • the employee has more than one job with you and you need to aggregate earnings

Stopping deductions

HMRC will tell you if you need to stop making loan deductions from your employees’ pay. They’ll send you:

  • form SL2 for student loans
  • form PGL2 for postgraduate loans

Do not stop making deductions if an employee asks you to.

5. Registering your new employee

Register your new employee with HM Revenue and Customs (HMRC) by including their details on a Full Payment Submission (FPS) the first time you pay them.

On this FPS, include:

Giving your employee a payroll ID

You can assign payroll IDs to your employees. The ID must be unique - so use a different one if:

  • you re-employ someone - if you do this within the same tax year restart their year-to-date information from ‘£0.00’
  • an employee has more than one job in the same PAYE scheme

If you re-use a previous payroll ID, you’ll create a duplicate record and report payroll incorrectly.

Special rules

There are special rules for making deductions for:

6. Late P45 or starter checklist

You may need to update your payroll records if your employee gives you a P45 or starter checklist after you’ve registered them with HM Revenue and Customs (HMRC).

You only need a starter checklist from your employee to work out their tax code if either:

  • they do not have a P45
  • they left their last job before 6 April 2023

If HMRC has sent you a tax code

Use the tax code that HMRC has sent you if your employee gives you a P45 or starter checklist after you’ve first paid them. Deduct any student loan repayments from the date your employee started with you.

If HMRC has not sent you a code

Late P45

Use your employee’s P45 to work out their tax code and update their details in your payroll software.

If your employee left their last job after 5 April 2023, you should also update both of the following fields in your payroll software:

  • ‘Total pay to date’
  • ‘Total tax to date’

Do this for the first week you included this information. If your software finds errors, update the fields with the correct figures.

Late starter checklist

Use your employee’s starter checklist to update the starter declaration in your payroll records.

Keep using the tax code you used in your first Full Payment Submission (FPS) until HMRC sends you a new one.

When you next pay your employee

Do not enter another start date on the FPS, even if you have not reported a start date before.