In this section:

When an employee leaves or retires

This guide explains the PAYE procedures you'll need to follow and the forms you'll need to fill in, if one of your employees leaves your business or retires.

On this page:

When an employee leaves
When an employee retires
PAYE tax and NICs on payments to an employee who's leaving
Help and advice
More useful links

When an employee leaves

When an employee leaves, you must update the form P11 or equivalent payroll record you've been maintaining for them and complete and file a form P45.

Updating the employee's P11 or equivalent record

If you've had to keep a form P11 or equivalent record for the employee who's leaving, the only change you need to make is to enter the employee's leaving date. If you are using:

the free HM Revenue & Customs (HMRC) P11 Calculator - which is part of the Basic PAYE Tools package - enter the employee's leaving date by updating their record in the employee database
commercial payroll software, the steps to take may differ from package to package - check the instructions or ask your software provider
a paper form P11, you should enter the leaving date in Box

Where to get HMRC's free P11 Calculator

A set of Basic PAYE Tools are now available to download straight to your computer. In addition to the P11 Calculator, the tools include:

an employer database on which you can record your employees' details
a range of other calculators that work out, for example, statutory payments
interactive forms such as P11D working sheets
a Learning Zone - including interactive material on how to use the Basic PAYE Tools

Download Basic PAYE Tools from the Business Link website (Opens new window)

Completing a P45 for the employee

You must complete a form P45 for any leaving employee for whom you've had to keep a form P11 - and remember - almost all employers must file this form online. Part 1 of the form is sent online to HMRC and you must then print and give parts 1A, 2 and 3 to the leaving employee.

The information required on form P45

The basic information you need to enter includes:

Your Employer PAYE reference.
The leaving employee's name, address, National Insurance number, date of birth, gender and works/payroll number. Make sure that you provide the employee's full forename(s) and surname and that they are spelled correctly. Check that you provide the correct date of birth and that this has been verified from an official source such as a birth certificate or passport; always provide the correct National Insurance number.
The employee's date of leaving and their tax code.
An indication of whether you've been making student loan deductions from the employee.

You'll also need to include details of the employee's earnings and tax deductions.

If the employee is on a cumulative tax code, then you'll need to provide both:

their overall pay and tax totals for the tax year so far, including from any previous employments during the year
their pay and tax figures relating only to their work for you during the tax year, if these differ from the employee's overall totals for the year

If the employee is on a week 1 or month 1 code, then provide their tax and pay figures relating only to their work with you in the current tax year.

File your PAYE in-year forms online: P45, P46, etc

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When an employee retires

The PAYE procedures that you need to follow when someone retires depend on whether or not you'll be paying them a pension.

If you won't be paying the employee a pension

If an employee retires and you're not going to be paying them a pension, you'll need to fill in a P45. Do this as you would for any employee who's leaving (see above).

If you will be paying the employee a pension

You don't need to complete a P45 if you're going to be paying a pension to a retiring employee. As you'll carry on paying the employee, HMRC doesn't treat them as having left your payroll.

However, you will still have to contact HMRC to provide the following information within 14 days of an employee's retirement:

the employee's name, address and National Insurance number - make sure that you provide the employee's full forename(s) and surname and that they are spelled correctly; ensure that you provide the correct National Insurance number
their retirement date
their total pay from you in the current tax year up to their retirement date
the tax you've deducted from their pay for the tax year so far
the pension that you'll be paying them each week or month

This information should be submitted to HMRC - and remember, almost all employers must file this form online. A copy must be provided to the employee.

If the employee continues in your employment and will also receive a pension from you

If you start to pay a pension to an employee who is to continue in employment with you, you should:

complete a form P46(Pen)
operate code 0T on a week 1/month 1 basis on the individuals pension payments
continue using the same code as before on the employment income

PAYE for pension and annuity payments

File your PAYE in-year forms online - including P46 (Pen)

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PAYE tax and NICs on payments to an employee who's leaving

Payments to an employee who is leaving or retiring are treated differently depending on whether they count as standard payments (such as salary, wages, holiday pay and bonuses) or one-off payments (including redundancy payments and retirement lump-sums).

PAYE tax on standard payments

In most cases you must work out, record and deduct PAYE tax as usual on any standard payments that you make to your employees when, or after, they leave your business.

However, if you have already completed a form P45 for the employee and you make a further payment to them, then you must take the following steps:

deduct PAYE tax using code 0T on a week one/month one basis
enter this as the amended code on the employee's form P11 or equivalent payroll record
enter the payment and the PAYE tax you've deducted on the employee's P11 or equivalent record
give the employee a letter showing the date of the payment, the gross amount, and the PAYE tax you deducted

NICs on standard payments

If you make a final standard payment to an employee at the time they leave your business, you must work out, record and deduct National Insurance contributions (NICs) in the normal way.

If you make the payment after the employee leaves, then the NICs treatment depends on what the payment includes:

if the payment is wages or salary, you should work out the NICs due using the normal earnings period and National Insurance category letter, and the contribution rates and limits current at the time of payment
if the payment is an irregular payment - such as an unexpected bonus or accrued holiday pay - you should use the usual rates, limits and National Insurance category letter, but with a weekly earnings period

You'll find more detailed information and examples in the HMRC publication CWG2, 'Employer Further Guide to PAYE and NICs' - use the link at the bottom of this guide.

PAYE tax and NICs on one-off payments (including redundancy payments)

Different types of one-off payments to employees leaving your business are treated differently, and separate rules apply for working out the PAYE tax and NICs due:

for PAYE tax purposes, some types of leaving payment are tax-free, some taxable in full, and some taxable only above £30,000
for NICs purposes, one-off leaving payments are either wholly taxable or wholly tax-free

For a list of the PAYE tax and NICs rules for the most common types of one-off leaving payments, (such as redundancy and payments in lieu of notice), read the HMRC publication CWG2, 'Employer Further Guide to PAYE and NICs' - use the link below.

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Help and advice

If you can't find the information you need, you can ask a question through our email query service.

Send an email query about completing form P45

Alternatively you can get advice from HMRC's Employer Helpline.

Find contact details for HMRC's Employer Helpline