When an employee leaves, retires or is made redundant

This guide explains the PAYE procedures you need to follow if one of your employees leaves your business, retires or is made redundant. You'll also find information relating to PAYE tax and National Insurance contributions (NICs) on payments made to an employee who is leaving your employment.

This guide does not cover what to do if an employee or pensioner dies. For further information about that, please follow the link below.

If an employee or pensioner dies

On this page:

When an employee leaves

When someone leaves your employment, you must:

  • include the date of leaving on the Full Payment Submission (FPS) when you make their final payment
  • give the employee a form P45

Find form P45

Updating the employee's payroll record

Whether you are using a commercial payroll package or HM Revenue and Customs' (HMRC's) Basic PAYE Tools, the only change you need to make is to enter the employee's leaving date. For details on how to do this, check the user guide for your payroll software or ask your provider for more details.

Late amendments

If an employee who has left your employment changes their mind, or you mistakenly take an employee off the payroll and have already notified HMRC on an FPS, you should take the following action.



You have not issued form P45

Continue making payments using the same payroll ID and submit an FPS - but remove the leaving date and don't enter a new start date.

You have issued form P45 which your employee hasn't given back to you

Treat the employee as a new starter and give them a different payroll ID with a new start date. Don't include their previous earnings and tax deducted to date on the FPS. You can use the original start date where this is required for contractual reasons, if they have been reinstated.

If the change relates to a merger or succession you must follow the relevant guidance.

If your business closes or changes

Late notifications

If an employee leaves your employment, but it doesn’t become apparent until sometime later, you should take the following action.



Reporting a leaving date only and the leaving date is in the current tax year

You must:

  • include them on the next FPS

  • show the leaving date

  • enter zeros in the pay and tax in this period field

  • enter the last reported figures of pay, tax, NICs, etc in the year to date field

  • show the payment date as either the:

    • current FPS payment date

    • last date the employee was paid and include a late reporting reason 'H' - correction to an earlier submission

Reporting a leaving date only and the leaving date is in a previous tax year

You should send either an:
• Earlier Year Update for that year
• FPS for the current tax year showing the current FPS payment date and report the date of leaving

Reporting a leaving date and making a payment after you have given the employee a P45

Include the date of leaving on the FPS that is used to report payment and set the ‘Payment after leaving’ indicator

Reporting a leaving date and correcting previously reported payroll figures Follow the guidance for correcting payroll errors and include the leaving date

Correcting payroll errors - current year

Correcting payroll errors - previous year


More guidance about the 'Late reporting reason' conditions can be found by following the link below.

What payroll information to report



When an employee is made redundant

Different types of payments to employees being made redundant from your business are treated differently. Some types of leaving payment are tax-free, some taxable in full, and some taxable only above £30,000. Most redundancy payments are tax-free up to £30,000 and not liable for NICs. Separate rules apply for working out the PAYE tax and NICs due. For NICs purposes, payments on redundancy are either wholly liable to NICs or not liable at all. Unpaid salary and holiday pay are treated as earnings for the purposes of tax and NICs.

For a list of the PAYE tax and NICs rules covering the most common types of one-off leaving payments, read the HMRC publication CWG2, ‘Employer Further Guide to PAYE and NICs’.

For taxable redundancy payments where you have shown the date of leaving on a previous FPS - and given the employee a P45 - report the payments as payments after leaving by completing the following steps:

  • deduct PAYE tax using code 0T on a week 1/month 1 basis
  • calculate NICs if appropriate - there’s information to help you work out if the most common types of one-off leaving payments are liable to NICs or not in CWG2 'Employer Further Guide to PAYE and NICs'
  • enter the amended code, including the payment and the PAYE tax and NICs you’ve deducted on the employee's payroll record
  • include this additional payment and the tax deducted on the FPS and in the pay and tax in this period - ensure the revised year to date figures include the additional payment. If you make a payment after leaving in a subsequent tax year the year to date figures on the FPS should only reflect the additional payment
  • give the employee documentary confirmation of the payment (for example a letter, payslip or other printable document) showing the date of the payment, the gross amount, and the PAYE tax you have deducted and confirmation that the payment is a post-leaving payment
  • include the details, set the 'Payment after leaving' indicator and show the original date of leaving on the FPS when you make the payment. You must not give the employee another P45

There's more information about redundancy on the GOV.UK website - see the link below.

Making staff redundant on the GOV.UK website (Opens new window)