Employers that take on a new employee need to work out which tax code and starter declaration to use in their payroll software. Incorrect tax codes can lead to the new employee paying more tax than is due.
The necessary information can be collected from the employee’s P45 or by asking the new employee to complete HMRC's new starter checklist (if they do not have a recent P45). A number of changes have been made to the new starter checklist from April 2020 to make it easier to complete.
The information collected must be held in the employers’ payroll records for the current year and the 3 following tax years. The new employee's tax code must be sent to HMRC using a Full Payment Submission (FPS) on or before the new employee’s first payday.
The required information usually comprises the following, the employee’s:
- date of birth
- full address
- start date
From the employee’s P45:
- 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.