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 a new employee paying more tax than is due.

Employers will require certain information from their new employee in order to ensure that the correct tax code and starter declaration information is entered on the payroll software. In most cases, all the necessary information can be found on the employee’s P45. It is important to remind new employees to bring this with them on their first day of work.

If the employee does not have a P45, the necessary information can be collected by asking the new employee to complete HMRC’s online starter PAYE checklist. A paper version can also be completed if the new employee is unable to use the online version.

This information must be held in the employer’s payroll records for the current year and the following three tax years. Once the information has been collated, HMRC’s online tool can be used to work out the employee’s tax code.

The starter checklist can be used by a new employee if:

• they have a student or postgraduate loan; 
• their personal details are different to those shown on their P45; 
• they do not have a P45; or
• they have been sent to work temporarily in the UK by their overseas employer. 

Once the checklist has been completed, the new employee should email, post or give the completed list to their employer. There is no requirement to send the checklist to HMRC.

Please contact us with any payroll questions you may have.

Internet link: GOV.UK