Introduction
​What information do I need to determine the tax code?
​Using a P45 to determine an employee's tax code
​Uplifting an employee's P45 tax code
​Using a starter checklist to determine an employee's tax code
​After your employee's first payroll
​When receiving the employee P45
​

If you have a new employee joining your company, it is your job to determine the employee's tax code for their first payday.

When your new employee joins, the first thing you need them to complete is a Starter Checklist. This is an HMRC document that gives your employee 3 options to choose from for their employment status.

Next, your employee may give you a P45 from their previous employer. If your employee does not give you a P45 then you can work a tax code out from their Starter Checklist.

These are the only two documents that will be used to determine the employee's tax code for their first payroll.

If your employee has given you a P45 from their previous employer, you may be able to use this to determine their tax code.

Once you have checked the employee's P45 to decide if you can use it, the P45 tax code will take precedence over the code generated by the Starter Checklist.

If your employee's P45 relates to the last tax year, you can still use their tax code on their P45. However, should this be the case, you must do the following:

- Uplift the employee's tax code by the standard uplift for the current tax year. For example, if the standard tax code has uplift by 7 points for this tax year then 1250L would become 1257L.
You can see more details on the tax codes uplifts in this article.

- Determine the basis - i.e. M1 or cumulative based on the employee's start date with your company

Even if your employee has handed you a P45, you still need them to provide you with a Starter Checklist.
​https://www.gov.uk/government/publications/paye-starter-checklist

The Starter Checklist has 3 options for the employee. These must be recorded in the PayFit app as this is reported to the HMRC.

This is an extract of a Starter Checklist. The tax code you need is as follows:

Option A - Standard tax code for the current tax year

Option B - Standard tax code for the current tax year on an M1 basis

Option C - BR

If an employee does not provide you with a Starter Checklist or a P45, use tax code 0T M1.

Once your RTI has been submitted on or before your employee's first payday, the HMRC will determine if the employee is on the correct tax code. If the HMRC wants to amend your employee's tax code they will send this to you using a P6 Notice via your HMRC account.

You cannot request a tax code from the HMRC before your employee's first payday.

As soon as you receive the employee P45, look at Part 2 which is the Copy for new employer.

Then go to My employees section and look for the employee.

Then go to the Employment section and scroll down to Previous employment.

Activate the toggle "Does the employee gave a recent P45 with a tax code and previous employment data?", add the details that can be found on the P45 as Total taxable pay to date in previous employments, Total tax to data in previous employment, Most recent tax code and Save details.

⚠️ Please note that if on the employee's P45 Part 2 (Copy for new employer), the X is added for Week 1/Month 1, this means that, in the PayFit app, you will add the tax code followed by an X or M1 and no previous employment for Total pay to date and Total tax to date will be added.