What to do when an employee leaves

You need to tell HM Revenue and Customs (HMRC) when one of your employees leaves or retires, and deduct and pay the right tax and National Insurance.

What you need to do

If the employee is leaving in the current tax year (before the next 6 April) and you will not be paying them a pension, put their leaving date on their payroll record when you last pay them.

Make deductions as normal when you send your next Full Payment Submission (FPS).

If you pay an employee for the last time but they’re leaving in the next tax year (on or after the next 6 April), do not put their leaving date in the same FPS as their final payment. Include them in your first FPS in the new tax year with:

  • their leaving date
  • ‘0’ in the ‘Pay and tax in this period’ field
  • ‘0’ in the ‘Year to date’ field
  • a ‘Payment date’ of the FPS payment date for the period

You must give your employee a P45 when they leave. If you’re exempt from filing your payroll online, you can order copies of P45s from HMRC.

If you did not report an employee leaving

If the employee left in the current tax year and you did not report it in the month they left, include them in your next FPS with:

  • their leaving date
  • ‘0’ in the ‘Pay and tax in this period’ field
  • the last reported figures of pay, tax, National Insurance and other payroll information in the ‘Year to date’ field
  • show the ‘Payment date’ as either the current FPS payment date or the last date the employee was paid
  • add ‘H’ (correcting an earlier payroll report) as your reason for reporting late if the ‘Payment date’ you entered is not the current FPS payment date

If the employee left in the tax year 2023 to 2024, send an FPS for the previous year showing the correct year to date information, if your software supports it.

If you gave the wrong leaving date

If you put the wrong leaving date in your FPS, update your payroll records with the correct date. Do not report the amendment in your next FPS as this may create a duplicate record for the employee.

If you’ve reported an employee’s leaving date in your FPS and they carry on working for you:

  • use the same payroll ID if you have not given them a P45 yet, remove the leaving date and do not put a new start date
  • give them a new payroll ID if you’ve already given them a P45

Follow the guidance for correcting payroll errors if you need to change any other previously reported payroll information.

Paying a company pension

If you’re paying a pension to the employee:

  • do not include their leaving details in your FPS as they’re still on your payroll
  • use a different payroll ID for the pension payments, showing on the FPS that the payroll ID has changed and giving the previous payroll ID
  • give the full annual amount of the pension
  • use the employee’s existing tax code on a ‘week 1’ or ‘month 1’ basis until you receive a new code from HMRC, or on a cumulative basis if the first pension payment is in the new tax year
  • put ‘Yes’ in the ‘Occupational pension indicator’ field for each pension payment
  • give them a retirement statement showing their employment details up to their retirement date

Do not deduct National Insurance from the pension payments if your scheme is registered with HMRC. You should deduct tax in the normal way.

Paying statutory maternity, paternity or adoption pay

You must continue paying statutory maternity, paternity or adoption pay until the end of an employee’s statutory leave, even if they stop working for you. You should agree one of the following with the employee:

  • give them a P45 when they stop working for you, then deduct tax on the remaining statutory payments using code 0T on a ‘week 1’ or ‘month 1’ basis (use the code S0T if they’re taxed at the Scottish rate or C0T if they’re taxed at the Welsh rate)
  • use their usual tax code for the statutory payments and give them a P45 after you’ve made the final payment, recording the final payment date as their leaving date

Paying an employee after giving them a P45

If you have to pay an employee after they leave (including someone you’re giving a taxable redundancy payment over £30,000):

  • use tax code 0T on a ‘week 1’ or ‘month 1’ basis (use the code S0T if they’re taxed at the Scottish rate or C0T if they’re taxed at the Welsh rate)
  • deduct National Insurance (unless it’s a redundancy payment) and any student loan repayments as normal - but if it’s an ‘irregular’ payment like accrued holiday pay or an unexpected bonus, treat it as a weekly payment
  • report the payment and deductions in your next FPS, using the employee’s original ‘Date of leaving’ and payroll ID, and set the ‘Payment after leaving’ indicator
  • give the employee written confirmation of the payment showing the gross amount and deductions
  • add the additional payment in the ‘Year to date’ field if the payment is in the same tax year

The payment should be the only one in the ‘Year to date’ field if it’s being paid in the next tax year.

You must not give the employee another P45.

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