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 by asking the new employee to complete HMRC's new starter checklist and / or from the employee’s P45. This information must be held in the employer's payroll records for the current year and the 3 following tax years. Once the information has been collated, HMRC’s online tool can be used to work out the employee’s tax code.
There is also an online tool that can be used to work out any new employee's tax code correctly. This information 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.