P45 or P46
Every new employee needs either to give the employer a P45 from preceding employment or complete a P46 immediately on starting the new job. The employee can complete a P46 on screen. We will establish a tax code according to PAYE procedures and HM Revenue & Customs will make any amendments to the code which may be necessary. If a P45 should be received later we will update the information brought forward from the previous employment ready for the next pay day. Changes in the tax code will be advised to us, and also directly to the employee, by the tax office. The employee's tax office is the one which administers the employers' payroll scheme.
Tax free band
There is a tax free band of provided it is the employees only job. They make a declaration about this on the P46.
Please double check that the correct tax code is being applied. Particularly the new starter tax code. This appears as “Tax code:” in the top right hand corner of each pay slip. The normal code is . If, however, the employee has another job (or pension) where they are being given their personal allowance (tax free pay/tax code) the code with you should be BR, basic rate, which results in all pay being taxed at .
Employees who over-claim their personal allowance will receive a tax bill after the end of the tax year and are likely to blame their employer for the mistake. There could be circumstances in which the employer has to pay the under-deductions.
If employees should feel that they are paying too much tax they can contact the tax office and obtain a PAYE code which will enable adjustments to be made in the payroll. This will not affect the overall cost to the business provided that the salary is based on a gross amount.
HMRC guidance - P49 Paying someone for the first time 6.27MB.