What is P45?
A P45 is issued when an employee leaves a job. It shows their total pay and tax in the current tax year up to their leaving date, along with their tax code.
The new employer uses the P45 to apply the correct tax code and avoid emergency tax. Without it, the employee may be put on an emergency code until HMRC updates their record.
In practice
An employee leaving in September gets a P45 showing pay and tax since April; they hand parts to their new employer so PAYE continues on the right code.