Do you use the new HMRC starter checklist when taking on new employees? This form was updated in April 2019, and you should ask all new employees to complete it even if the individual presents you with a completed form P45.
Page 1 of the starter checklist asks the new employee to tick a box next to statements summarised as:
- this is my first job since claiming state benefits
- this is my only job
- this is second concurrent job or pension.
If all choices are left blank, you should choose option C for your new employee. In that case your payroll software will give the employee a PAYE code of OT/1. This generally leads to the employee being over-taxed as no tax-free Personal Allowance is given in the PAYE code.
Please help your new employees to complete the starter checklist correctly, as some people may not understand the language used. HMRC can take months to issue a correct PAYE code, and during that time your employee may be short of cash and unhappy.
Do you download any new PAYE codes using your payroll software before each payroll run? Most PAYE codes are delivered electronically, and you need to check whether new codes have been issued to your employees.
HMRC is actively checking up on employers who are not using the correct PAYE code for each of their employees. If you notice a problem with a PAYE code, such as an incorrect name or NI number, report it to HMRC as soon as possible.