If an employee has left, you need to raise their P45 as soon as possible. Sometimes, however, there are payments due the following month such as bonuses, commissions etc. The employee may have already begun another job by then.
Here’s what to do:-
- Re-employ them within your payroll software and select the option to state they do not have a P45, a P46 or completed a New Starter Check List.
- Use tax code OT.
- Calculate their pay.
- Finish their employment and raise a further P45.
Tax Code OT
This tax code is used when the employee has, or probably has, used their tax free allowance. If the employee already has another job, their tax free allowance will be used by their new employer. There is another code which does a similar job – BR. BR taxes the employee at 20% on all their earnings. OT, however, takes into account the standard rate of tax and the higher rates of tax, which is important for higher earners.