The P45 is a document presented to employees when they end their employment and contains information about tax and student loans. The requirement to issue the P45 when an employee leaves remains but the guidance has changed for the new employer for what to do with a late P45.
When a new employee joins your organisation
When a new employee joins your organisation you should ask them to complete a starter checklist and request a P45 if applicable. If the P45 is presented before the payroll is processed and FPS submitted then the details can be used. There are some rules about previous tax years and what to use but as long as the P45 arrives with the employee it is generally OK to use those values.
The new starter declarations
We would always suggest completing the starter declaration even if there is a P45. If the starter declaration is unknown we are effectively telling HMRC we are unsure but this employee may have another job or source of income. See here for our new starter form.
If the P45 is presented later (here is where things have changed)
If a P45 is presented after the first pay day but there had been no P6 issued then previously you could apply the tax code, previous pay and previous tax but the guidance has now changed. Previous pay and tax should now only be added if a coding notice is received directly from HMRC. As long as the tax code was derived from the starter declaration that should not be changed either but Student Loans can be added if indicated on a P45.
The starter declaration is the most important part to complete for new employees. It is not a problem if a P45 is late arriving and HMRC are frequently very quick to issue P6 updates to change employee tax codes and year to date values.