Understand the HMRC starter checklist, where to find it online and the meaning behind statements A, B and C.
Friendly Disclaimer: Whilst I am an accountant, I’m not your accountant. The information in this article is legally correct but it is for guidance and information purposes only. Everyone’s situation is different and unique so you’ll need to use your own best judgement when applying the advice that I give to your situation. If you are unsure or have a question be sure to contact a qualified professional because mistakes can result in penalties.
What is a Starter Checklist?
The HMRC starter checklist is a .GOV form that replaced the P46 form back in 2013. It is used when new employees who start working for an employer don’t have a P45 but need to be added to the PAYE system.
The checklist helps the new employer to gather personal information and details on things like student loans so they can establish the best tax code to use for their new employee. The starter checklist contains boxes that need to be filled in so the employer can deduct the most accurate amount of income tax and national insurance in the absence of a tax code.
Although the code used may not be correct in many circumstances HMRC will send a correction and amendments can be made in later payslips.
Where to Find the HMRC Starter Checklist
You can find the Starter Checklist on the HMRC website. There is a printable paper version and an online version. However, neither version must be sent to HMRC. Instead, the form must be filled out by the employee and returned to their employer who will then send the appropriate information over to HMRC as part of their usual RTI submissions.
What are the Sections of the P46 Starter Checklist?
The starter checklist requests personal information about the new employee such as name and address. In addition, the employee is required to choose from three statements that best describe their personal tax situation. This enables the employer to put them on a suitable tax code (which may be an emergency tax code depending on the statement they choose). The employee must choose an option.
Starter Checklist Employee Statement A
Employee Statement A – This is my first job since 6 April and I’ve not been receiving taxable Jobseeker’s Allowance, Employment and Support Allowance, taxable Incapacity Benefit, State or Occupational Pension.
If the employee chooses statement A they’ll be placed on the standard tax code, which is currently 1257L for 2022/2023 (previously 1250L for 2020/2021) so that if they haven’t received or lost their P45 they’ll be entitled to receive the full personal allowance (tax free-pay). This statement tells the Employer that they have had no other forms of taxable income during the tax year and want them to give you all the tax-free pay you are entitled to. For example, if the employee is paid monthly, they’ll receive £1,047.50 (£12,570 ÷ 12) of tax-free pay each time they get paid.
If the employee has not had any other taxable income and start their job part way through the tax year, the employer will use this tax code to ensure that the new employee receives any previous personal allowance they were entitled to in their first pay packet. That could mean the new employee pays very little tax in the early part of their new employment, depending on their gross pay.
This box should not be ticked on the starter checklist unless the new employee is certain they haven’t received any other forms of taxable income, otherwise, they could end up owing HMRC money.
Starter Checklist Employee Statement B
Employee Statement B – This is now my only job but since 6 April I’ve had another job, or received taxable Jobseeker’s Allowance, Employment and Support Allowance or taxable Incapacity Benefit. I do not receive a State or Occupational Pension.
By answering yes to statement B on the starter checklist, the new employee will be placed on a W1 or M1 tax code which stands for week 1 or month 1, depending on whether they are paid weekly or monthly. This statement indicates that they have received other taxable income during the tax year that may affect how much personal allowance they are entitled to.
By using a W1 M1 tax code, employers avoid giving too much personal allowance to the new employee, leaving them in a position where they need to repay tax because they have received too much free pay which they may have benefitted from in their previous employment. The W1 or M1 tax code is a temporary code and it will be amended once the new employer receives an updated tax code from HMRC.
If an employee is placed on a W1 or M1 tax code and a correct code has not been issued then the first thing to do is for the employee to call HMRC on 0300 200 3300 to discuss their situation and get it changed. Remaining on a W1 or M1 tax code to the end of a tax year can mean that an individual end up paying too much tax and may be owed a refund.
Starter Checklist Employee Statement C
Employee Statement C – As well as my new job, I have another job or receive a State or Occupational Pension.
By choosing statement C on the HMRC starter checklist means the employer will put the individual on one of the following tax codes, depending on their gross pay, and that they will not receive any personal allowance:
- Basic Rate (BR) where all earnings are taxed at 20%
- Emergency tax (OT) where all earnings are taxed at 20%, 40% and 45% depending on how much they are paid
- D0 tax code where all earnings are taxed at 40%
If an employee feels that any of these tax codes have been assigned incorrectly or has not heard anything from HMRC in regards to correcting the code, then they must call HMRC on 0300 200 3300. The longer they leave it, the more tax they’ll be paying, although they will be entitled to get a tax refund, if owed, through their payslip once their employer gets an amended tax code.
Do You Need to Use HMRC Starter Checklist if You Have a P45?
No, you don’t need to use an HMRC starter checklist if a P45 is handed to the employer. This P45 contains all the information an employer needs to set up a new starter on payroll, with the right tax code. Any changes required to this tax code will be issued by HMRC directly to the employer.
HMRC Starter Checklist if You’re Self-Employed
Self-employment doesn’t count on the HMRC starter checklist. Statements A, B and C don’t make reference to being self-employed. If you tick statement A or B you’ll receive your personal allowance from your employer through your payslip. That means when you fill in your tax return to declare your self-employment income you’ll need to remember you will have already had the benefit of this allowance.
If you choose to tick statement C you’ll be put on a tax code that doesn’t give you any personal allowance through your payslip. That means you’ll need to wait until you fill in your tax return to get the benefit of your personal allowance.
Find out more about how tax works when you’re employed and self-employed in this guide, including how national insurance is calculated.