Every new employee needs to be set up in payroll before their first payday. If they bring a P45 from their previous job, it gives their tax code and pay to date. If they do not, or the P45 is from an earlier tax year, the employer uses HMRC’s starter checklist instead.
The three statements
The employee chooses one statement:
| Statement | Meaning | Tax code used |
|---|---|---|
| A | first job since 6 April, no taxable benefits, State or Occupational pension or Jobseeker’s Allowance | the current emergency code on a cumulative basis |
| B | this is now the only job, but they have had another job since 6 April (or received certain benefits) | emergency code on a non-cumulative (week 1/month 1) basis |
| C | they have another job or a pension | BR (all income taxed at the basic rate) |
HMRC may later send a different code; use the newest one received.
Student and postgraduate loans
The checklist asks whether the employee has a student loan not fully repaid, which plan they are on (1, 2, 4 or 5) and whether they have a postgraduate loan. Set these up from the answers; if the employee is unsure of the plan, HMRC will issue a notice (SL1 or PGL1) and that takes priority. Deductions start from the next payday after the employer receives the instruction.
Other details to collect
- full name, date of birth, address and gender, as on official records;
- National Insurance number, if known (do not delay the first FPS if it is not);
- start date and pay frequency;
- bank details for net pay;
- right-to-work check evidence, kept outside payroll.
The first FPS
The first FPS for the new employee includes their starter details and the starter declaration (A, B or C). HMRC uses it to match or create the employment record. Send it on or before the first payday, as for any FPS.
Common problems
- Employee leaves the checklist blank: use statement C (BR code) until the information arrives.
- Two employees with the same name and date of birth but no NI number: check addresses carefully; mismatches create duplicate records.
- A P45 arrives after the first payday: use it if it is for the current tax year and the code on it is more favourable or more accurate.
When the employee is a director
Directors are set up the same way, but their National Insurance uses an annual earnings period. Mark the director status and appointment date in the software so NIC is calculated correctly from the first pay.
The checklist form and guidance are on GOV.UK: starter checklist for PAYE. For leavers, see final pay for leavers; for loan deductions, student loan deductions.