Understanding the Starter Checklist (P46)
Why the Starter Checklist Matters
For UK contractors, starting a new assignment often means joining an umbrella company as your employer. In this scenario, you may be asked to complete a Starter Checklist (previously known as the P46). This document is not mere formality: it determines your initial tax code, ensuring you pay the correct amount of tax from day one. Without it, you risk being placed on an emergency tax code and potentially overpaying.
“The Starter Checklist is fundamental to a contractor’s financial wellbeing when changing roles or employers. Fiscal prudence demands getting this right from the start.”
Key Facts About the Starter Checklist
Purpose: To provide your new employer with the information HMRC requires to assign your correct tax code.
When Required: If you cannot provide a P45 from your previous employment.
Who Needs It: Any new employee or umbrella worker in the UK without a P45.
Where to Access: Available online via the official government website.
P45 vs. Starter Checklist
If you have a valid P45 from previous employment, simply provide it to your new employer or umbrella company. There’s no need to fill in the Starter Checklist. However, many contractors moving from a limited company to umbrella employment rely on their accountant to issue a P45. If you do not have one, the Starter Checklist becomes mandatory.
Summary Table
| Scenario | Document to Provide |
|---|---|
| Have a P45 from previous employer | P45 |
| No P45 available | Starter Checklist (P46) |
Completing the Starter Checklist
The Starter Checklist is clear, but accuracy is crucial. It asks you to select one of three employee statements, each with significant tax implications. Here’s what they mean:
Statement A
When to use: You have not received any other taxable income since the start of the tax year.
Outcome: You are assigned the standard tax code and receive the full personal allowance (£12,570 for the 2024/25 tax year).
Statement B
When to use: You have received other taxable income since the start of the current tax year.
Outcome: You’ll be assigned a temporary non-cumulative tax code (M1 or W1), which does not account for previous income or tax paid. HMRC will issue an updated code after reviewing your details.
Statement C
When to use: You are currently receiving another source of taxable income and are not eligible for a personal allowance.
Outcome: You will be placed on a BR (Basic Rate) tax code, and all your income will be taxed at 20%. This can lead to underpayment if not updated in due course.
Quick Reference:
| Statement | Choose if… | Tax Code Assigned | Consequence |
|---|---|---|---|
| A | No other taxable income this tax year | 1257L | Full personal allowance |
| B | Other taxable income received this tax year | M1/W1 | Temporary code, full review pending |
| C | Another job or pension, no allowance due | BR | Flat 20% tax, may underpay overall |
What If You Select the Wrong Statement?
Selecting the incorrect statement can result in:
Overpaying tax: Choosing a higher-tax scenario than applies to you.
Underpaying tax: Which may lead to bills from HMRC later in the year.
It is your responsibility to ensure the information is correct. If in doubt, consult your accountant or contact HMRC directly. Mistakes can be rectified, but prompt action is essential to avoid unnecessary complications.
Best Practices When Starting a New Contract
Check if you have a recent P45: Provide it to your umbrella company if available.
If not, complete the Starter Checklist: Use the official form online.
Select your employee statement carefully: Review your income history since the start of the tax year.
Keep records: Retain a copy of your submission for reference.
Monitor your payslips: Check that the correct tax code is applied and contact your employer or HMRC if discrepancies arise.
The Conservative Case for Compliance
Fiscal responsibility is a cornerstone of professional contracting. By ensuring your tax affairs are correct from day one, you avoid inefficiency, unexpected tax liabilities, and administrative headaches. The Starter Checklist may seem minor, but it is a crucial step in upholding the integrity of the tax system and your own financial stability.
Next Steps
Have a P45? Submit it to your new employer or umbrella company.
No P45? Complete the Starter Checklist before your first payroll is processed.
Uncertain? Contact HMRC or a qualified accountant for guidance.
For contractors seeking clarity or support on the Starter Checklist or umbrella employment, professional advice is always recommended. Stay informed, stay compliant, and protect your interests as you begin your next contract.
