Usually an employee is paid a net salary after certain taxes/deductions have been taken into consideration. What follows is a suggestion of how you might account for these various components.
As an example, let's assume that an employee gets paid monthly and that the following values apply:
|Amount paid to employee (a)||£1150|
|+ PAYE (b)||£250|
|+ Employee NI contribution (c)||£100|
|= Gross Wage on payslip||£1500|
|+ Employer's NI contribution (d)||£150|
|= Total Salary Cost to Organisation||£1650|
To reflect this in Accountsportal, you need to enter two transactions. Start with a General Payment transaction for the amount paid to the employee, followed by a Journal entry transaction to capture the taxes/deductions and show that they are payable to the HMRC at a later date.
Step 1: General Payment for amount paid to employee (a)
Enter a General Payment transaction transaction as per the instructions in the link above. The following fields need special attention:
- Type: Type of transaction being entered which should be General Payment.
- Amount (incl VAT): Enter the Amount paid to employee (a).
- Account: Enter the Salaries account.
- VAT Rate: Select 'No VAT'.
Step 2: Journal entry for payroll costs, eg. PAYE (b) and NI (c + d)
Enter a Journal entry to capture the taxes/deductions and show that they are payable to the HMRC at a later date. For more detail on entering journals view the instructions in the link above.
Line Item 1 Enter a Debit amount which raises the taxes as an expense in your books. The amount is the total of all (b) + (c) + (d). Enter this as a single line to the account of your choice (eg. PAYE) or split this line into multiple debit lines to enter each category of tax/deduction against its own account.
Line Item 2 Enter a Credit amount which raises the liability for the amount that needs to be paid to HMRC at a later date. The account to use is PAYE and NIC Payable.
Step 3: General Payment for amount owed to HMRC (b + c + d)
At some point you will need to pay the HMRC the total amount of PAYE and NI due to them. This can also be entered as a General Payment transaction. In the example below, it is assumed that the HMRC is paid monthly for taxes/deductions. If you only pay quarterly, then you should adjust the amounts as required. The entry against the PAYE and NIC Payable account creates a debit entry which offsets the credit amount entered in the journal above.
Type: Type of transaction being entered which should be General Payment.
- Amount (incl VAT): Enter the Amount due to the HMRC (b + c + d).
- Account: Enter the PAYE and NIC Payable account.
- VAT Code: Select 'No VAT'.