Tagging the payment to PAYE from the bank will enter the movement from bank to PAYE on Quick File, the final wages/salary journals need to be entered after you run your payroll, this is in order to take into account both tax and national insurance contributions on the P&L Account and Balance Sheet. I have prepared a worked example, along with the steps to follow below:
1. EXAMPLE:
Lets take an example of a payroll report processed through payroll software:
Gross wages = £1000.00
Employers NIC = £49.50
Employees NIC = £42.36
Tax = £42.60
NET WAGES = £915.04 (tagged directly from the bank to ‘NET Staff Salaries Paid’:
2. TAGGING FROM BANK:
a. Tag Net Salaries Paid:
Click ‘Tag Me!’ next to this item, followed by ‘Salary, dividend or other drawings’, enter the 'Recipient’s Name’and click ‘Save’. .
b. Tag the PAYE/NI Payment:
Click ‘Tag Me!’ next to this item, followed by ‘Tax payment to HMRC (e.g. VAT, PAYE or Corporation Tax’, on the next screen select ‘PAYE Liability’ under 'What type of tax is being paid? and finally click ‘Save’.
PERIOD/ MONTH END PAYROLL JOURNAL:
Salary/wages payments tagged from the bank will debit ‘NET Staff Salaries Paid’ on the P&L, this is because ‘Gross Wages’ includes both PAYE and employees national insurance contributions, therefore the final wages/salary journals need to be entered as shown in the example below:
You can access the journal system through the full chart of accounts (COA) from your dashboard by clicking ‘Reports >> Chart of accounts’ from top navigation menu option, followed by ‘New Journal Entry’:
If you now check the balances on the ‘Chart of Accounts/Trial Balance’ you can see the balances are correct with no PAYE/NI or Net Wages Liability on the Balance Sheet, see the example below:
