Directors Loan & PAYE

[Phillip_Morgan]

Hi All,

I have taken a small directors loan and I am trying to pay it back. I use PAYE to pay myself and have added a PAYE deduction for repaying the loan. Example:

Gross Pay : £240.00
Less Loan Deduction: £40.00
Less Tax: £40.00
Nett Pay: £160

How do I add the deduction into my accounts? Is the done through the Journal system, and if so, would someone be able to show me an example?

Thanks in advance all!

[ian_roberts]

Presumably you’re already doing payroll journals for your normal PAYE setup before you added in the loan repayment element. Assuming you tagged the taking of the loan as a bank transfer to the Director’s Loan account (so credit bank, debit director’s loan), then the repayment would be a credit line on that same account, i.e. you credit £40 less to “net salaries” in the payroll journal and add a credit line of £40 to director’s loan to balance it.

An alternative if you don’t want to mess with the payroll journals (if you have them generated automatically by your payroll software) would be to create a transaction on the director’s loan to pay the full £200 net salary from there, then tag the actual £160 outgoing payment from the bank as a transfer to director’s loan. This has the same net effect, leaving director’s loan £40 lower than it was before.