I’m getting my year-end sorted out and I found that I have a payroll payment for the first year which was actually made in the second year. E.g. year end is June, and I ran payroll in June, but the payment wasn’t made to the director until July, so when I tag the payment as a director salary (7001) it appears in the second year’s PL account. Whilst I’m sure I should have just done the payment in June, what can I now do in QF to ensure the payment gets recorded in the correct FY?
You should have net wages payable in balance sheet from year one if you have recorded payroll journals correctly, tag July payment to net wages a/c in balance sheet not P&L
When I tag a transaction as director’s salary I think it journals it through net wages anyway. Is the issue in my case that journal through net wages to directors’ salaries is all on the same date, and I somehow need to split the journal when the salary doesn’t get paid on the date payroll is run?
To complicate matters, some of the salary was paid in a non-GBP currency, which even though tagged as Directors’ salaries it doesn’t journal through net wages, so I guess I’ll have to create a journal for this manually?
I’m working my way through undoing my payroll transactions and doing them this way. I have noticed that I need to untag all bank transactions in all currencies, set up the journals as shown on the support page, then go back and retag the bank transactions as salary payments.
However I’ve noticed some things that don’t line up (note this is moving beyond the original topic of the thread):
Payments to HMRC are typically done as one lump, total NI + PAYE combined, and when I tag the bank transactions as PAYE then the PAYE code gets overloaded, so I guess I need to do some journals from the PAYE account to the National Insurance one?
I originally tagged bank transactions for the payments into the pensions as Employers Pensions, but now looking at the payroll support page journal example, I presume I need to tag these transactions to Pension Fund?
I’ve done the above and things look tidier now, so I hope that was the right thing to do!
Any other tidying up I should be aware of when recording payroll manually? It would be helpful if the support page could be updated to explain some of the above things.
You’re falling into the common trap of treating “PAYE” as a synonym for “income tax”, but it isn’t. The PAYE nominal is where your payday journals should put all liabilities that are settled through Pay-As-You-Earn, which includes income tax, employees’ NI deductions, employer’s NI contributions, student loan repayments, etc. etc. It’s a catch all for all the things that you pay to HMRC as part of your once a month PAYE payment.
There may be a separate balance sheet nominal labelled “national insurance” but this is generally only used for NI liabilities such as class 1A that are not part of the regular PAYE cycle and are instead settled by their own separate payments to HMRC.
I’m not sure why the support example splits the different PAYE liabilities into separate nominals on the balance sheet, that just makes things far more complicated than they need to be.
This is a similar situation as with the PAYE nominal above - the “Employers pensions” code is a P&L code that represents the additional cost of employer contributions on top of the employee’s gross wages, whereas “pension fund” is a balance sheet code representing your total liability to the pension provider for both the employer and employee contributions. Your payroll journals would typically debit employer pensions with the employer contribution, and credit “pension fund” with the sum of the employer contributions plus the amount you have deducted for the employee’s own contributions when calculating their net pay.
When you pay the combined contributions over to the pension provider those bank transactions are tagged to “pension fund” to net off the liability that was created by the journals.
Thanks for correcting my terminology on PAYE. However, on “National Insurance”, that’s the terminology used by Quickfile in the example journal here: Recording payroll
If I follow that example, PAYE account always ends up in credit due to everything being paid to HMRC in a single transaction, and National Insurance account ends up negative. Is the support page example wrong?
Thanks for the explanation on pension bits, that confirmed my understanding.
I would say it is wrong, yes. Given everything PAYE is a single liability settled in a single payment it makes no sense to split them up in the journals.
Given net wages of W, income tax T, employer NI of N1, employee NI of N2, employer pension contributions of P1 and employee contributions of P2 my payroll journal looks like
silly me… thanks