Processing payments to HMRC for income tax

[HMHill]

Hi All,

Just wondering if anyone has recorded payments for HMRC for income tax and how they have allocated them?
On the bank feeds, there is an option for HMRC but the only two options are PAYE Liability or VAT.
How can you allocate them for income tax?

Thanks in advance

[rhc]

Hi, are you a sole trader? If so, income tax is a drawing and recorded as a transfer between accounts and choose your drawings account.

Hope this helps

[HMHill]

Thanks for the reply. Yes sole trader but new to doing my own accounts!
@rhc

Thanks for the info - wasn’t aware of that.

I’d like to keep the amounts seperate from any personal draws (just for my own records) so am I correct in thinking I could therefore create a different account (under the same group as a drawing account) but name it something like Income tax paid and use that to transfer the amounts to?

[rhc]

As far as I know you can create a separate account for that but you have to exclude it from your business accounts like p+l and balance sheet.
I personally wouldn’t create an account for that. If you have paid HMRC from your business bank account you could add a note to the transaction in your bank account; you can also change the whole description from the transaction to reflect the meaning of that transaction but you have to tag it to drawings (or to the account you want to create).
The self-assessment income tax payment is your personal responsibility not the responsibility of your business and should therefore not show up as such.
Hope that makes sense and helps

[HMHill]

@rhc - thank you! You’ve been really helpful.
Haven’t bothered creating a new account, just tagging the payments to my normal drawings account but adding a note to them so I can filter through if I ever want to.