Our salary payments to our bank (director and spouse, same shared personal bank account) are a single payment comprising both salaries.
Let’s say, for illustration, that it’s a payment of £800 Director and £200 staff.
When I tag the bank transaction as a salary, I either have to select the whole amount as a Staff salary or a Director salary.
How can I split the account code when I tag it for £800 to code 7001 and £200 to code 7003?
If there’s no deductions for tax/NI/pensions then you can just use “something not on the list” instead of “salary”, which will then allow you to split it across codes.
All that actually does in the background is create a journal, which you could do yourself if you need more flexibility. Certainly, if you do have any deductions to make or any employer’s NI to account for then you would be better off making your own journal to put the net wages as a balance sheet credit on 2220, then in your account settings set “post net wages to balance sheet only” to “ON” and then the bank payment will balance off 2220 rather than posting to the expense codes directly.
The figures are net - i.e. the salaries are the take home pay of the director and staff after PAYE deductions which are paid to HMRC by the company in a separate transaction (obviously).
So, I think I understand correctly that I can use the ‘something not on the list’ method and assign the 7001/7003 codes split?
You’re getting into the realm where you would probably be better off doing a proper payroll journal and enabling the “post net wages to balance sheet only” thing.
You need to create a journal with the gross total before deductions as a debit on 7000 (for staff) and 7001 (for directors) and the employer’s NI (if any) as a debit on 7006, and then the credit side is split between 2220 (net wages) for what you owe to the staff and directors and 2210 (P.A.Y.E.) for what you owe to HMRC - employer and employee NI plus income tax. If there’s any pensions involved then similarly you’d have a debit for the employer’s contribution on 7007 and a credit on a balance sheet code (I use 2230) for the total owed to the pension provider for employer contributions plus employee deductions.
With this journal in place you can then tag the staff payment as wages (with no need to split as that’s already been handled by the journal) and the HMRC payment as tax → PAYE liability
Just so you know. You should be paying director salaries and employee salaries to the same account as separate transactions.
When HMRC come knocking, it will save you a lot of headache. Plus the added benefit is, you won’t have the issue you raised in future.
Thanks @Paul_Courtier, we will do this in future. I had no idea I was making life so difficult for myself.
Thanks @ian_roberts,
Maybe I should say that I’m using QuickFile as a means to reconcile the bank statement and to manage the VAT for MTD. I don’t think I’m too worried about whether QF prepares an accurate profit/loss balance sheet as my accountant does this currently; I thought that he could just pull the appropriate figures from the chart of accounts.
For the 5 ‘staff+director’ bank transfers that I have made so far, I’m wondering if it wouldn’t be simpler to tag the bank transfers with something else not on this list and split the combined total using 2220 net wages (for the staff) and 7001 (for the director’s salary). I would also tag the quarterly HMRC PAYE transfers as ‘PAYE Liability’.
(Although I will do future pay via a journal and separate bank payments as suggested).
Given the way I’m using QuickFile, would this work?
You could avoid the balance sheet altogether by tagging the bank payments as a split between 7000 (staff) and 7001 (directors), and the HMRC payment as a split between 7000/7001 (for the portion of the pay packet that was tax and empoyee NI deductions from gross) and 7006 (for the employer’s NI, if any), but in my mind this is less clear than doing one journal that clearly lists the total gross pay as a single figure for directors and one for staff and apportions it correctly to net and deductions on the balance sheet.
And doing it this short-cut way may also mean putting things in the wrong accounting year if, for example, you paid salary on 15th March, paid the PAYE liability to HMRC on 12th April, but your year end was 31st March - you really want the total gross pay before deductions in the earlier year’s P&L but you’d actually end up with the net portion in one year and the deductions portion in the next.
On balance I think I will take the short-cut route to deal with the few bank payments that I combined. There’s no end-of-year issue with those and I think I understand how to do it more robustly for the remainder of the year.
Thanks @ ian_roberts.
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