Tagging Sole trader Tax/NI payments to HMRC

I have paid my first combined Tax/NI payment to HMRC since becoming self-employed. From the Bank Account I tagged it as PAYE, but not sure this was correct.
It now shows as an Asset on my Balance Sheet. I’ve checked out various other queries on this apparent anomaly but they all related to people with payroll, i.e. employee PAYE. I don’t have employees.
I still can’t see how to change it via a journal entry as it can’t be an asset.
Can you help please?

Hello @AnneL

I found this thread in the forum which may help.

If you’re talking about payments towards your own self assessment bill for tax and class 2/4 NI, then this is not a business expense at all and if you pay it with business funds you just tag it as drawings. You’ve drawn money from the business for personal use (which use just happens to be to settle your debt to the tax man).

The amount you owe is based (in part) on how much profit the self employed business makes, but the liability is yours personally.

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Sorry, Steve but I did look at this and it wasn’t much help. I don’t have payroll entries as I have no employees. I think I may have tagged my Tax/NI payment incorrectly but couldn’t find any other category.

Hello @AnneL

Is it as @ian_roberts said “payments towards your own self assessment bill for tax and class 2/4 NI”?

Thanks, @ian_roberts
It does help a bit and I can see if changing the nominal code with a journal entry will put it right.

Yes, @QFSteve, that’s correct.

If I change the nominal code category what should it be? There isn’t one called Drawings. Should it be 1202 Proprietors Drawings Account?

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Yes, that’s the correct account for a sole trader.

Yes, typically you use that account during the year to track movements of funds between “you” and “the business” (drawings where you take money for personal use but also cases the other way round where you use personal funds to pay for business expenses), then clear the balance from the drawings “bank” account over to the proprietor or partner drawings nominal under capital and reserves as part of your year end.

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