Create a manual payroll journal

Salary journals are where you record all the information used to pay your employees. This includes the wage payments actually made to your employees, the amount you have paid to HMRC for tax etc, as well as keeping track of employee costs.

We recommend that you complete your salary journals at the end of each pay period.

To make sure your accounts are fully up to date, we recommend that you create the following:

• A salary journal showing the amounts due for your wages, PAYE and and national insurance. This is so you can accurately track your employee costs,

• A bank payment showing the amount actually paid to your employees, so your bank balance is up to date and you can reconcile this with your bank statement.

• A bank payment showing the amount paid to HMRC.

Before you start

For whatever payroll system you use, you'll need the following information for each pay period.

• Total PAYE (income tax)
• Total gross pay
• Total net pay
• Student loans
• Deductions and attachments
• Employee pension contributions
• Employer’s NI contributions
• Employees NI contributions
• Employer pension contributions, if applicable
• Any statutory payments made
• Any statutory payments reclaimed. If you reclaim statutory payments, you can get this value from the monthly P32 report.

Create the salary journal

When you record details of your payroll, your net wages and the money you owe HMRC in tax and insurance is recorded as a liability on your balance sheet to show that this is money owing by your business. These are all entered as a Credit in your payroll journal

The other half of the payroll journal records the costs to your business, and is reported on profit and loss. These are all entered as a Debit value.

Your liability is then cleared when you record bank payment to pay your employees and HMRC.

1. From More, choose Journals, then New Journal.
2. Enter the pay date for the relevant pay period.
3. Enter a reference and if required a description.
4. Enter the relevant amounts as debits and credit as shown in the following table.
5. Make the Include on VAT return checkbox is cleared, as this is not reported on the VAT return.

The following table shows the details of a salary journal:

Code	categoryt	Description	Debit	Credit
2210	PAYE  to pay to HMRC	The total tax deducted. If you’re due a tax refund, this recorded as a debit and is included in the credit for net wages.		Credit
2220	NIC to pay to HMRC	The total of employee and employer NI contributions. If you’re due an NI refund, the value posts as a debit and is included in the credit for net wages.		Credit
2230	Student Loan	The total value of student loan deductions made.		Credit
2240	Attachments	The total value of attachments deducted from employees’ net pay.		Credit
4900	Other Income	For each pay period where a calculation results in a deduction, you may take up to £1.00 from your employee’s earnings towards your administrative costs.		Credit
2250	Net Wages	The total value of the employees take home pay.		Credit
2260	Pension	The total employee and employer pension contributions. If you use more than one pension scheme, separate entries are shown for each scheme.		Credit
7000	Wages & Salaries	Total gross wages for all employees, not including statutory payments.	Debit
7020	Employers NI Contribution	The total employer NI contributions.	Debit
7030	Employer Pensions	If you have more than one pension scheme, separate entries are made for each scheme.	Debit
7050	Other Deductions	Total of any remaining employee deductions, excluding attachments and student loans.		Credit
7060	Statutory Sick Pay	Total SSP paid.	Debit
7070	Statutory Maternity Pay	Total Statutory Maternity Pay paid	Debit
7080	Statutory Paternity Pay	Total SPP paid	Debit
7090	Statutory Adoption Pay	Total Statutory Adoption Pay paid.	Debit

Record payments of wages to your employees

You can record this as a journal or as a bank payment.

Record the bank payment for your wages

Once you've paid your employees, you'll need to make sure your record the corresponding bank payment. This will make sure that you correctly show your wages as being paid in your reports.

Whether you import transactions from a bank feed or create the bank payment manually, make sure you choose the Net Wages ledger account.

To make it easier for you to match with your bank statement, consider creating a separate line for each employee.

1. From Banking, open the required bank account.
2. Choose New Entry, then click Money Out.
3. Choose Other Payment then enter the date for the payment. this should be the same as your pay date.
4. Enter the total amount paid for the pay period.
5. Create a single line for the total or create separate lines for each employee with the following details:
   1. For Ledger Account list, choose 2250 - Net Wages.
   2. Choose No VAT for the VAT rate.
   3. Enter the amount the employee was paid.

If you're entering separate lines for individual employees, check that the total matches your net wages for the pay period.

Record this as a journal

To do this follow the steps in the previous section and add the following information:

category code	category	Description	Debit	Credit
Code for your bank account	Bank account	Total net wages.		Credit
2250		Net Wages	Debit

Record payments to HMRC

When you make your monthly or quarterly payment to HMRC, you need to show this in your accounts so you can reconcile the payment in your bank and so the amount you owe is reduced and shown accurately on your reports.

Whether you create a payment manually or import via a bank feed or your statement, you'll need to record the payment against various ledger accounts, depending on the breakdown of your liability to HMRC.

1. From Banking, open the required bank account.
2. Choose New Entry, then click Money Out.
3. Choose Other Payment then enter the date for the payment.
4. Enter the amount paid to HMRC.

5. Add separate lines for tax, national insurance and any student loan payments, if applicable.

   category	VAT rate
   2210 - PAYE to pay HMRC	No VAT
   2220 - NIC to pay to HMRC	No VAT
   Student Loan	No VAT

Record this as a journal

To do this you need to create the following journal:

categorycode	category	Debit	Credit
Code used for the bank account	Bank account		Credit
2210	PAYE to pay to HMRC	Debit
2220	NIC to pay to HMRC	Debit
2230	Student Loan	Debit