Salary journals are where you record all the information used to pay your employees. This includes: - Wage payments made to your employees
- Amount you have paid to HMRC for tax
- Employee costs.
We recommend that you complete your salary journals at the end of each pay period. To make sure your accounts are up to date, we also recommend you create the following: - A salary journal showing the amounts due for your wages, PAYE and national insurance. This is so you can track your employee costs
- A bank payment showing the amount paid to your employees. This is so your bank balance is up to date. You can reconcile with your bank statement
- A bank payment showing the amount paid to HMRC
Before you startFor 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
When you create the salary journal you will record details of your: - Payroll
- Net wages
- Money you owe HMRC in tax and insurance
These are all recorded as a liability on your balance sheet to show that this is money owed 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. These are on the the profit and loss report. These are all entered as a Debit value. Your liability clears when you record bank payments to pay your employees and HMRC. - From Adjustments, choose Journals. Select New Journal.
- Enter the pay date for the relevant pay period.
- Enter a reference and if required a description.
- Enter the relevant amounts as debits and credits as shown in the following table.
- Make sure you clear the Include on VAT return checkbox.
 NOTE: You can leave certain lines out of the journal if not required.
The following table shows the details of a salary journal: Code | Ledger Account | Description | Debit | Credit | | 2210 | PAYE to pay to HMRC
| The total tax deducted. If due a tax refund, record this as a debit. It's 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, post the value as a debit. It's 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 | If you have an employee with an attachment of earnings order, 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 show for each scheme. | | Credit | | 7000 | Employee Wages and Salaries | Total gross wages for all employees, not including statutory payments. | Debit | | | 7020 | Employers NI | The total employer NI contributions. | Debit | | | 7030 | Employer Pensions | Total employer pension contributions. | 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 | | Reclaim statutory payments If you can reclaim any statutory payments such as SMP, SSP or SAP, include the following lines: Ledger Account code | Ledger Account | Description | Debit | Credit | | 7070 | Statutory Maternity Pay | The total Statutory Maternity Pay reclaimed. | | Credit | | 7080 | Statutory Paternity Pay | The total Statutory Paternity Pay reclaimed. | | Credit | | 7090 | Statutory Adoption Pay | The total Statutory Adoption Pay reclaimed. | | Credit | | 2220 | NIC to pay to HMRC | The total of all statutory payments reclaimed this period. | Debit | Reclaim Employment Allowance If you claim employment allowance, include the following lines: Ledger Account code | Ledger Account | Description | Debit | Credit | | 2220 | NIC to pay to HMRC | The amount of employment allowance you want to claim. | Debit | | | 7020 | Employers NI | The amount of employment allowance you want to claim. | | Credit | 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 record the corresponding bank payment. This will make sure that you show your wages paid in your reports. You can import transactions from a bank feed or create the bank payment manually. In each case, make sure you choose the Net Wages ledger account. Make it easier for you to match with your bank statement. Create a separate line for each employee. - From Banking, open the required bank account.
- Choose New Entry, then click Purchase / Payment.
- Choose Other Payment then enter the date for the payment. This should be the same as your pay date.
- Enter the total amount paid for the pay period.
- Create a single line for the total or create separate lines for each employee with the following details:
From the Ledger Account list, choose 2250 - Net Wages.
Enter the amount paid to the employee.
Choose No VAT for the VAT rate. 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: | Ledger Account code | Ledger Account | Description | Debit | Credit | | Code for your bank account | Bank account | Total net wages. | | Credit | | 2250 | Net Wages | Net Wages. | Debit | When you make your monthly or quarterly payment to HMRC, you need to show this in your accounts. This is so you can reconcile the payment in your bank. The amount you owe reduces and shown on your reports. When you create the payment, you'll need to record it against various ledger accounts. This depends on the breakdown of your liability to HMRC. - From Banking, open the required bank account.
- Choose New Entry. Select Purchase / Payment.
- Choose Other Payment then enter the date for the payment.
- Enter the amount paid to HMRC.
- Add separate lines for tax, national insurance, and any student loan payments, if applicable.
| Ledger Account | VAT rate | | 2210 - PAYE to pay to HMRC | No VAT | | 2220 - NIC to pay to HMRC | No VAT | | 2230 - Student Loans | No VAT | | 7050 - Other Deductions | No VAT | Record this as a journal To do this you need to create the following journal: | Ledger Account code | Ledger Account | 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 Loans | Debit | | | 7050 | Other Deductions | Debit | | If your business makes use of the Employers NI allowance you can include the following two lines: | 7020 | Employers NI | | Credit | | 2220 | NIC to pay to HMRC | Debit | | [BCB:299:UKI - Personal content block - Dane:ECB] [BCB:302:UKI - Search override - Accounting UK:ECB] [BCB:276:UKI - hide back button:ECB] |