Payroll and Accounting integration

Summary

How to enable Sage Payroll integration in Sage Accounting.

Description

If you subscribe to both Sage Accounting and Payroll, save time when you pay employees and send salary details directly to Accounting.

Here we'll tell you

How to turn on the integration with payroll
How to choose whether to create a bank payment for your net wages or enter this as a liability
How we record your salary details, wage payment and pension payment

If you don't subscribe to both Accounting and Payroll, then you must enter your payroll journal manually. For more information, read Create a manual payroll journal article.

Resolution

How the integration with payroll works

Once set up, we create a journal every time you complete a pay run in Payroll.

The journal is always recorded using the default ledger accounts set up in Accounting.

If you want to record the journal using your own ledger accounts, then you may need to continue creating the journal manually. You may need to do this if you want to run more detailed reporting, or you want to use a different set of ledger accounts.

Nominal codes do not need to be the same as those listed below, you can create your own, as long as the ledger account is correct.

Set up the integration with Payroll

From Settings, select Apps & Connections.
Select Sage Payroll.
Select Enable Journals from Payroll.
Choose the Default Payroll Bank Account.
Choose whether to record your net wages as bank payment or as a liability.
Select Save to enable the integration settings.

NOTE: If you want to change your Payroll Integration settings, follow steps 1 and 2, and make your changes.

Record net wages as a bank payment

Save time by recording this bank payment automatically when you complete your pay run in Payroll.

Use this when you pay your employees from the same bank account. Also use this when you're happy to show this as a single payment, rather than individual amounts to your employees.

Just select Post employee net wages to the default bank account. Then choose the bank the payment will come out of
When you choose Record Payment / EPS from the Summary page in Payroll, the corresponding bank payment creates in Accounting

If you use bank feeds

Remember that the bank payment will also import from your bank.

To make sure you don't duplicate this payment, make sure you delete it from your bank feeds import.

To discard a transaction, just select the crossto the left of the transaction.

Record net wages as a liability

If you don't want to automatically record the bank payment, we record your total net wages against the 2220 - Net Wages ledger account. Just choose Post employee net wages to liability account.

You will also need to:

Enter a bank payment to show when you have paid your employees
Enter a bank payment to show when you have paid HMRC

▼Record the bank payment for your wages

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

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:
- For Ledger Account list, choose 2250 - Net Wages
- Choose No VAT for the VAT rate
- Enter the amount you paid the employee

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

▼Record the bank payment when you pay HMRC

When you pay HMRC, make sure you record the payment in your accounts. Make sure you record the payment against the correct ledger accounts. This is to ensure your accounts are accurate.

Whichever way you create the payment, you'll need to record it against various ledger accounts. This will depend on the breakdown of your liability to HMRC.

From Banking, open the required bank account.
Choose New Entry, then 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

Student Loan No VAT

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

If there is a negative amount, you're due to pay on your P32 in this period, you can either:

Adjust your P32, which moves the credit into the next P32 period. This can only happen in Quarters 1, 2 and 3 of the tax year (before month 12 of your tax year)
Request a refund from HMRC, if you're doing this in Quarter 4 of your tax year. Check that your bank details are valid and up to date with HMRC before requesting this refund

HMRC reserves the right to refuse a refund, if they have reason to believe a refund is not due to you or your business.

How payroll details are recorded in your accounts

When you record details of your payroll, the money you owe your employees in wages and the money you owe HMRC records as a liability on your balance sheet. This is 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 appears on your 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.

▼Salary details

When you complete your pay run in Payroll, we created the following journal in your accounts.

Code	Ledger Account	Description	Debit	Credit
Bank account specified in the		Total value of your net wages.		Credit
2210	PAYE to pay to HMRC	The total tax deducted. If you’re due a tax refund, this gets recorded as a debit and 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 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
2250	Net Wages	The total value of the employees take home pay.		Credit
2250	Net Wages	When you create the bank payment, this debits the Net Wages ledger account for the same value as the credit. This is to show that you've paid your wages.	Debit
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

▼Payment to HMRC

If you've chosen to record the bank payment (Post employee net wages to the default bank account), when you choose Record Payment / EPS from the Summary page in Payroll, we will also record the details of the payment you need to make to HMRC.

If you’re due a refund from HMRC in the period, you can choose to either take the refund or postpone it. Select:

P32 Adjustment. To move the credit to the next P32 period to offset liability. This option isn't available if you are in the twelfth month or the fourth quarter of a tax year. Or
Refund. Enter your bank details and submit the request to HMRC. Your bank details will update at HMRC, so be sure they are correct before submitting your request

Ledger account code	Ledger account	Description	Debit	Credit
Bank Account		Total owed to HMRC and should agree to the value on your P32. If you’re due a refund from HMRC, this posts as a debit.		Credit
2210	PAYE to pay to HMRC	Total Income tax.	Debit
2220	NIC to pay to HMRC	If you’re entitled to employment allowance or have statutory payments to recover, this is offset against this value and reduces your liability to HMRC.	Debit
7020	Employers NI	The amount of employment allowance you can reclaim, if applicable. If you’re entitled to claim employment allowance, this is offset against your employer’s NI contribution account as a credit.		Credit
7070	Statutory Maternity Pay	The total SMP reclaimed.		Credit
7080	Statutory Paternity Pay	The total SPP reclaimed.		Credit
7090	Statutory Adoption Pay	The total SAP reclaimed.		Credit

▼Pension payment

To help you keep track of your pension payments, record the payment of your pension when you complete your pay run, and we'll enter the following transactions to clear your liabilities.

Ledger account	Description	Debit	Credit
2260 - Pension	Total amount paid to the pension provider.	Debit
Bank account	Total paid to the pension provider.		Credit