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harmerbrownlara-
April 22, 2022
Solved

Hello. I take a monthly wage from my part time business. I currently pay an accountant to do my payslips and work out the tax. Does anyone know how to do this myself?

  • April 22, 2022
  • 1 reply
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How to generate and work out tax with HMRC reference for paying?
Best answer by paul72

Hi @harmerbrownlara- 

 

I hate giving 'it depends' as an answer but... it depends!

You need to check how the accountant is (has been) classifying the payments.  Replicating it should then be quite easy.

 

The most likely is that the payments are being classed as Dividends (similar to Drawings above).  As a shareholder of a limited company there is a (slight) tax benefit to taking money out as a dividend (a distribution of profits after corporation tax has been paid).

Entering the Dividend payments into QBO is very similar to entering Drawings.

 

However, it's also possible that the payments are classed as PAYE (straightforward wages) but this wouldn't have the same tax advantage.

You would also have to report each payment under RTI (but this can be done using HMRC's free Basic PAYE Tools), pay monthly PAYE/NIC contributions & enter these all into QBO.

1 reply

paul72
paul72
April 22, 2022

Hi @harmerbrownlara- 

 

This really depends on how much you take out, how the accountant reports the payments & how the business is structured.

 

If you are running the business as Self-Employed (& not a Limited Company), your accountant is probably not reporting the wage as a wage in the usual sense.  By that I mean as a PAYE employee.

It is probably classed as Drawings - i.e. a drawing against the yearly profits.

In that case, there is no need for a payslip & no tax calculation per se (the tax is calculated on the yearly profits & this wage is drawing against those after-tax profits).  In QBO it is simply a payment from Bank to Drawings account.

 

You just need to make sure to retain enough cash to pay the tax bill when it comes!

 

If the business is a Limited Company, the arrangements are different & a bit more complicated.

 

Hope this helps.

H
harmerbrownlara-Author
April 22, 2022

Thankyou for your help. The business is a Ltd company. I only take a few hundred each month currently as I work 34hrs for the nhs. How complicated would that be? 🤔 

paul72
paul72Answer
April 25, 2022

Hi @harmerbrownlara- 

 

I hate giving 'it depends' as an answer but... it depends!

You need to check how the accountant is (has been) classifying the payments.  Replicating it should then be quite easy.

 

The most likely is that the payments are being classed as Dividends (similar to Drawings above).  As a shareholder of a limited company there is a (slight) tax benefit to taking money out as a dividend (a distribution of profits after corporation tax has been paid).

Entering the Dividend payments into QBO is very similar to entering Drawings.

 

However, it's also possible that the payments are classed as PAYE (straightforward wages) but this wouldn't have the same tax advantage.

You would also have to report each payment under RTI (but this can be done using HMRC's free Basic PAYE Tools), pay monthly PAYE/NIC contributions & enter these all into QBO.

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