Tax payment

[Louise]

To record a tax payment to HMRC do you post it to drawings?

[brucedenney]

No

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The "proper" way to do it is to do a wages journal each month.

This puts the total cost of employing staff (wages + national insurance+ tax) into the P&L Account(s) typically 700X

The balance it splits into the control accounts in the Balance sheet, between PAYE, NI and Actual wages paid using 2010, 2011 and 2020 respectively.

The payments to staff go against 2020 brining it back to 0
The payments to HMCR go to 2010 and 2011 and bring it back to 0

As a variation of this it is quite common to merge NI and PAYE into one account 2010 and it simplifies things a bit more.

Some Payrolls will create this journal for you. the sage one will even post it into Line50 for you.

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The "improper" way to do this

Is to set up and extra P&L account for PAYE/NI say 7010 and post HMCR payments there.

And post the Wages Payments to 700X

The problem with this approach is that if you have wages split into several areas e.g. production staff and office staff, the additional costs of Tax and NI show up as a lump sum and not split between the different cost centres.