FreeAgent, Employers Allowance & Payroll Journal Entries

[SimonMac]

I love FreeAgent, and it is a lot simpler than my old method of doing my own books, but there is one thing that I just can't get my head around, even though the numbers seem to work out correct on paper, it just doesn't make sense!

I use HMRC Basic PAYE Tools, so I need to add Journal Entries to FA to account for the payments.

According to the help I should have:

Debits:

Code 407 - 987.50 - Directors' Salary
Code 408 - 39.40 - Directors' Employer NIC's
Code 814 - 39.40 - PAYE/NI

Credits:

Code 902 - 953.24 - Salary and Bonuses
Code 814 - 73.66 - PAYE/NI
Code 408 - 39.40 - Employers Allowance

The numbers all add but, but it seems to me I am cancelling out the two entries in bold with each other, and it doesn't seem to effect anything other than just this this entry. All other balances stay exactly the same except now there are more transactions in 814 and 408!

Is it me or is this just a waste of effort?! (I mean the extra transactions, not doing it all myself as that has been done to death)

[Maslins]

Any good reason why you don't use FreeAgent's inbuilt payroll feature?!

[SimonMac]

Any good reason why you don't use FreeAgent's inbuilt payroll feature?!

I moved from Spreadsheet and HMRC Basic PAYE Tools mid financial year, added back in all past transactions (easy enough to do with bank reconciliation and journal entries) but didn't want to change PAYE until I was more comfortable with FA. Will swap to completely FA when at next year end

[Maslins]

Looking at the journal, yeah I think it's basically a case of "showing all your workings". Ie you could cut out a couple of the entries and achieve the same effect, but to an outsider it might be less clear why.

If you wanted to you could not only cut out your bolded transactions to 408, but also ignore the debit to 814 and only do a credit of £34.26.

[SimonMac]

Looking at the journal, yeah I think it's basically a case of "showing all your workings". Ie you could cut out a couple of the entries and achieve the same effect, but to an outsider it might be less clear why.

If you wanted to you could not only cut out your bolded transactions to 408, but also ignore the debit to 814 and only do a credit of £34.26.

That is how I had it originally, as the credit of £34.26 was what I actually paid HMRC, if the objective is to simple show my workings then fair enough, I am sure it matters somewhere but it's a small issue so one I am willing to keep doing until FA can take over the entire payroll

[ladymuck]

I use Sage One payroll and they too have (what looks like) unnecessary debits and credits which cancel each other out. You may find FA will still do that when you switch over.

[Sam B Dynamo Accounts]

The journals are correct

Hi SimonMac

The journals are correct, the reason it looks unnecessary is due the cancelling action in the beginning of the payroll year - it is best practice to log the transactions even though it seems fruitless at the time as if you are operating a large enough payroll you will run out of employers allowance in the tax year and when this happens it usually happens mid month giving a partial expense. There is a way to add payroll to FreeAgent mid tax year and account for previous salary/tax/NI - it would make your life a lot easier! (happy to talk you through it-no charge or hard sell I promise!!)

Can I ask if you're the only person on the payroll this tax year? Just wanting to save you a problem later in the tax year if you are.