Hi there, hopefully a simple question from a payroll novice with very rusty accounting knowledge... I run the books for a small charity as it's Treasurer. We have one employee, and I run the payroll through QBO. I am confused about the way in which NI has been treated. As we are a charity, the EPS credits any Employers NI, but the employee's NI is paid to HMRC as normal, though my confusion comes from when I have created an expense to pay this to HMRC. The Journal created when I run payroll lists the gross pay and then adds the employee's NI to the gross, giving what appears to be an incorrect total cost. My assumption would be that the journal would recognise that the actual cost to the charity is the net pay, plus the employee's NI that I pay as an expense the following month (which adds up to the gross pay listed on the pay slip, i.e. the physical cash that has left the business). I hope all of that makes sense, apologies if not but please ask for further info and I'll happily give it! Perhaps I should have amended the journal to account for the employee's NI, rather than an expense?
Solved! Go to Solution.
Welcome to QuickBooks Community, @Jaimie.
The system calculates contributions and deductions depending on how they are set up in the account. You need to check the employee’s profile to ensure the National Insurance Tax is added correctly.
Here’s an article about Director’s National Insurance in PaySuite for reference.
EE’s NI should be part of the paycheck’s net pay instead of adding it up to the Gross total. Since payroll in QBO is third-party, I recommend giving support a call for assistance in handling the corrections.
They can pull up your account in a secure environment and walk you through the steps in fixing the employee’s NI set up. Here’s how:
Leave a comment if you need anything else. I’m always ready to help. Take care!
It would depend on what payroll system you are using. If you are using Paysuite the Journal created lists the net pay as liabilities, on the debit side of the Journal. You will then have to create expenses, when you pay the employee, select Payroll clearing in the category column, when you pay HMRC, select Tax & National Insurance in the category, this will then negate the liability amounts posted to these accounts.
If you are using the QuickBooks standard online payroll the expenses for the employees net wages are generated automatically however you will still have to create the expense when you pay HMRC for the liability due for NI. In this system the liability is posted to the Payroll Liabilities HMRC which you will have to select when creating the expense.
Hi John C, thanks for the reply.
I think(!) I am using the standard QBO payroll as I don't see any reference to Paysuite; however, on raising the expense I am already assigning it to Payroll Expenses:Taxes (which is an account that QBO must have created upon activating the Payroll system). The point is that the expense is being added to my total Payroll for the month, apparently in error. Perhaps the following illustration will help to clarify my situation (using arbitrary numbers as an example):
Gross Pay: £830
Employers NI: £15 (which is automatically refunded via the EPS, so zero net cost)
Employees NI: £13 (this is what I need to pay HMRC as an expense)
Net Pay: £817
On raising the expense, my total payroll cost for the month is shown as £843, as opposed to the £830 that it should be, as the employees NI that I have paid to HMRC has been added to the gross pay.
I suspect that either there is an error QBO payroll, or most likely I am misallocating the expense in some way. When I get a moment I will contact support, as suggested by KhimG, unless you can see where I am going wrong from what I have written! Thanks again for your advice.
If you are using the standard online payroll the expense will already be created for the net wages, £817.
You will therefore have to create an expense for the NI which in your example is £13.00. As you have stated, if you have selected that you are entitled to to claim employers allowance in the payroll settings the payroll journal, if you haven't used up all your allowance, will show as 0 for Employers NI.
Where are you getting the figure £843 from?
Thanks again for the swift response, sorry the delayed reply!
The '£843' is showing as the total payroll cost, i.e. the employee's NI appears to be being counted twice...
Good to have you back, Jaimie.
I can share some pointers on why payroll cost is counting twice for NI in QuickBooks Online.
It's possible that the National Insurance Tax is incorrectly set up on your employee's profile. To better isolate the issue, you may want to double-check the tax calculation method, NI letter, status, and lastly review the previous pay run if there are changes were made.
If you'd like to go through this over the phone, you can call our dedicated team who will be happy to assist you. You can get our most-up-to-date contact number here: https://quickbooks.intuit.com/uk/contact/.
I'm including these articles to know more about the NI in QuickBooks:
For additional queries about National Insurance, feel free to drop me a reply below. Have a good one.
Thanks for the reply Rose.
I called the help line in the end, which sort-of helped explain what was happening.
The total payroll cost is actually including the Employers NI (on top of the Net Pay and Employees NI). This is normal, of course, unless you do not actually pay the Employers NI because of the EPS rebate (which applies in our case).
So, although the 'total payroll cost' is the Net Pay + Employees NI + Employers NI, a separate journal entry is being created by QBO payroll suite to effectively ensure the Employers NI is net zero.
The bit that confuses me is why, then, the total payroll cost still includes the Employers NI...? I haven't really gotten to the bottom of it, and I guess it's probably just a book-keeping thing but worry I will come unstuck at year end.
Hey-ho, probably why folks tend to pay professionals for this stuff!
As you have stated the payroll journal created shows the Employers NI and then a separate journal is created to negate the amount as a liability as you have enabled employers allowance.
When you run a report on the wages/payroll expenses chart of account it shows the gross wages amount which is made up of amounts in the credit column of the payroll journal but not the Employer NI amount or the Employer Pension Contribution.
Ah, thanks John, I see that now. Okay, so that's the Employers NI resolved...
...but when I run the report my total for Payroll Expenses I have the Gross Pay (which includes the Employee's NI) plus the expense raised when I pay HMRC the Employee's NI. So, as mentioned earlier in the thread, it looks like the Employee's NI is being counted twice?
Should I raise a separate Journal to counter this? Or should QBO payroll be intelligent enough to spot this, suggesting something isn't quite working as it should?
I hugely appreciate your input, by the way, thanks again for taking the time to help.
John, you legend! That has solved the problem.
I had the expense as Payroll:Taxes, but changing it to Payroll Liabilities:HMRC ensures that when I now run the Payroll Expenses report everything balances as expected. Unsurprisingly, a user-error after all...
Thank-you so much for patiently helping me to navigate this.