How do I categorise a payment that I have already payed tax on?

Hi there, @PeatmT.

I can guide you on how you can record your taxes.

You can create an Expense transaction to record the payment you've made to HMRC for the VAT Return filed outside of QuickBooks. I can walk you through how to do it.

First, let's make sure to create an Expense account and use it in tracking the VAT payments. Here's how:

1. Go to the Accounting menu.
2. Click the New button.
3. Choose Expenses for the Account Type.
4. Select Taxes Paid for the Detail Type.
5. Enter a Name (i.e HM Revenue & Customs) for this account.
6. Click Save and Close. 

Once done, you can create an Expense or Cheque transaction to record the VAT Payments.

1. Choose the New (+) icon.
2. Pick either Expense or Cheque.
3. Select the VAT agency from the Payee drop-down.
4. Enter the necessary information.
5. In the Category details section, choose Taxes Paid account for the Category, Description, Amount, then select No VAT for the VAT column.
6. Click Save and close.

On the other hand, you can follow the steps below to record VAT payments in QuickBooks:

1. Go to the Taxes menu.
2. Choose the VAT tab.
3. From the Returns section, locate the returns you've paid.
4. Click Record payments from the Action columns.
5. Enter the VAT payment details.
6. Click the Save button.

I've added these references for more information:

• Submit a VAT Return in QuickBooks
• Submit a VAT return to HMRC - MTD for small businesses

Fill me in if you have other questions about tracking your VAT-related transactions. I'm always here to help.

Hi @AbegailS_ 

Thank you for you response. This is very helpful but I am not sure I explained myself correctly.

The 'money in' to my account is everything earned minus tax. 

Tax and NI etc was calculated by the company. (basically like full time employment)

The only transaction I have is the money earned. No tax payments were made from my account. 

Apologies if I'm explaining this poorly. It is likely very straightforward. But I am over complicating it. 

Thanks again

Thanks for getting back to us and for that clarification, @Peatm.

Allow me to chime in and help record or categorise the money you've earned in your QuickBooks Online (QBO).

You can directly record the payment as a deposit. The steps to do this are pretty quick and simple. Here's how:

1. In QBO, go to the + New option at the top left.
2. Under Other, choose Bank deposit.
3. In the Account drop-down, choose the account you want to put the money into.
4. Fill in the other necessary information.
5. Click Save and close.

To review the deposit you've made, you can run the Deposit Detail report. Please refer to these steps on how:

1. Go to the Business overview and select Reports menu.
2. Scroll down to the Sales and customers section.
3. Select the Deposit Detail report.

For more information about managing deposits in QBO, consider checking out this article: Record and make bank deposits in QuickBooks Online.

I also recommend visiting our website for more tips and other resources you can use in the future: Self-help articles.

Please post again or leave a comment in this thread if you have more questions about this or anything else QuickBooks. I'm always ready to assist. Keep safe.

Hi @Peatm 

This sounds like an IR35 employment - the company deducted (the equivalent of) Income Tax & NI before paying you?

This is probably a question for an accountant but it may not need entering into QBO at all - just as 'Other Income' on your tax return.

Are you using QBO Standard or Self-Employed?

In either case, they are intended for calculating untaxed income/profit.  This payment has already been taxed so is difficult to enter into QBO without the risk of it being double-counted.

Thoughts for a workaround...

It's a similar situation to entering CIS payments received - but QBO is set up for this & can do it automatically.

If you create an account/category for Tax Already Paid (I guess this is an Asset Account).

Receive the payment as a Deposit - with:

    Deposit = £800 (for example)

    Accounts Receivable = £1000 (invoice amount)

    Tax Already Paid = -£200

Then go to Receive Payments & there should be a credit of £1000 to clear against the outstanding invoice.

As above - I think it is a question for an accountant.

This method simply allows you to use the Tax Already Paid account to keep track of (& offset at the end of the year) - it may not be correct from HMRC's point of view.

Hope this helps.