Hi, koal.

Thanks for posting your concern here in the Community. Let me share some information on how to record payments that don't show as taxable in QuickBooks Online (QBO).

When recording the transaction's payment either a cheque or an expense, make sure to select the No VAT option on the VAT column when entering the category or item details. This will record the payment as non-taxable.

For additional reference, you can check this article to learn more about the difference between bills, cheques, and expenses.

Feel free to leave a comment below if you have any other questions about recording payments. Have a good one. 

Hello,

Does this 'VAT' option also take into account the national insurance that PAYE takes off also?

The VAT won't directly affect the national insurance, Abskybabs.

This will affect on your products and services depends on the code you've set up in the Tax Setting.

Since PAYE is for the payroll side, it is the one who collect Income Tax and National Insurance from the employee.

You can browse this article to know more about the different codes: Common VAT Codes.

Don't hesitate to leave a reply if you have other concerns. I'll get back to you as soon as possible.