Hi again,
I think I could work this one out, but just to confirm. The help page goes through how to log an employee's NI contribution, but I'm self-employed and need to log my own NI contributions - is there a straightforward way to do this too?
Many thanks,
Adam
Hi Adam,
You can record Class 2 NICs in the same way as your self-assessment income tax:
http://www.solaraccounts.co.uk/help/how-to-record-an-annual-tax-liability.php
If you don't want to categorise this cost as a 'Tax Expense', create another expense account called 'National Insurance Expense'.
Cheers,
Thanks, Mark, that's great!
Adam
You're welcome - keep the questions coming!
Hi Mark,
I understood that a self employed / sole traders personal tax & NI has to be treated as a personal expense not a business expense and would therefore need to be allocated against their 'drawings' not 'tax' expense account unlike an employees tax & NI which is a business expense.
I wouldn't mind some clarification on this matter please if possible?
Rachel
Hi Rachel,
Certainly from the point of view of HMRC income tax is not an expense. That is, it cannot be used to reduce the total earnings for tax purposes.
However, from a business point of view I think it depends on what is most helpful to the business owner. Many self-employed people like to see their profit 'after tax' so we suggest recording income tax as an expense. If you prefer the profit figure to be 'before tax' you can allocate to Owner's Drawings account as you have described.
Regards,
Hi Rachel,
After more investigation we've changed our help topics to match the legal status of income tax and NI contributions - we now recommend that self-employed people treat their tax and NI payments as a personal expense.
If you pay your personal tax and NI from a business account, record it as a non-business payment (ie. drawings from the business) as described here:
http://www.solaraccounts.co.uk/help/how-to-record-non-business-payments.php
For PAYE and NI payments made by employees, see this help topic:
http://www.solaraccounts.co.uk/help/how-to-record-paye-and-ni-contributions.php
Regards,
