Pay and deductions
This article provides a glossary of all the pay and deductions that can be entered into a payment profile or added to payslips when you run a monthly payroll.
Please note that FreeAgent's payroll functionality won't be available if you have an unincorporated landlord or non-UK account type, or if you're preparing your accounts using cash basis accounting.
Monthly pay
Pay should be entered into each employee’s payroll profile. These figures are used as the default values for each monthly payroll – payslips for each individual month can then be edited when running a payroll.
Basic pay
Also known as Gross Pay. Subject to tax and NI.
Allowance
Any allowance that’s subject to tax and NI. For example, London weighting or other regional allowances.
Other payments
Any other pay that's subject to tax and NI. For example, a monthly travel allowance received as salary or annual leave.
Pay not subject to tax or NI
Any other pay that's not subject to Tax or NI. For example, Childcare Vouchers exempt from tax and NI that are not being taken under a salary sacrifice scheme.
Irregular employee payments
If an employee is not paid on a regular basis, select 'Yes' in the 'Employee paid irregularly' option when creating their payroll profile.
To record the payments, you'll need to edit the employee's payslips before filing them to HMRC.
Overtime
Any one-off overtime payments for this month. Subject to tax and NI.
Bonus
Any one-off bonus payments for this month. Subject to tax and NI.
Commission
Any commission earned this month. Subject to tax and NI.
Monthly statutory pay
Tax and NI is automatically calculated for statutory pay. You can use HMRC’s statutory payments calculators to get the figures that you need to add here.
Statutory maternity pay (SMP)
Ordinary statutory paternity pay
Additional statutory paternity pay
Statutory adoption pay
Monthly deductions
Add any monthly deductions that need to be made here.
Payroll giving
Include any payroll giving an employee has asked you to take from their pay. FreeAgent will automatically make the necessary adjustments to their total pay, tax, and NI.
Read more from HMRC →
Other deductions from net pay
Include items such as trade union subscriptions and employee paid health cover.
To record an attachment of earnings order or direct earnings attachment, enter the amount under 'other deductions from net pay'. You can either do this in the employee's payroll profile (if the attachment is on-going) or on the payslip (if the attachment is a one-off). Explain the payment as 'Other Money Out > Other Payroll Deductions'.
Items subject to Class 1 NIC but not taxed under PAYE regulations
Include items such as non-cash vouchers and payments of an employee's personal liabilities. Exclude pension contributions.
Salary sacrifice deductions
Enter any salary sacrifice deductions that are not related to pension contributions. Explain the associated payment as 'Other Money Out > Other Payroll Deductions'. Find out more about how FreeAgent handles salary sacrifice deductions.
Monthly pension contributions
Enter the pension contributions here if you operate a pension scheme which allows staff to pay into a pension fund directly from their wages. The company might also put some money into the fund for them. Find out how FreeAgent can calculate the pension contributions automatically.
Net pay contributions
If the company pays the pension out of the employee's gross salary and the pension company doesn’t claim tax relief for the employee then it would be a net pay arrangement pension. FreeAgent assumes the employee is eligible for tax relief and the pension scheme is registered with HMRC.
Read more from HMRC.
Relief at source contributions
If the pension company is claiming the tax relief for your employee, then the employee is paying the premium out of their net salary. This is a “relief at source” pension.
Read more from HMRC.
Salary sacrifice contributions
When ‘Salary Sacrifice’ is used as the contribution type, the pension contribution is taken before the deduction of Income Tax and National Insurance.
Employer contribution
Include any pension contributions made by the company.
Student loans
Tick the relevant box from the 'Deduct student loans?' options and choose the appropriate plan type.
Find out more about how to enable student loan deductions in FreeAgent.