Record a pension contribution refund

This article explains how to record the refund of a pension contribution in FreeAgent.

Please be aware that FreeAgent doesn’t currently have a banking explanation option for refunds from a pension provider, so you’ll need to amend the accounts in FreeAgent so that the pension liability is removed.

1. Edit the payslip(s)

Current tax year

If the relevant payslip(s) relates to the current tax year then you can edit it.

Navigate to the ‘My Money’ tab at the top of the screen and select ‘Payroll’ from the drop-down menu.

Payroll highlighted in drop-down menu under My Money on the overview page.

Select the relevant employee.

Example employee name highlighted in list of employees.

Select ‘View Payslip’ for the relevant month.

'View Payslip' button highlighted next to months of payroll.

Select ‘Edit Payslip’.

'Edit Payslip' button highlighted at the top of the page.

Edit the payslip by entering the correct amount in the relevant Employee and Employer Contribution fields. For this example, there should be no pension contribution, so the value input is zero (0.00).

Pension contributions section with employer and employee contributions marked to zero.

Select 'Save changes' at the bottom of the screen.

Please be aware that editing the payslips won't re-submit these pay months to HMRC. However, when you submit the payroll for the following month through FreeAgent, the year-to-date figures will be updated accordingly.

Previous tax year

If the refund relates to an earlier tax year, you may be able to edit the payslips and file amendments to HMRC. Read more about how to make a payroll correction for a previous tax year.

2. Edit the bank transaction

Once you’ve edited the payslip(s) you'll need to edit the explanation of the original transaction.

Navigate to the relevant original transaction.

Example original payment highlighted in list of explained transactions.

Change the transaction 'Type' to ‘Other Money Out’.

'Other Money Out' highlighted on drop-down menu of Types.

Change the 'Category' to ‘Payment from Contra Account'.

Category highlighted and set to 'Payment from Contra Account'.

Select ‘Save changes’ to complete this part of the process.

If only part of the original payment paid to the pension creditor is being refunded, you may need to split the original bank transaction. For example, if £500 was handed over but only £450 was due, this would require splitting the transaction by explaining £450 as ‘Other Money Out’ as the 'Type' and ‘Pension Creditor’ as the 'Category'. You would then explain the remaining £50 as ‘Other Money Out’ as the 'Type' and ‘Payment from Contra Account’ as the Category.

3. Explain the refund

Navigate to the relevant money in transaction.

Example refund transaction highlighted on list of unexplained transactions.

Select ‘Other Money In’ as the transaction 'Type'.

'Other Money In' highlighted on drop down menu of Types.

Select ‘Receipt into Contra Account’ as the 'Category'.

Category highlighted and set to 'Receipt into Contra Account'.

Select ‘Explain transaction’ to complete the process.

Refund the employee contribution

If you pay any employee contribution element back to the employee, you’ll need to explain the transaction as ‘Money Paid to User’ as the 'Type' and ‘Net Salary and Bonuses’ as the 'Category'.

Example explanation with Type as 'Money Paid to User' and Category as 'Net Salary and Bonuses'.

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