Employment Allowance

Hello there, @spookiebabe. Since this credit originated from a previous year, it acts as an overpayment or an asset with HMRC. Because you aren't making a new bank payment to satisfy this year's liability, you can record this as an adjustment instead of using the Pay Taxes button.

You will need to use a Journal Entry to move the value from your Credit with HMRC to your PAYE Liability account. These are the steps:
 

1. Click the + Create button and select Journal Entry.
2. Use the date HMRC applied the credit to your current balance.
3. Select your PAYE Liability or Payroll Liabilities account. Enter the credit amount in the Debit column. This reduces the amount you owe.
4. Select the account where you tracked the prior year's credit. Enter the same amount in the Credit column. Note that Employment Allowance Credit from prior year applied to current PAYE.

For more details, please see this page: Create journal entries in QuickBooks Online.

Once you save the Journal Entry, your Balance Sheet will correctly show that you owe less money to HMRC. However, the Pay Taxes reminder in the Payroll hub might still show the full amount.

When recording the payment for the remaining balance, only record the actual cash sent from your bank. You may need to use the Mark as Paid or Add Adjustment feature within the Payroll Tax center to inform the payroll module that a portion of the tax was satisfied by the prior-year credit.

Working with an accountant can provide additional ways to handle this while ensuring your QuickBooks records remain accurate.

Feel free to click the Reply button if you have other questions about the program.