Should I record salary before or after tax?

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MoneyMagic
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Should I record salary before or after tax?

Post by MoneyMagic »

I'm not sure how salary and income tax works in other countries, but as an employee in the UK, my gross salary (before tax) is split up as follows:
  • Income tax
  • National insurance
  • Pension payments
  • Payroll giving (monthly charity donation commitments)
  • Take-home pay (net salary after the above have been deducted)
The easy option is to just record take-home pay as my income, as this is the amount that arrives in my bank account each month. (I never see the rest of my salary, as the deductions are made by my employer before I am paid.) This would give me a correct net salary figure on the reports, showing what my actual income is.

However, if I do this, I have no record of where the rest of my salary is going. I am not too bothered about recording income tax and national insurance, as I have no control over these amounts and they are not really expenses; but I would like to record how much I am committing myself to in charitable donations by payroll giving, and what is going out in pension payments.

Should I have a separate (term?) account for my salary, and record a deposit of my gross salary, a transfer of my take-home pay to my bank account, and withdrawals of the remainder in the other 4 categories listed above? The reason I'm hesitant to do this is because it will inflate both my income and my expenses, giving a false impression of what I am earning and what I'm spending.

I would be very interested to hear what others do. Thanks!

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MisterY
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Re: Should I record salary before or after tax?

Post by MisterY »

I'm continuing a practice from Quicken, where the salary deposit tracks the gross amount together with all the debits, including the retirement funds and insurance. Although I also don't need those 98% of the time, there are those moments when the amounts come in handy.
Some customization of the reports is useful in excluding these amounts to bring them to the "everyday level" but it is worth it, I believe.

MoneyMagic
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Re: Should I record salary before or after tax?

Post by MoneyMagic »

Interesting. Time for me to learn how to customise/create my own reports I think. Haven't ventured there yet... 

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