What are non-taxable small loans?
Non-taxable small loans are an informal agreement between an employer and an employee.
Non-taxable small loans increase an employee's net pay in the pay period the loan is given.
The amount loaned will be automatically deducted in the next pay period. However, this can be changed if a loan is to be repaid over multiple pay runs.
You can also increase the loan amount if necessary.
These types of loans have no terms or conditions and no interest is added to the loan balance.
How to process non-taxable small loans
In Sage Payroll, you can only add a loan while processing a pay run.
📎 Note: Non-taxable small loans also appear in the Payslip values tab of Employee details.
Payslip values act as a template for the pay runs.
To prevent non-taxable loans from being part of every pay run, it is not possible to add a loan amount here.
The steps below assume you have already completed pay runs in Sage Payroll.
If this is your first pay run, you should read our Process a pay run in Sage Business Cloud Payroll article.
Select Pay runs.
Select the pay run you need to process, then Process pay run.
Select the employee you are giving a loan to.
Scroll down to the Other amounts section and select Add other amounts.
Select Non-taxable small loan, then Add.
You must enter loans given as positive amounts.You can then process the pay run as normal.
Loan repayments
Loan repayments automatically appear in the next pay run as a negative amount.
This shows the employee is paying back the full amount they borrowed.
You can overwrite this amount if you loan more money to your employee.
Read how to add to an existing loan
📎 Note: It is not possible to enter a repayment amount that is higher than the amount the employee owes.
For example, if the employee owes $100.00, this is the maximum amount you can enter as a repayment.
If you enter a repayment amount that is more than the balance, the following prompt will appear:
Amount entered is higher than the loan balance of $xx.xx.
Enter a different amount.
Read an example of a loan and repayment:
Read an example of a loan and repayment:
Our employee, Alex, asked for a loan of $100 to cover an unexpected repair bill.
Pay Period 1
We loan Alex $100
Pay Period 2
In the next pay run the loan shows -$100, which is a repayment of the full amount we loaned to Alex.
When we finalise this pay run, the full amount loaned to Alex is repaid.
The next pay run will show $0.00 in the loan amount field.
How to add to an existing loan
There may be situations where you need to loan your employee more money before they have fully repaid you.
You can do this by overwriting the repayment amount with a new loan amount.
Select Pay runs.
Select the pay run you need to process, then Process pay run.
Select the employee you are giving a loan to.
Scroll down to the Other amounts section and select Add other amounts.
Overwrite the negative amount with the new loan amount.
Enter this as a positive value.
📌 Tip: Payroll will remember the original and new loan amounts.
In the next pay run, the loan will appear as a repayment for the full amount loaned to the employee.
Read an example of adding to an existing loan:
Read an example of adding to an existing loan:
Our employee, Alex, asked for a loan of $100 to cover an unexpected repair bill.
Pay Period 1
We loan Alex $100
Pay Period 2
In the pay run the loan shows -$100, which is the repayment of the full amount we loaned to Alex.
Alex cannot pay back the full amount this month, so we overwrite -$100 with -$50.
Pay Period 3
In the pay run the loan shows -$50.
Alex asks for an additional $50 loan.
To process this, we change the amount from -$50 to $50 for the additional loan.
Pay Period 4
In the pay run the loan shows - $100.
This amount is deducted from Alex's pay, repaying what they loaned from us.
