Explain personal payments paid out of the business by a sole trader, partner or landlord
This article describes how sole traders, partners and unincorporated landlords explain money paid out of a business for personal payments.
For money paid into the business, please read how to explain money paid into a business by a sole trader, partner or landlord.
The options listed below relate to personal payments such as wages you pay yourself and ad hoc money transferred throughout the month from your business account to your personal account.
If the payments are transferred to another bank account that's set up in FreeAgent, you would explain the payments as a transfer to another bank account. However, if the payments aren't transferred to another bank account that's set up in FreeAgent, you would explain the payments as 'Money Paid to User' > 'Drawings' instead.
Please note:
- You'll need to have level 6 access or above to your FreeAgent account to explain bank transactions.
- If the bank account you use for your business has been set up as a personal bank account in FreeAgent, you won't see the ‘Money Paid to User’ option. Therefore, you'll need to explain the payment as a transfer to another bank account instead of drawings.
- Money taken out of the business will be removed from your capital account.
- The options below will only be available if your FreeAgent account is listed as a sole trader, partnership or unincorporated landlord. If you have a limited company FreeAgent account type, find out how to explain transactions using the director’s loan account.
1. Navigate to the relevant transaction
Navigate to the 'Banking' tab at the top of the screen and select 'Bank Accounts' from the drop-down menu.
Choose the relevant bank account from the list.
Select the transaction that you would like to explain.
2. Select the appropriate ‘Type’ for the bank transaction
Next, select the relevant ‘Type’ for the transaction using the drop-down menu. The option you choose depends on whether or not the money is being transferred to another bank account that you've set up in FreeAgent, for example a personal bank account.
Transferred to another bank account set up in FreeAgent
If the money is being transferred to another bank account that you’ve set up in FreeAgent, select ‘Transfer to Another Account’ as the transaction ‘Type’ and select the bank account that the money was transferred to, from the ‘Bank Account’ drop-down menu.
Select ‘Explain transaction’ to complete the process.
Not transferred to another bank account set up in FreeAgent
If the money isn’t being transferred to another bank account that’s set up in FreeAgent, for example a cash withdrawal, earnings or a wage paid to yourself, select ‘Money Paid to User’ as the transaction ‘Type’.
Please note that this option will only be available for business bank accounts. You won’t see this option if the bank account has been marked as personal or for a user who has been allocated the role of ‘Accountant’.
Then, select the relevant user from the ‘Payment to’ drop-down menu and select ‘Drawings’ from the ‘Category’ drop-down menu.
Select ‘Explain transaction’ to complete the process.
If you have more than one transaction that you need to explain, tick the checkboxes to the left of the relevant transactions and select the appropriate ‘Type’ and 'Category' in the panel on the right-hand side.
Select ‘Explain [X] transactions’ to explain all the selected transactions in the same way. Remember to include an appropriate description for the selected transactions. If you leave the ‘description’ field blank, the transactions will be given the original descriptions that came through for them via the bank feed import or bank statement upload.
If you need to, you can view a breakdown of drawings taken out of the business.