This article describes how to explain a refundable deposit paid into your bank account from a tenant if you have an unincorporated landlord account in FreeAgent.
If you receive a refundable deposit from one of your tenants, you should follow the steps below to explain the bank transaction. You may also need to pay the tenant’s deposit into a Tenancy Deposit Scheme.
Please note that the unincorporated landlord account type is currently only available if you work with an accountant who is a FreeAgent Partner. You’ll need level 7 access or above to your FreeAgent account to follow the steps below.
If you have a sole trader, partnership or limited company account and you receive a rental deposit from a tenant, find out how to explain a rent deposit received from a tenant.
If you've returned a refundable deposit to one of your tenants, find out how to explain a rental deposit repaid to a tenant.
Explaining the money paid into your bank account
Once the relevant bank transaction has been imported into your FreeAgent account via a bank feed or uploaded from a bank statement, you will need to explain it using the appropriate ‘Type’ and ‘Category’ as detailed below.
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 relates to the rental deposit.
Select ‘Rental Deposits In’ from the transaction ‘Type’ drop-down menu.
Select ‘Rental Deposits Received’ from the ‘Category’ drop-down menu.
Once you’ve selected the relevant category, select ‘Explain Transaction’ to complete the process.
A record of the bank transaction being explained will appear in your Audit Trail report.
Paying the deposit into a Tenancy Deposit Scheme
You may need to pay the tenant’s deposit into a Tenancy Deposit Scheme, which will hold the deposit for the duration of the tenancy. For more information on this process, please see HMRC’s guidance. If you’re unsure whether this applies to you, please ask your accountant or HMRC.
When the money is paid out of your business bank account into a Tenancy Deposit Scheme and the transaction has been imported into FreeAgent, navigate to the relevant bank transaction and select ‘Rental Deposits Out’ from the ‘Type’ drop-down menu.
Select ‘Repayment under Rental Deposit Scheme’ from the ‘Category’ drop-down menu.
Select ‘Explain Transaction’ to complete the process.
A record of the bank transaction being explained will appear in your Audit Trail report.
Once the tenancy ends and you need to pay the deposit back to the tenant, find out how to explain a rental deposit repaid to a tenant.