Types of payment and receipt
When explaining bank transactions or entering bank transactions manually you need to select a transaction type. Here's a glossary of the various types of payment and receipt in FreeAgent, and when to use them.
Use a Payment category to explain any money you've spent that isn't paying off a bill you've entered into FreeAgent, or money paid to a user in FreeAgent. You'll find admin expenses and cost of sales here, as well as payments of taxes such as VAT and PAYE.
If a Payment category is not there you can add a new category to the list.
Use Bill Payment to explain any bills already entered into FreeAgent - choose from a list of your open, unpaid bills.
You won't see the Bill Payment type if you don't have any open, unpaid bills.
Money Paid to User
Use this option to explain Money paid to an employee, director, sole trader, partner, or anyone else who's been set up as a user in FreeAgent.
Other Money Out
Use this option to explain Money paid to a supplier who you owed money to as at your FreeAgent start date. This kind of money owed is also called trade creditors, so for this you would use category Payment to Initial Creditor.
Use Invoice Receipt to explain money coming in against an invoice that you've created in FreeAgent and sent to one of your customers - choose from a list of your open, unpaid invoices.
Money Received from User
Use this option to explain money that an employee, director, sole trader, partner or anyone else who's been set up as a user in FreeAgent has paid in.
Other Money In
This is where to find the category for bank interest received and is also where to find money received from a customer who owed you money as at your FreeAgent start date. This kind of money owed to you is also called trade debtors, so for this you would use category Receipt from Initial Debtor.
Explaining the payment of personal income tax, class 2 NIC and class 4 NIC
Sole traders and partners
If you're a sole trader or partner in a partnership, you should explain the payment of your personal tax or NIC to HMRC as Money Paid to User>Drawings. This is because HMRC doesn't view this payment as an expense of your business; it's your personal tax or NIC liability.
Limited company directors
If you're running your business through a limited company, and the company pays some of your personal tax through Self Assessment (separately from the PAYE that runs through your payroll), you should explain this as Money Paid to User>Payment from Director Loan Account.