What's the difference between personal and business bank accounts in FreeAgent?
This article explains how to mark a bank account as ‘personal’ in FreeAgent and how to explain transactions in a personal bank account.
Please note that if your business is a limited company or limited liability partnership, you shouldn’t have personal bank accounts in FreeAgent. Instead, any money that you personally spend on business costs would need to be entered in the 'Expenses' area under the 'My Money' tab.
It’s good business practice to have a separate bank account for your business if you can, because HMRC says that you need to be able to identify your business income and spending separately from your personal earnings and costs - and a separate bank account makes it much easier to do that.
However, if you’re a sole trader and you’re running your business through a bank account that you also use for something other than your business, you can mark the bank account as ‘personal’ in FreeAgent.
When you add a new bank account to FreeAgent, you’ll be presented with an optional checkbox to indicate whether the account is personal.
If you don’t check the box, that means the bank account you’re adding is a business account and you will have to explain all of its transactions in FreeAgent in order to keep your business books up to date.
If you do check the box, FreeAgent will treat the bank account as a personal one. For personal bank accounts, you only have to explain the transactions that relate to your business.
FreeAgent expects there to be transactions that you won’t need to explain in a personal account, so you can leave non-business transactions (i.e. any transactions that you take out of the business to spend on personal items or to transfer into other personal accounts) as unexplained, and they won’t have any effect on your records. However, transactions in personal bank accounts will be included in your Cashflow unless those bank accounts are excluded.
How to change a bank account a personal account
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 of accounts.
Select 'Edit details' at the top right of the bank account page.
Tick the 'This is a personal account' checkbox and select ‘Save changes’ at the bottom of the screen to complete the process.
If you don’t check the box, that means the bank account you’re adding is a business account and you'll have to explain all of its transactions in FreeAgent in order to keep your business books up to date.
If you do check the box, FreeAgent will treat the bank account as a personal one. For personal bank accounts, you only have to explain the transactions that relate to your business.
Untick Guess explanations
Guess is a FreeAgent feature that attempts to automatically explain transactions based on existing information in your FreeAgent account. Guess does this by identifying the relationship between a transaction's description and the category applied across your other FreeAgent explanations with similar descriptions.
To prevent Guess from explaining transactions that don’t relate to your business, untick the ‘Guess explanations for my transactions’ checkbox.
FreeAgent expects there to be transactions that you won’t need to explain in a personal account, so you can leave non-business transactions (i.e. any transactions that you take out of the business to spend on personal items or to transfer into other personal accounts) as unexplained, and they won’t have any effect on your records. However, transactions in personal bank accounts will be included in your Cashflow unless those bank accounts are excluded.