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Money paid in to make a purchase for the business.
First off I'm a sole trader, I have a current account and a savings bank account (neither are "business" accounts). Clients pay into my current account and then I move it into the savings account or my personal account as earnings.
Recently I paid money back into the current account from the business savings one to purchase a new computer (since I also make purchases from the current account). Was this a bad move? I don't know how I should explain money paid in from the savings for Freeagent and my self assessment return.
Recently I paid money back into the current account from the business savings one to purchase a new computer (since I also make purchases from the current account). Was this a bad move? I don't know how I should explain money paid in from the savings for Freeagent and my self assessment return.
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Inappropriate?Hi Ryan,
Before I give you an answer, may I check with you please, have you got both those accounts (current and savings) set up on FreeAgent, and are they both ticked as personal accounts?
Kind regards,
Emily -
Inappropriate?Hello,
I don have the current account on there but I've just checked and don't have the savings account on FA. Confusingly I do have another savings account used for saving money to pay tax, but separately to the general savings account.
I'll add the general savings account to FA used for the business now.
I hope that helps.
Thanks
Ryan -
Inappropriate?Oh I forgot to say, they are not listed as personal accounts because this caused problems back at the start. I can't remember what the problems were but I was advised to unselect the personal account option.
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Inappropriate?Hi Ryan,
OK, no problem.
Once you've put in the savings account, then explain the money coming into the current account as a Type "Transfer from Another Account", and in the box that asks you which account it was from, enter the savings account.
That's all you need to do to record it on FreeAgent.
Transfers from one personal account to another don't form part of your tax calculation at all - it sounds like you've already recorded the income from your clients in separate transactions, so I wouldn't think you have anything to worry about there.
I hope that helps but do come back to us if you get stuck.
Kind regards,
Emily -
Inappropriate?Hello thanks for the response and help.
However I should apologise, with all these accounts I've managed to confused myself. The one I believed was the business savings is actually my personal savings which explains why it was not in FA... although being a sole trader and without real "business" accounts the differences are just symbolic aren't they?
I've added it to FA but should I mark it as a personal account and continue as you advise?
This is where I essentially pay myself, the personal current account is used for making non-business bill payments and purchases.
Thanks
Ryan
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Inappropriate?Hi Ryan,
You're right about the differences being "symbolic" if you're a sole trader, because legally you are the business. (For example, bank interest, both on business and personal accounts, goes in the same place on your tax return, separate from your business's income and expenditure details.)
What I would do is what you've suggested, mark the personal savings account as personal, then record the bank transfer as explained.
Does that work please?
Kind regards,
Emily -
Inappropriate?Thanks I've done that, the payment hasn't come out of the account yet so I'll post back when it does.
This clearly shows why I'm a designer and not an accountant! I think I'll look for one next year.
Thanks again,
Ryan
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Inappropriate?Hi Ryan,
No problem at all, glad to help.
Do feel free to come back to us if you get stuck again.
And if you need some suggestions for an accountant please do check out our list of FreeAgent Friendly accountants at http://www.freeagentcentral.com/accou...
Kind regards,
Emily
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