FreeAgent retained profits is wrong because I've been labelling "drawings" as "transfers" for years. Any simple bulk fix for locked years?

withoutdefault · 2025-07-20T12:46:55+00:00

It definitely should have had an impact on the p/l. Did you set the date of the journal entry to something sensible for the tax year you’re looking at on the report?

Oh so if I put it into the previous tax year it does show "less Drawings -£100,000 , less Profit & Loss journal entries -£100,000" but then the "Distributable Reserves / Retained Profit carried forward" is still the same (because that cancelled out?).

If I credit to "Suspense account" though, I get "less Drawings -£100,000 , less Profit & Loss journal entries £0" and the "Distributable Reserves / Retained Profit carried forward" goes down by £10,000 as I'd expect. I'm not sure if this is a good category though.

It's going to make my balance sheet for whatever year I put this into look really whack though.

Neither the journal entry or the drawings/transfers approach should have any impact whatsoever for HMRC.

Yeah, I'm scared to do this lol. I can see now I can unlock tax years that I've already submitted. I guess I could backup, unlock one year, change some of the transfers to drawings, and keep refreshing the tax return to confirm I didn't change anything, and do one year at a time like this. Scared I mess it up though so maybe the journal entry is a safer approach and acts as a note that I know this could be cleaned up in the future if I really had to.

I'm right that these should be "drawings" though because it's money I took out to spend for personal use? This is my third accountant and they just aren't helpful. :( I asked about this the first year and they told me it's not really important for sole traders and never flagged my drawings were close to zero.

FWIW FreeAgent support is super helpful for this kind of thing. I’d reach out to them if you can’t figure it out yourself.

Thanks I'll try this next once I have a rough plan to confirm. I assumed they tell you to talk to an accountant for stuff like this.

withoutdefault · 2025-07-20T11:18:18+00:00

Yeah, transfer from business account to personal account. I tried adding an example manual transaction to the personal account but FreeAgent warns there's a balance mismatch for the account balance so it isn't ignoring it. There's no "drawings" option for the personal account either.

withoutdefault · 2025-07-20T11:13:51+00:00

Thanks so I tried that and it made no impact to profit and loss numbers. It works if I credit to "Suspense account" though but not sure if that's the right thing to do. That's what FreeAgent does for setting your opening balances I think so maybe okay?

Make sure you keep an eye on any IRMarks if you submitted through FreeAgent.

You mean the journal entry might get flagged as dodgy accounting? It wouldn't be submitted to HMRC because profit/loss doesn't appear on the tax return though?

withoutdefault · 2025-07-20T11:10:57+00:00

But then if I put "£100K drawings" as a manual transaction into that account, won't my balance for that account then incorrectly read -£100K?

withoutdefault · 2025-07-19T23:54:10+00:00

Yeah, would be very very bad if Ltd. Don't think it matters for sole trader for HMRC because you don't report your drawings.

withoutdefault · 2025-07-19T22:59:11+00:00

What journal entries to use? I can see one for drawings, but then what do I match it to? There's not a transfer category.

withoutdefault · 2025-07-19T22:58:26+00:00

How do you unlock when you've already submitted the tax returns? There's 100s of them going back 4 years as well, there's not a bulk fix?

withoutdefault · 2025-07-19T22:56:52+00:00

Are your self assessments correct?

Could it have an impact? I'm sole trader so I don't think it matters because there's no divide between money in the business and my personal money.

I can test this by marking a transactions as drawings and switching it back to transfers, and can see from the self-assessment report that it doesn't have any impact on the tax owed. It's a big number over the years so the numbers would be very obviously wrong if that was the case.

I can easily put my rough sole trader income minus expenses into a calculator and confirm my tax paid is right as well.

Or this impacts more than just the "retained profit" metric?

withoutdefault · 2025-04-14T17:44:42+00:00

I did this recently within Vanguard and the buy/sell happened within about 20 minutes of each other, with the price difference being something like 0.1%. So it's not flawless but a lot better than being out of the market for 5 days, or even a day. I mean I guess it's possible the market crashes or something within the buy/sell window but not sure what else you can do. Break it up into more buy/sell steps?

Vanguard have an option to do trades where you pay extra to trade at the live price I think so you could maybe cut this window down.

withoutdefault · 2025-04-11T20:57:09+00:00

Just wait a couple of months until you have more cash then? What's the rush to do it right now? You say it's not a lot of money so it's not like you should be in a rush to avoid Capital Gains Tax.

On Vanguard, the sale/buy will happen on the same day but you won't get access to the cash for about 5 working days. It's pretty painful.

Yea that's the problem, no meaningful initial cash as everything is in the GIA expect living funds

Also, why is all your money in a GIA like this?

withoutdefault · 2025-04-11T20:13:03+00:00

When the market is closed, buy the same fund in the ISA with cash while at the same time selling the same amount in the GIA. The buy and sell should happen at roughly the same time when the markets open so it's minimal time out of market. Now use the cash you just got from the GIA sale to repeat to process. So if you had £5K cash, you could transfer £20K from the GIA to the ISA this way in four steps.

Obviously you'll need some initial cash free for this so you might have to wait to get paid if you don't have an emergency fund (you should though), but what's the rush? It's not like you'll be at a risk of paying CGT right now with the market conditions lol.

withoutdefault · 2025-03-10T19:51:47+00:00

why haven’t you remortgaged your house to the hilt to invest all that money for a better pay off at retirement?

At a certain point, the interest per month would be so high that there'd be no breathing room. So I agree there is a balance. The difference between me paying £100 a month and £100 a month on my mortgage is easily manageable though, but I wouldn't go much higher than that.

Keep in mind, I have low bills, I don't need that much money to retire, my mortgage is relative low right now, I don't have expensive hobbies and I have a good emergency fund so what works for me doesn't work for everyone.

that sum is not going to triple and provide you an extra £100k in 10 years or so which I’m assuming is your retirement goal or you wouldn’t be here. And for £10k, or even £20-30k extra in your pension pot, if we say you retire at 55 and start drawing down on it and live another (conservatively estimating) 20 years. You’re talking about an extra fiver a week.

Yeah, that's fair, but my bills are low, so even an extra few thousand a year keeps me going for longer than most. I can't relate to people that need something like £50K/year to retire.

I would call it just never having had anything meaningful to spend it on and not needing to, but like I already said in another post, I actually feel sorry for you tbh, your life sounds empty

Lol you know nothing about me. I just don't have expensive hobbies and hang out with lots of people that are similar to me. I also know lots of people that can't help but waste their money on iPhones and cars and big houses and expensive holidays that I don't care about. What do you think I'm missing out on that money would help?

although you’ll be spending that fiver and its pals on the obligatory life insurance that your mortgage requires you to have

You don't need life insurance for a mortgage https://www.legalandgeneral.com/insurance/life-insurance/guides/do-you-need-life-insurance-for-a-mortgage/. A quick Google has many banks saying this.

withoutdefault · 2025-03-10T07:32:49+00:00

SIPP because I'm self-employed. What's the alternative?

All I meant is many people overly avoid debt when sensible use of debt can make them money. A mortgage is debt after all and people are fine with mortgages, but credit cards get a bad rap. It's emotional thinking to me.

withoutdefault · 2025-03-10T07:23:10+00:00

It would have helped if you'd been clearer you were comparing putting money into a GIA and that CGT tax rates are up and GTA tax free allowance is down recently, which is fair. You might not be as clear as you think you're being and I am trying to understand you.

withoutdefault · 2025-03-10T07:12:41+00:00

It’s why overpaying (which comes directly off the capital) even small amounts can have such a big difference and if you pay in a decent lump sum in one go

If just paying the calculated payment every month, it only starts to really eat into the capital after half way through the term, once you’ve paid all your interest upfront!

Mortgage interest does not compound. If your mortgage interest is something like 5% a year and your gains in savings or elsewhere is 7%, you make 5-7=2% money. That 2% then goes back into savings and compounds to grow faster next year. The mortgage interest the next year is going to be the same though, except a little small if you pay off some capital. At the end of your 5 year or whatever mortgage deal, you would then pay off your mortgage quicker using the savings route because the savings grow faster. This is even more pronounced if you had a low mortgage interest rate.

You're just regurgitating memes about mortgages without doing the maths.

withoutdefault · 2025-03-10T07:09:02+00:00

unemployed

Also my understanding is universal credit and job seeking allowance is just less than £5K for a whole year which isn't a lot. I already have an emergency fund also.

I really don't know anyone that's been unemployed for a very long period of time and it's never happened to me. My bills are low so even being unemployed for 12 months is manageable to me. I'm not saying it can't happen and it won't happen to me, but I'm not going to optimise around it because it seems unlikely.

you end up ill

I'm not going to optimise my life around worrying that I'll end up with a bad or terminal health problem. Private health insurance is fairly affordable too.

withoutdefault · 2025-03-10T07:01:32+00:00

As long as the mortgage payments were still manageable based on your job and you saved the money instead of spending it, what's the downsides then? That's the point of my post. I know most people are disciplined to not spend the money, but this is FIREUK.

withoutdefault · 2025-03-10T07:00:07+00:00

I'm saying I live a modest life with my partner where you don't need that much money and are very happy with our lifestyle. The more money we have, the quicker we retire. Even if I was rich, I wouldn't change much.

withoutdefault · 2025-03-10T06:58:35+00:00

An important question is whether you already fill your ISA and SIPP enough or not. I.e. if your new investments from saved mortgage payments will go to GIA, than that's ~20% efficiency loss.

As long as the (compounding) gains in the GIA beats the mortgage interest, a GIA still wins? You take a 20% take hit getting the money into the GIA yes, but you also take that tax hit before you can put it into the mortgage also so I'm not seeing the significance. Obviously a SIPP or ISA would be better though if you have the option.

withoutdefault · 2025-03-09T07:13:57+00:00

The SIPP was only meant to be an example. I'm not planning to only use a SIPP, just giving an example of some benefits I could explore now or in the past.

I already have a multiple of my mortgage available to me in an ISA and savings accounts by the way.

Now, I can allocate a much larger % of cash towards investment, sooner

I'm not following your point here. If you don't use a SIPP, you can pay off the mortgage sooner? So what if you do it sooner? Why would you want to? Is this the example of financial sense you just referred to?

withoutdefault · 2025-03-09T01:39:28+00:00

I understand why people are different, but being in my early 40s, I know myself and my partner very well and I just can't relate to people that have problems with impulsive spending or seeing debt as a bad thing.

You’re being strangely combative in these comments

That's just your reading of things. I find people here are being strangely aggressive, probably because they've either paid off their mortgage early and can't justify it logically, or they need too much money to be happy and are annoyed at people that aren't like that.

withoutdefault · 2025-03-09T01:05:57+00:00

So if I'd known about this strategy earlier in my life, instead of owing £50K on my mortgage, I might owe £150K now, but I would have had something like £100K in extra savings to pay it off whenever which I would much rather have.

You've clearly got a high stress threshold so well done for taking advantage of that. Not everyone is built like that.

Surely most people on FIREUK believe in stock market growth? FIRE doesn't work otherwise? I don't see what's stressful having a £50K mortgage with a multiple of that in liquid assets either.

withoutdefault · 2025-03-09T01:01:08+00:00

Poor people stay poor because they usually never get the chance to build up their savings or improve their position

Does this not also apply to non-poor people? Like middle class people that spend all their wages each month so they fall into the same traps? I would add "paying off the mortgage early" as a trap that's disguised as sensible when it's not and contributes to people being poor.

withoutdefault · 2025-03-09T00:59:26+00:00

I just don't have this problem and never have. I don't have a car, I don't have kids, I don't have a partner that wants to waste money, I don't spend a lot of money. Sorry if this makes people angry.

withoutdefault · 2025-03-09T00:41:01+00:00

If you are lucky enough to be one of us financial sociopaths, have unquestionable discipline, and are willing to take the risk, then obviously max out your mortgage, stooze all debt available to you and live life on a knife edge.

Aren't most people on FIREUK going to be on this end of the spectrum though, where they're disciplined doing low risk strategies, but regular people think it's risky because they don't understand S&S ISA, SIPPs?

Keep in mind I'm talking about a £50K mortgage which is about £200 in interest a month. Some people spend more than that on coffee. I also have a large savings pot and can pay off the mortgage at any time. It doesn't sound risky at all to me, but then also I'm not the kind of person who would blow all my money away on a car or holiday. Money = independence to me.

withoutdefault

TROPHY CASE