diff --git a/.changeset/famous-buttons-greet.md b/.changeset/famous-buttons-greet.md
new file mode 100644
index 00000000..be818a25
--- /dev/null
+++ b/.changeset/famous-buttons-greet.md
@@ -0,0 +1,5 @@
+---
+'@moonbeam-network/xcm-builder': patch
+---
+
+Apply correct transferrable balance formula
diff --git a/packages/builder/src/balance/BalanceBuilder.test.ts b/packages/builder/src/balance/BalanceBuilder.test.ts
index 6f53fa01..556dcc63 100644
--- a/packages/builder/src/balance/BalanceBuilder.test.ts
+++ b/packages/builder/src/balance/BalanceBuilder.test.ts
@@ -2,8 +2,16 @@
 import { describe, expect, it } from 'vitest';
 
 import { TypeRegistry, U128 } from '@polkadot/types';
+import {
+  FrameSystemAccountInfo,
+  PalletBalancesAccountData,
+} from '@polkadot/types/lookup';
 import { SubstrateQueryConfig } from '../types/substrate/SubstrateQueryConfig';
-import { BalanceBuilder } from './BalanceBuilder';
+import {
+  BalanceBuilder,
+  calculateSystemAccountBalance,
+} from './BalanceBuilder';
+import { PalletBalancesAccountDataOld } from './BalanceBuilder.interfaces';
 
 function balanceOf(number: number | string): U128 {
   return new U128(new TypeRegistry(), number);
@@ -193,4 +201,79 @@ describe('balanceBuilder', () => {
       });
     });
   });
+
+  describe('calculateSystemAccountBalance', () => {
+    it('should correctly calculate balance with PalletBalancesAccountData', async () => {
+      const response = {
+        data: {
+          flags: balanceOf(0),
+          free: balanceOf(1000),
+          frozen: balanceOf(300),
+          reserved: balanceOf(200),
+        } as PalletBalancesAccountData,
+      } as FrameSystemAccountInfo;
+
+      const result = await calculateSystemAccountBalance(response);
+      expect(result).toBe(BigInt(900));
+    });
+
+    it('should correctly calculate balance with PalletBalancesAccountDataOld', async () => {
+      const response = {
+        data: {
+          feeFrozen: balanceOf(0),
+          free: balanceOf(1000),
+          miscFrozen: balanceOf(300),
+          reserved: balanceOf(200),
+        } as PalletBalancesAccountDataOld,
+      } as unknown as FrameSystemAccountInfo;
+
+      const result = await calculateSystemAccountBalance(response);
+      expect(result).toBe(BigInt(900));
+    });
+
+    it('should handle when reserved is greater than frozen', async () => {
+      const response = {
+        data: {
+          flags: balanceOf(0),
+          free: balanceOf(1000),
+          frozen: balanceOf(300),
+          reserved: balanceOf(400),
+        } as PalletBalancesAccountData,
+      } as FrameSystemAccountInfo;
+
+      const result = await calculateSystemAccountBalance(response);
+      expect(result).toBe(BigInt(1000));
+    });
+
+    it('should return 0 when all balances are zero', async () => {
+      const response = {
+        data: {
+          flags: balanceOf(0),
+          free: balanceOf(0),
+          frozen: balanceOf(0),
+          reserved: balanceOf(0),
+        } as PalletBalancesAccountData,
+      } as FrameSystemAccountInfo;
+
+      const result = await calculateSystemAccountBalance(response);
+      expect(result).toBe(BigInt(0));
+    });
+
+    it('should handle large numbers correctly', async () => {
+      const largeNumber = '123456789012345678901234567890';
+      const response = {
+        data: {
+          flags: balanceOf(0),
+          free: balanceOf(largeNumber),
+          frozen: balanceOf(largeNumber),
+          reserved: balanceOf(100),
+        } as PalletBalancesAccountData,
+      } as FrameSystemAccountInfo;
+
+      const result = await calculateSystemAccountBalance(response);
+      expect(result).toBe(
+        BigInt(largeNumber) - (BigInt(largeNumber) - BigInt(100)),
+      );
+    });
+  });
 });
diff --git a/packages/builder/src/balance/BalanceBuilder.ts b/packages/builder/src/balance/BalanceBuilder.ts
index 165261e7..7675165d 100644
--- a/packages/builder/src/balance/BalanceBuilder.ts
+++ b/packages/builder/src/balance/BalanceBuilder.ts
@@ -164,7 +164,10 @@ export async function calculateSystemAccountBalance(
   const balance = response.data as PalletBalancesAccountData &
     PalletBalancesAccountDataOld;
 
+  const free = BigInt(balance.free.toString());
   const frozen = balance.miscFrozen ?? balance.frozen;
+  const frozenMinusReserved = BigInt(frozen.sub(balance.reserved).toString());
+  const locked = frozenMinusReserved < 0n ? 0n : frozenMinusReserved;
 
-  return BigInt(balance.free.sub(frozen).add(balance.reserved).toString());
+  return free - locked;
 }