Starting your freelance business can be exciting and just a little nerve-wracking at times. One of the most important things to get in place either before you start or as soon as possible after you start is to get to grips with your accounting. There are lots of resources out there, including a wide range of good accounting software for freelancers. But you don't have to go it alone. Get in touch with us today at Auditox Accountancy and we can help you with all of your freelance accounting needs.


The importance of bookkeeping

You should never discount the importance of bookkeeping. Keeping timely and accurate books isn't just important during tax season but it can also help you to get a better idea of how your business is running on a weekly or monthly basis. Without regular bookkeeping, it can be hard to keep track of invoices that are outstanding, accurate cash flow, accounts payable/accounts receivable, and how much you need to put aside for your tax bill.

Organisation is key

When it comes to freelance accounting, organisation is key. Bookkeeping is one of those tasks that can easily build up quickly and become overwhelming. So make sure that you start your bookkeeping as soon as you open your freelancing business. It is so much harder to look back at business transactions from months before to try and work out where they came from, especially if you have multiple clients. Finding a regular time to send invoices and do your books, ideally weekly, can help you to stay on top of things even during busy periods.

Find the right software

Finding the right software for your freelance accounting can make a huge difference to how well you can stay organised and how easy it will be for you to keep track of all of the factors that you need to. There are so many choices for modern accounting software that can automate all sorts of processes (e.g. recurring invoices, calculating quarterly taxes, and scanning receipts) for you so that you can dedicate more time to your business.

What you should be keeping track of

Hours work or jobs completed for each client

This is especially important if you have multiple clients. Keeping track of the jobs you have completed for each client or how many hours you have worked for them can help you make sure that you don't have any outstanding invoices and can give you an overview of the pattern of work that you have for each client.

Business expenses

Some businesses will have more expenses than others. If you are working from a laptop, for example, you will likely have fewer expenses than someone who needs to travel and use specialist tools for their work. Either way, it is important to keep track of every business-related expense so that you can have a better idea of your cash flow and also so that you can have all the information you need ready for your accountant and have a good idea of what tax payments you will need to make.

Total income

Keeping an eye on your weekly, monthly, and yearly income will help you to plan your expenses. It will also help you to calculate how much to set aside each month for your tax bill at the end of the financial year. Freelancers pay their income taxes via Self Assessment and you will have a total at the end of the year for how much you owe based on your income.

Many people prefer to put money aside every month so that they don't have as much have to do your tax payments in one go at the end of the year. You will also need to put money aside to pay your National Insurance contributions (either Class 1 or Class 2). It can be helpful to have separate bank accounts for the money that will be going towards your tax and the money that will be for running your business and your living expenses.

The importance of bookkeeping

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Do I need to hire an accountant or bookkeeping services?

Using bookkeeping services can be a helpful way of ensuring that all of your accounts and business transactions and your balance sheet are up to date and accurate. Very often, people only see an accountant once a year when it's time to fill in their Self Assessment form and using bookkeeping services to help make sure that everything is running smoothly throughout the year can make life a lot easier. They will be able to keep track of your accounts receivable and accounts payable, keep a close eye on your balance sheet, calculate the company profits, generate sales receipts, and much more.

There is online accounting software for freelancers that can provide all the tools you need to get your accounts ready for your accountant, including mobile apps. At Auditox Accountancy, we understand the business needs of freelancers and can help to advise you and ensure that your accounts are exactly where they need to be.

Do I need to hire an accountant or bookkeeping services?

Why is tracking my business expenses so important?

When it comes time for tax season and preparing your Self Assessment, having your business-related expenses collated and ready to show your accountant is invaluable. This is because you can deduct your allowable business expenses from your taxable profit.

Allowable expenses include:

  • office costs, such as stationery and office equipment
  • travel costs, such as bus fare or fuel (you can track mileage to work out your fuel costs for business-related journeys)
  • clothing expenses
  • the cost of stock or raw materials
  • financial costs, such as insurance
  • business premises costs, including heating and lighting (if you work from home you can only claim for one room and not the whole house)
  • marketing costs
  • training, such as courses or seminars related to your business

Things get more complicated if you are classed as a limited company. For example, you will need to report any item that you get personal use out of as a company benefit.

At Auditox Accountancy, our accountants have a deep understanding of allowable expenses and will be able to advise you both during tax season and throughout the year.

Why is tracking my business expenses so important?

Do I need a separate business bank account?

If you are a sole trader, you do not need a business bank account that is separate from your personal accounts. This is because, in the eyes of HMRC, your small business and you are counted as a single person when calculating how much income tax you will need to pay.

With that being said, many freelancers do choose to have a bank account for their small business finances that is separate from their personal accounts. The main reason for doing so is that it simplifies the process of separating business-related transactions from personal ones when it comes time to fill out your Self Assessment. It can also make it easier to get a full picture of how the business is doing so that your accountant will be able to make better sense of it quickly.

With many of the options for accounting software for freelancers, you can set it to automatically categorise your transactions so that your personal and business ones are separated. This can allow you to have the same clear picture and easy tax season as you would if you had a separate business account.

Do I need a separate business bank account?

Best accounting software for freelancers

Getting the best accounting software for freelancers can make all the difference when it comes to managing your accounts and bookkeeping yourself, and it can also allow you to present your accounts to your accountant much more easily. And there are lots of different kinds of online accounting software available. It is a good idea to think about exactly what you want out of the software so that you can make an informed decision about which one is right for you.

QuickBooks UK - best accounting software for sole traders

QuickBooks has a long history. Its parent company, Intuit, released the first computerised home accounting software way back in 1984, and QuickBooks, the version for businesses, was released in 1998. Since then, the software has, of course, become more intricate and it was also one of the first to move onto the Cloud so that people could access their accounts from wherever they are.

For sole traders and small businesses, QuickBooks offers two different plans. There are two more plans available for larger businesses with extra features like the ability to add more than one user.

QuickBooks Self-Employed Plan

This plan is for sole traders who aren't registered for VAT but who will need to complete their Self Assessment. It usually costs £8 a month but QuickBooks often has special offers available where you can either get 30 days free or pay a reduced amount for the first few months.

You can access QuickBooks via QuickBooks online or through its mobile app. The mobile app allows you to take photos of receipts for business expenses and upload them directly to the software which can be a useful time-saving tool.

It will also help you to prepare for Self Assessment and you can download the details to an Excel file ready to fill in your forms. It will also give you real-time income tax and National Insurance estimates so that you can predict how much your final tax bill will be and prepare for it.

You can connect QuickBooks to most major bank accounts so that you can track your expenses and income. And if you use the same bank account for your business and your personal expenses, there is an automatic categorisation tool included in the software.

If you use invoices in your business, QuickBooks Self-Employed allows you to generate unlimited professional invoices. The invoices are quite standard and it isn't really possible to edit or customise them, so they probably won't be pretty, but they are accurate.

Another handy tool, if you use the mobile app, is that you can set automatic mileage tracking to keep track of your business mileage. If you don't use the app, you can manually import your business mileage into the QuickBooks online accounting software.

You will also have access to free chat messaging via QuickBooks Online if you have any issues that need resolving and their customer service is highly-rated.

QuickBooks Simple Start

This version of QuickBooks Online is perfect if you are a sole trader or small business that needs to manage VAT. With that being said, the inclusion of VAT services isn't the only difference between Simple Start and QuickBooks Self-Employed. Along with all of the tools available with Self-Employed, there is also a range of other tools that can be helpful, whether you need to manage VAT or not. These extra tools are reflected in the price, with Simple Start costing £12 a month.

You can use QuickBooks Simple Start accounting software to submit your VAT directly to HMRC. You can also use it to check your VAT for errors before you submit it.

As with Self-Employed, you have unlimited invoices but with Simple Start, when you send invoices out to your clients, they can pay them with one click. This makes the process of sending invoices and receiving payments easier, both for you and your clients.

You can also use it to forecast your cash flow, which can help you to see if there are any bumps in the road that you will need to look out for. Of course, this prediction isn't foolproof and it is mainly based on recurring invoices and expenses, so it is also a good idea to have some manual calculations to hand as well.

Simple Start allows you to create estimates and quotes directly in the accounting software and you can also use it to calculate and submit your CIS. You can access support from QuickBooks via their free phone number rather than relying on chat messaging only.

QuickBooks summary

QuickBooks accounting software is one of the biggest names in the game and it has a huge range of tools and services included that can help you, not only during tax time but also with your general bookkeeping needs. Having a dedicated sole trader's plan that is priced cheaper than their plans for a small business or a larger business makes this a great option for many freelancers.

If you want to be able to generate and customise your invoices, then this isn't really possible in QuickBooks. Sometimes the syncing between your business transactions and the date in the app/software can lag a little, which can make it difficult at times to get a full picture.

With that being said, the comprehensive tools and features, many of which are closely aligned with UK tax processes, can be incredibly useful for freelancers working in the UK. When it comes to filling out your Self Assessment, the time you spent setting QuickBooks up will seem more than worthwhile.

Best accounting software for freelancers


As with QuickBooks, FreshBooks offers four different plans targeted towards a variety of business needs. The two most expensive plans are aimed at companies that either hire employees or contractors, but the two cheapest plans are aimed at sole traders and small businesses. The differences between the cheapest (Lite) and second-cheapest (Plus) plans aren't along the same lines as QuickBooks, however (no VAT needs versus VAT needs) so it can take a bit more thought to decide the one that's right for you. Both will allow you to create VAT reports, for example, but you can only access mileage tracking with the Plus option.

FreshBooks was initially created as a software for creating invoices before moving into more general accounting software. If the bare QuickBooks invoices are a problem for you, then you might appreciate the more aesthetically pleasing invoices that you can generate with FreshBooks.

FreshBooks Lite plan - best accounting software for invoices and payments

The FreshBooks Lite plan costs £11 a month but they often have offers available so that you can get it cheaper for the first few months. You can create unlimited invoices with this plan but you can only send invoices to a maximum of five clients. This makes it perfect for freelancers who have a small number of regular clients.

One of the features that make FreshBooks stand out from the crowd is the ability to have your clients pay you directly to the accounting software using a credit card or Direct Debit. This feature is provided via Stripe. You can also use this accounting software to generate unlimited estimates. These two features together make communication with your clients much easier and will make it more simple to keep track of.

In terms of tracking, you can track unlimited expenses and you can also track your sales and see detailed sales reports as well as your accounts receivable and accounts payable. There is an Android and iOS mobile app so that you can access everything you need from your phone.

If you need any help, you can phone the FreshBooks support staff line for free with any of the plans available.

FreshBooks Plus plan

This plan costs £19 a month and is designed for people with slightly more complex business finances. You also get unlimited invoices with this plan but you can send them to a maximum of 50 clients. Everything can again be managed via the mobile accounting app and you get all of the features that are included with the Lite plan, with a fair few extras.

Being able to give your accountant direct access to your accounts can be important, and this is possible with the Plus plan. We will be able to look through your accounts and help to prepare them ready for tax season. We will also be able to provide you with sound business advice.

Another important feature of the Plus plan is double-entry accounting, which is when every business transaction gets two entries in your books: a debit and a credit. This can make it far easier to balance your books and ensure that your financial records are completely accurate.

The Plus plan offers mileage tracking when using the mobile app. The app tracks your driving movements and you can categorise journeys as being personal or business-related. You can then use the business mileage to claim tax relief when it comes to your Self Assessment.

The accounting software will also give you the option to set up recurring billing and client retainers as well as the ability to create unlimited proposals. This can make the process of dealing with clients much more streamlined and simple.

By linking your bank account to FreshBooks, the Plus plan will allow you to automatically track your business expenses. This will help to free up time and will make it much easier to fill in your Self Assessment come tax season.

Finally, the Plus plan also allows you to generate a business health report which can be invaluable if you want to get a good handle on where your business is, financially.

FreshBooks summary

In many ways, FreshBooks is similar to QuickBooks and has many of the same features, along with some extra ones. It is at a higher price point, however, with the cheaper Lite option being more expensive than both the Self-Employed and Simple Start QuickBooks plans.

The extra features that many people value are the more attractive invoices, as well as the option to do double-entry accounting and for credit card and Direct Debit payments to be made directly to the FreshBooks accounting software. The ability to allow accountant access with the Plus plan is also a big draw as are the more appealing invoices. The software is intuitive and it has an attractive user interface that is easy to navigate.

It doesn't at present, however, allow you to download the information in a way that is directly aligned with your Self Assessment forms and you will have a limit on the number of clients you can send invoices to with both the plans aimed at a sole-trader. And the software gets updated quite often which can, at times, make it confusing.

With that being said, the extra features and tools included in the FreshBooks accounting software can be enough for many people to decide that it is the perfect option for them. Being able to use double-entry accounting and to allow accountant access can make filling out your Self Assessment much easier and having an easy way for your payments to be made directly to FreshBooks can make keeping track of your business payments much easier. You will also get telephone support from FreshBooks regardless of what plan you're on so if you do get stuck on anything, there will be someone on the end of the line who can help you.

Sage Business Cloud Accounting - best accounting software for flexibility

Sage has been creating accounting software for a long time and the company was founded in 1981. They are a UK-based company with headquarters in Newcastle and, while they are now a global brand, many of their tools and features are entwined with UK accounting and tax law. They also have a UK-based 24-hour phone line. Many of the other accounting software companies are based elsewhere, such as the US, which can make getting hold of someone to talk to difficult due to timezone differences. But this isn't something you will need to worry about with Sage.

As with most accounting software for freelancers, Sage Business Cloud Accounting offers a hierarchy of plans that can provide you with extra features for a higher price. The unique thing about Sage, however, is that they also have an extensive library of app add-ons that you can pay for separately. These apps are catered towards businesses with a variety of different needs and they can grant you a lot of flexibility. Rather than paying a lot more for a plan that maybe only has one feature that you need, you can pay for that one feature on its own, which will save you money.

The user interface of Sage Business Cloud Accounting is quite similar in many ways to Excel. Many people when they first start trading will use Excel for their accounting needs so having a similar UI means that Sage can be much easier to learn in the beginning. All of the business reporting within Sage, which includes your balance sheet, profit analysis, sales revenue, and more, can be exported as a .csv file that can be imported into Excel easily. This can make it easy to share your financial records with other people within the company or with your accountant. You can also save it as an easily-printable PDF file.

You can use Sage Business Cloud Accounting within the cloud-based web service or you can download their mobile app so that you can do your accounting and bookkeeping on the go.

Sage Start

This is the most basic plan and it costs £12 a month. Sage often offers discounts where you can get the first three months free so you can try it out and see if you like it. If you are a sole trader, this can be a good plan for you because it should cover most of the things that you will need. The plan will support one user accessing the accounting software.

With the Sage Start plan, you can create and send professional invoices. These are somewhat customisable so you can add your company logo, change the colours, and a few other details, but they aren't fully customisable. One of the biggest draws of Sage accounting is that its invoices are trackable. So you can see exactly when the invoice was created, when it was sent, when it was seen by the client, and when it was paid. Being able to know exactly when the client saw the invoice can be very helpful when collecting payment. You can also keep track of all outstanding invoices in one place so that you know exactly how much money you are owed.

You can sync your bank account to the Sage software and set it to automatically categorise business transactions and personal transactions, which can mean that you won't need to have separate accounts for your personal and business needs.

Sage Business Cloud Accounting is designed to be used directly with HMRC's Making Tax Digital VAT reporting. You can calculate your VAT bill within the software and then, as long as you have inputted your Government Gateway ID, you can even submit the report to HMRC directly from the software or accounting app.

The software is also set up to make filling out your Self Assessment quick and easy. All of the information that you will need is displayed clearly and you can download it as a .csv or PDF file so that you can send it in an easily readable way to your accountant. Tracking your income and expenses within the software can also help you to have the financial data to hand when you need it and to be aware beforehand of what your tax payments are likely to be.

Sage Standard

This is the next plan up from Start and it costs £24 a month, after any trial period. It allows you to have unlimited users and it also has extra features that can be useful both if you're a sole trader and if you run a small business.

If in-depth knowledge of your business health is important to you, then the advanced reports available with the Standard plan can be extremely useful. They provide you with detailed financial data which can help you to see at a glance everything that's going on with your business finances. You will also be able to forecast your cash flow.

The Standard plan also allows you to manage and submit your CIS, send quotes, and estimates, and manage your purchase invoices. If these are features that would help you in running your business, then it might just be worth the extra cost to upgrade to Standard.

The final feature that is included in the Standard plan will cost you extra money when you use it. You can snap receipts using Auto Entry so that you can easily track your expenses. But to use Auto Entry, you will need to make sure that your account is topped up with credit.

Sage Plus plan

The Plus plan costs £30 per month after your trial period. It includes all of the features in the Start and Standard plans but it also allows you to use multi-currency banking and invoicing, which can be very useful if your clients come from all over the world. You can also use it for inventory tracking which will help if your business uses stock.

Sage Accounting apps

Sage Business Cloud Accounting has an extensive library of accounting apps that you can add to your plan when you need them. This includes payroll services, the ability to accept payments via Stripe, and the use of Sage Intelligence. Sage Intelligence gives you a much deeper understanding of your business finances and you can use it to prepare and present your financial records to potential investors or other interested third parties.

You can also get specific add-ons for Amazon, Shopify, and eBay, which can automate your accounting for these sites. As well as add-ons that make recurring invoices and late payment reminders for clients much easier to manage, and many more.

Sage Business Cloud Accounting summary

The greatest draw of Sage Business Cloud Accounting is just how flexible it is. Like many other options for accounting software for freelancers, you can choose between different plans to suit your needs. But, on top of this, you also have the option to pick and choose your add-ons to make your plan perfectly suited to your personal business needs.

Sage also has an excellent reputation for customer service. You can access 24-hour UK-based customer support via phone or live chat. There are network opportunities with the online community Sage City where you can talk to other business professionals. And you can even access accredited free courses that can help you with your continuing professional development.

The pricing is higher than it is for a lot of the other accounting software for freelancers and the user interface isn't as clean and attractive. You will also have to pay extra for some features that are come as standard with the plans available from other companies, such as mileage tracking and accepting payments.

With that being said, Sage Business Cloud Accounting offers many features that just aren't available with the software from other companies. So if these features are something that would help you to run your business, it can be worth the extra expense.

QuickFile - best accounting software for affordability

The pricing plan for QuickFile is completely different from the other accounting software companies covered so far. It's a pricing system that will be familiar to many people who regularly download apps to their phones. If you are a smaller business, you can get completely free access to the majority of the QuickFile accounting services, with the addition of ads, or you can use the paid version to remove the ads. There is a limit on the free version, however, with a maximum of 1000 ledger counts in a 12-month period. If you have a sole trader and have relatively simple accounts, this should be more than sufficient for you.

There are five plans overall to choose from: Extra Small, Small, Medium, Large, and Extra Large. You only have to pay for the Large and Extra Large plans and these cost £45 per year plus VAT.

What you get for free

You'd be forgiven for thinking that the free software version of QuickFile would have an obviously limited choice of features, but you would be wrong. There is an impressive range of tools available on the free version and many freelancers will never need to upgrade to the paid version.

QuickFile supports VAT returns that can be submitted to HMRC directly from the software. This can be standard or flat rate and cash or accrued. When it comes to reporting, there is a range of custom tools and custom chart options that can make visualising your finances much easier. You can also include group activity within the software so that your accountant can have direct access to your accounts. And you can connect it with most major banks so that your transactions are automatically imported.

You can also create and send estimates, purchase orders, and delivery notes, as well as send invoices. The invoices are fully customisable fully trackable. QuickFile supports online payments via Stripe, Square, PayPal, WorldPay, GoCardless, among others. And you can set up automatic invoice reminders. It will also support payments in multi-currency options, so you can use this even if you have clients that are in other countries.

In terms of your data, QuickFile automatically backs up remotely every 15 minutes and you can set additional regular backups for your own accounts. It also uses 2-factor authentication, which is the gold standard in data security. It has an accessible API so that you can integrate it into your own back-office system.

If you use the mobile app, you can capture and import your receipts directly from your phone. Within the software, you can manage your documents and you can even send out snail mail via the Royal Mail.

What you get if you pay

For many freelancers, the free software QuickFile version will be the best accounting software for their needs. But the paid version does add some extra features that can be useful to a variety of businesses. These include:

  • No ads
  • 400+ integrations
  • Advanced customisation
  • Custom trading styles
  • Invoice revision history
  • Sent email log
  • Enhanced bilk invoice entry
  • Keyboard shortcuts
  • Custom client email templates
  • VAT bridging

QuickFile summary

QuickFile certainly understands the modern internet and mobile market. The pricing plan they use is probably the most common you will find among app developers, and there's a reason why. The people who have the free version "pay" via watching ads and they also get a taste for what the software can do, so they may well be more likely to go for the paid version later.

In any case, if you are a freelancer who appreciates value for money, QuickFile is a great option. With the free version, you get so many features that would only be included in the more expensive price plans with many of QuickFile's competitors. This includes online payments, VAT returns, group activity/accountant access, and more. You also get access to a helpful community and customer support, as well as QuickFile's well-respected blog. This blows much of the competition out of the water when you compare how much you would have to pay each month for identical services.

The extra features that you can get with the paid version can be very useful and you will need to opt for this version if your business grows past the point of 1000 ledger entries. If you are using the free version, the ads can get annoying so that might be a motivator to upgrade in and of itself. But QuickFile is the best accounting software for value for money and it is one of the only companies that offer a usable free version.


The bottom line

Managing your accounting as a freelancer is vital. It won't just make your life easier around tax time (although it definitely will!) but it will also allow you to have a much clearer picture of how your business is running. Finding the best accounting software for freelancers that works for you can free up so much time that could be being spent on your most important business tasks. Here at Auditox Accountancy, we can work with whatever software or data you use to give you the best advice and to prepare your accounts ready for tax season.

The bottom line

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