Organising Self-Employed Expenses: A Practical System That Actually Works

Quick Answer

The best expense system is one you'll actually use. Keep it simple: categorise spending as it happens (or monthly via bank import), track business use percentages for mixed items, and review monthly totals to catch problems early. No shoebox required.

Disclaimer

This tool provides estimates and organisation help only. It's not financial advice. Always check HMRC guidance or a qualified accountant for your situation.

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Why Most Expense Systems Fail

Let's be honest: most expense tracking attempts fail. Not because people don't care, but because:

Too complicated: Multi-field forms for every coffee
Too time-consuming: Hours of data entry each month
Too disconnected: The system doesn't link to tax estimates
Too late: Setting up in January when the year's nearly over

A good system avoids all of these. It's quick, integrated, and built to last.

The Foundation: Categories That Make Sense

Before tracking anything, you need categories. But here's the key: keep them broad.

Recommended Categories for Most Sole Traders

Category	What Goes Here
Office & Equipment	Computer, phone, printer, desk, chair, stationery
Software & Subscriptions	Adobe, Dropbox, accounting apps, hosting
Travel	Train, bus, fuel, parking, mileage, accommodation
Professional Services	Accountant, legal, insurance, memberships
Marketing	Ads, website, business cards, networking events
Communications	Phone bill, internet, postage
Training	Courses, books, conferences (related to your trade)
Bank & Finance	Bank fees, card processing, interest
Other Business	Catch-all for genuine expenses that don't fit

Categories to Avoid (Common Mistakes)

Too granular: "Blue pens" and "Black pens" as separate categories
Too vague: "Stuff" or "Miscellaneous" for everything
Personal items: "Groceries" shouldn't be a business category

Your categories should match what you'll report to HMRC. Not so detailed you're overwhelmed, not so vague you can't analyse.

The Two Tracking Approaches

Approach 1: Real-Time Entry

Log expenses as they happen. Works if you:

Have few transactions (under 20 per month)
Like staying on top of things daily
Don't mind quick phone entries

How it works:

Make a purchase
Open your tracking app
Enter amount, category, date
Add a note if helpful ("Client meeting with X")
Done

Pros: Nothing piles up. Always current.

Cons: Requires discipline. Easy to forget.

Approach 2: Monthly Bank Import

Import your bank CSV once a month. Works if you:

Have many transactions
Prefer batch processing
Use a separate business account (makes filtering easier)

How it works:

At month end, export CSV from your bank
Import into your tracking tool
Review auto-categorised transactions
Adjust anything miscategorised
Done for the month

Pros: Minimal daily effort. Hard to miss transactions.

Cons: Requires monthly discipline. Categorisation review needed.

Which Should You Choose?

Most people: Monthly bank import. It's faster overall and ensures nothing slips through.

Exception: If you're meticulous and have few transactions, real-time works great.

Handling Mixed Personal/Business Use

The trickiest part of expense tracking is items you use for both business and personal life.

Common Mixed-Use Expenses

Item	Typical Business %	How to Calculate
Mobile phone	40–80%	Estimate business calls/data vs personal
Internet	20–50%	Hours used for work vs personal browsing
Home office	Varies	Room proportion or simplified flat rate
Vehicle	Varies	Business miles ÷ total miles
Computer/laptop	50–100%	Hours used for work vs personal

The Golden Rule

Only claim the business portion. If your phone is 60% business, claim 60% of the bill. Not 100%.

How to Track Mixed-Use

Option 1: Set a percentage upfront

Decide once (e.g., "Phone is 70% business") and apply that to every bill. Review annually—if your work pattern changes, update the percentage.

Option 2: Calculate each bill

More accurate but more effort. Good for large, variable expenses. Not worth it for a £30/month phone.

Option 3: Use HMRC's simplified rates

For home office and vehicles, HMRC offers flat rates that skip the calculation:

Home office: £6/week if you work 25+ hours from home
Vehicle: 45p/mile for first 10,000 miles, 25p thereafter

Simplified rates are often (but not always) lower than actual costs. Worth checking both.

Setting Up Your System (30 Minutes)

Ready to get organised? Here's how to set up a working system in one sitting.

Step 1: Choose Your Tool (5 Minutes)

You need something that:

Tracks income and expenses separately
Supports categories
Calculates totals automatically
Ideally links to your tax estimate

Options range from simple apps to full accounting software. If you're reading this, our calculator does all of the above.

Step 2: Create Your Categories (5 Minutes)

Use the recommended list above, or customise for your industry:

Photographer: Add "Equipment Hire" and "Props"
Consultant: Add "Client Entertainment" (non-allowable, but useful to track)
Tradesperson: Add "Materials" and "Tools"

Aim for 8–12 categories. Fewer is better.

Step 3: Set Business Percentages (5 Minutes)

For mixed-use items, decide:

Phone: ___%
Internet: ___%
Computer: ___%
Vehicle: ___%

Write these down. You'll apply them when tracking.

Step 4: Import Historical Data (15 Minutes)

If we're mid-year, catch up:

Export bank CSV for the current tax year (from April 6th)
Import into your tool
Categorise in bulk
Apply business percentages

This gets you to a clean baseline.

Step 5: Schedule Monthly Reviews (0 Minutes)

Add a calendar reminder for the 1st of each month: "Import expenses and review."

Monthly Maintenance (10 Minutes)

Once set up, monthly maintenance is quick:

Week 1 of Each Month

Export last month's CSV from your bank
Import into your tracking tool
Scan auto-categories – fix any obvious errors
Check totals – does the month feel right?
Done until next month

What to Look For

Uncategorised items: Assign a category or mark as personal
Large expenses: Make sure they're in the right category
Personal expenses: If using one account, mark and exclude
Missing expenses: Cash payments won't appear in bank export—add manually

Red Flags to Watch

Expenses Growing Faster Than Income

If your expense-to-income ratio is climbing, investigate. Are costs genuinely rising, or is personal spending creeping in?

Uncategorised "Other" Growing

If "Other Business" becomes your biggest category, your categories aren't working. Refine them.

Huge Monthly Variations

Big swings might be normal (seasonal business), or might indicate inconsistent tracking. Know which it is.

Same Expense Appearing Twice

Check for duplicates, especially if you import overlapping date ranges.

Year-End Checklist

At the end of the tax year (early April), do a final review:

1. Import Final Transactions

Get everything up to April 5th.

2. Review Category Totals

Do they make sense? Any category suspiciously high or low?

3. Check Mixed-Use Percentages

Still accurate? If your work pattern changed, adjust.

4. Look for Missing Expenses

Scan bank statements for anything uncategorised or missed.

5. Export a Summary

Create a record of your full-year expenses by category. You'll need this for your tax return (or your accountant will).

How Dude, What's My Tax? Helps

We've designed our expense features around this practical, sustainable approach.

Expenses CSV Import

Upload your bank export, and we:

Auto-categorise transactions based on merchant names
Let you adjust categories individually or in bulk
Set business use percentages per transaction or as defaults
Calculate allowable amounts automatically

Monthly View

See expenses broken down by month. Spot trends, catch problems early, and know exactly what you've spent.

Category Breakdown

See totals by category for any period. Perfect for year-end summaries or checking if a category is out of control.

Duplicate Detection

Import the same period twice? We catch duplicates and skip them. No messy double-counting.

Direct Tax Impact

Your expenses feed directly into your tax estimate. As you add expenses, watch your tax bill drop. Motivating.

MTD Quarterly Mode

Lock each quarter's figures. Export summaries. Prepare for Making Tax Digital without extra effort.

FAQ

How detailed should my expense descriptions be?

Brief but identifiable. "Adobe subscription" is fine. "Adobe Creative Cloud monthly subscription for design work" is overkill.

Should I keep receipts if I'm importing from my bank?

Keep receipts for large purchases, VAT claims, or anything unusual. For small routine expenses, the bank record is usually sufficient evidence.

What if I mix business and personal in one account?

It works, but you'll need to mark personal expenses when categorising. Consider a separate business account for cleaner tracking.

How do I handle refunds?

Log them as negative expenses in the same category as the original purchase. Or reduce the original expense amount.

What about payments to myself (drawings)?

Not an expense. Drawings (taking money out for yourself) don't reduce your profit.

Should I track VAT separately?

Only if you're VAT-registered. If you're below the VAT threshold, track expenses including VAT—that's your actual cost.

Can I change categories mid-year?

Yes, but be consistent within the tax year. If you rename a category, update past entries to match.

What if I forget to track something?

Add it when you remember. Better late than never. If it's a significant expense from a previous tax year, talk to an accountant about amending.

Next Steps

Don't let another month of expenses pile up. Set up your system today.

Start Tracking Expenses →

Learn more about what expenses are allowable or see how to build a quarterly review routine.

Back to the Learn hub.

This guide is for general information only. Tax rules change, and everyone's situation is different. Always check the latest HMRC guidance and consider speaking to a qualified accountant if you're unsure.