How to track small business expenses without accounting software

HMRC-allowable expense categories for UK businesses

If you are a sole trader completing a Self Assessment, HMRC expects expenses to be "wholly and exclusively" for business purposes. Structuring your tracker around these common allowable categories makes tax return preparation much simpler:

• Office costs — stationery, printing, postage, phone and internet (business proportion only).
• Travel — mileage (45p per mile for first 10,000 miles, 25p thereafter for 2025/26), train fares, parking, congestion charges, and accommodation when travelling for work.
• Marketing and advertising — website hosting, domain fees, social media ads, business cards, directory listings.
• Professional fees — accountant, solicitor, surveyor, or other professional services used for the business.
• Software and subscriptions — cloud storage, design tools, email services, CRM, and any SaaS products used for work. If you use something partly for personal reasons, only claim the business proportion.
• Equipment — laptops, monitors, phones, tools, and office furniture. Higher-cost items may need to be treated as capital allowances rather than day-to-day expenses — ask your accountant.
• Insurance — professional indemnity, public liability, and other business insurance policies.
• Bank charges — business account fees, card processing fees, and interest on business borrowing.
• Training — courses, books, and subscriptions that maintain or update existing skills relevant to your trade.
• Working from home — you can claim simplified expenses using HMRC's flat rate (based on hours worked from home per month), or calculate a proportion of actual household costs.

Always keep receipts and note which category each expense belongs to at the point of entry. Reconstructing categories months later from a bank statement is unreliable and time-consuming.

VAT tracking: what UK small businesses need to know

Even if you are not VAT-registered, tracking VAT on your purchases helps you understand the true cost of what you buy — and prepares you for registration if your turnover approaches the threshold.

• VAT registration threshold (2025/26): £90,000 in taxable turnover over any rolling 12-month period. Once you exceed this, you must register for VAT with HMRC.
• Deregistration threshold: £88,000 — if your taxable turnover falls below this, you can apply to deregister.
• Flat Rate Scheme: If your turnover is under £150,000 (excluding VAT), you may be able to use the VAT Flat Rate Scheme, which simplifies record-keeping by applying a fixed percentage to your gross turnover rather than tracking VAT on every transaction.
• Making Tax Digital (MTD): VAT-registered businesses must keep digital records and submit VAT returns using MTD-compatible software. A well-maintained expense tracker with VAT columns makes this much easier when the time comes.

If you are approaching the threshold, start tracking VAT now — do not wait until the month you cross it. A clean VAT column in your expense tracker gives you and your accountant the data needed to register smoothly.

Basic expense workflow

1. Add each income or expense row when it happens — same day, before you forget the context.
2. Assign the correct HMRC-allowable category and record whether VAT was charged.
3. Use categories consistently across the month — do not rename or merge categories mid-year.
4. Check unpaid rows and un-receipted expenses before month-end.
5. Export Excel at month-end for records, accountant handover, or further analysis.

Self Assessment preparation: what your tracker should produce

If you are a sole trader filing a Self Assessment tax return (SA100), your expense tracker should make it easy to pull out the figures you need for the SA103 supplementary pages. Specifically, HMRC wants to see totals for:

• Costs of goods bought for resale or raw materials (if applicable).
• Employee costs, subcontractor costs, and agency fees.
• Car, van and travel expenses — split between mileage, fuel, repairs, and vehicle insurance.
• Rent, rates, power and insurance costs for business premises.
• Phone, internet, and office costs.
• Advertising and business entertainment (note: client entertainment is generally not allowable for tax).
• Interest on bank and other business loans.
• Professional fees, accountancy, and legal costs.
• Other allowable business expenses not covered above.

If your tracker uses categories that map to these SA103 lines — or at least groups them in a way that makes the mapping straightforward — you will save hours of work in January. Export your monthly tracker exports into a single annual summary before handing over to your accountant.

Worked example: a freelancer's weekly tracking routine

Emma is a freelance graphic designer working from home in Manchester. She earns roughly £2,800 per month from a mix of client projects and uses a simple expense tracker to stay organised. Here is what her week looks like:

• Monday morning: Opens the tracker, adds any weekend purchases (Adobe Creative Cloud subscription charged Sunday night — £54.99 including VAT, category: Software).
• Wednesday afternoon: Buys train tickets for a client meeting in Leeds next week — £42.60 return. Logs the expense immediately on her phone, category: Travel. Also logs the mileage from home to the station.
• Friday afternoon: Quick 10-minute review. Spots that two client invoices sent last week still show as unpaid. Makes a note to follow up Monday. Also notices her monthly phone bill came out (£38.40 including VAT) and logs it, splitting 70% business use (£26.88) as the allowable amount.
• Last day of month: Exports the month's tracker as Excel. Reviews totals per category. Sends the export to her accountant ahead of the qua