Most freelancers treat their tax like a once-a-year panic. That is the expensive way to do it.
The spreadsheet I use tracks everything month by month, calculates my tax liability in real time, and tells me exactly what to set aside. Here is the setup.
Why monthly tracking beats annual panic
By the time January comes around, you have forgotten what half those transactions were. Receipts are lost. Bank statements require reconstruction. Your accountant bills you for the extra time.
Monthly tracking takes 15 minutes a month. January becomes a copy-paste exercise.
The five columns that matter
Every income or expense row needs:
1. Date — when the money moved, not when the invoice was raised.
2. Category — keep it simple. Income, Equipment, Software, Travel, Professional Services, Home Office, Other. Do not over-engineer this.
3. Amount (ex VAT) — if you are not VAT-registered, just record the amount you paid. If you are, separate the VAT.
4. Receipts reference — a filename or folder reference. "2026-03/adobe-subscription.pdf" is enough.
5. Notes — anything non-obvious. "Client lunch with [name] re project scope" is enough for HMRC if you are ever questioned.
The automatic calculations worth adding
Once you have income and allowable expenses, the rest is arithmetic:
- Profit = Income − Allowable Expenses
- Income tax estimate = profit above personal allowance × relevant rate
- Class 4 NI = profit between £12,570-£50,270 × 9%
- Tax pot = running total to set aside (25-30% rule works for most people)
The allowable expenses most people miss
- Home office (either £6/week flat rate, or proportional utility costs)
- Professional development (books, courses, subscriptions relevant to your work)
- Accountant and bookkeeping fees
- Business bank account fees
- Equipment depreciation (or annual investment allowance for full cost)
- Phone (business proportion only)
- Software (100% if business-only, proportional if mixed use)
The spreadsheet
The Freelancer Tax Tracker (£9) is the exact setup I use — pre-built formulas, category dropdowns, monthly summaries, and a tax liability estimate that updates as you enter data. Works in Excel and Google Sheets.
Do you track monthly or annually? What is the one category you always forget?
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