How to Track Income and Expenses for Your Side Hustle
If you run a side hustle, keeping clear records is one of the easiest ways to save time and money. Good bookkeeping helps you complete Self Assessment accurately, claim the right expenses, and see your true profit. You do not need expensive software to get started. A simple spreadsheet and a tidy system for receipts is more than enough for most people.
Why Record Keeping Matters
- Accurate Self Assessment with less January stress
- Confidence you are claiming all valid expenses
- Clear view of profit and cash flow, not just sales
- Prepared if HMRC asks for evidence
What You Should Track
Keep a record of all money in and money out. At a minimum, record:
- Income such as product sales, freelance invoices, platform payouts
- Expenses that are wholly and exclusively for the business, for example:
- Postage and packaging
- Software and app subscriptions
- Advertising and listing fees
- Office supplies and small equipment
- Phone and internet used for work (proportion only)
- Travel for work such as train fares or mileage
- Payment processing fees
Simple Spreadsheet Setup
Create one spreadsheet with two tabs. This layout works well for most side hustles.
| Income tab | Why it matters |
|---|---|
| Date | Helps reconcile monthly payouts and tax-year totals |
| Source or customer | eBay, Etsy, direct, client name |
| Gross amount | Total received before platform or card fees |
| Fees deducted | Platform or payment processor fees |
| Net received | What actually hit your bank account |
| Payment method | Bank, PayPal, Stripe, cash |
| Expenses tab | Why it matters |
|---|---|
| Date | Match each entry to a receipt or invoice |
| Supplier | Who you paid |
| Category | Postage, software, advertising, travel, supplies |
| Description | Short note of what it was for |
| Amount | Total paid |
| Business use percent | For mixed use items like phone or internet |
| Allowable amount | Amount x business percent |
How To Handle Mixed Use Costs
Some costs serve both personal and business use. Only claim the business share. Keep a simple note of how you arrived at the percentage.
| Item | Example basis | Allowable amount |
|---|---|---|
| Mobile phone bill £30 | Estimate 60 percent work use | £18 |
| Home internet £40 | Estimate 50 percent work use | £20 |
| Fuel or travel | Keep a mileage or tickets log | Claim business journeys only |
Receipts and Record Storage
- Keep digital copies of receipts. Photos or PDFs are fine if the details are readable.
- Store them in dated folders in Google Drive or similar to match your spreadsheet.
- Keep records for at least 5 years after the 31 January deadline for the relevant tax year.
Apps and Tools You Can Use
- FreeAgent easy for sole traders and very clear reporting
- QuickBooks or Xero good if you plan to grow or invoice regularly
- Pandle UK focused with a free tier
- Google Drive simple folder structure for spreadsheet and receipts
Start with a spreadsheet. If your sales grow or you need features like invoicing and bank feeds, move to software later.
Workflow You Can Stick To
- Pick one bank account for all side hustle money to keep things clean.
- Each week, enter sales and expenses in your spreadsheet and file receipts.
- Reconcile to your bank or platform payout once a month.
- Set a reminder every quarter to review profit and set aside money for tax.
Trading Allowance and Registration
If your total self employed income is £1,000 or less in the tax year, the trading allowance can cover it and you might not need to register. If you go over £1,000 or want to claim actual expenses, you will usually need to register as self employed and file a return.
Common Mistakes To Avoid
- Recording only sales and forgetting platform fees
- Claiming 100 percent of mixed use bills without a basis
- Keeping receipts in email inboxes where they are hard to find later
- Using several personal accounts so transactions get lost
Frequently Asked Questions
Do I need accounting software?
No. A spreadsheet is fine for most side hustles. Move to software if you need invoicing, bank feeds, or you are VAT registered.
Can I claim a new laptop or phone?
Yes if used for the business. If there is personal use, claim a reasonable business proportion and keep a short note of your basis.
How do I track platform fees from eBay or Etsy?
Record the gross sale on the income tab, then record the platform fee on the expenses tab. Your net bank payout should match after fees.
Do I need a separate bank account?
Not legally required for sole traders, but strongly recommended. One account makes bookkeeping and tax time far easier.
How should I track mileage?
Keep a simple log of date, purpose, start and end location, and miles. Claim only business journeys and use HMRC approved mileage rates.