Take control of your taxes

Expense tracking: the ultimate hack for independent workers

Tracking your expenses as you go throughout the year sounds like a hassle. But it might just be the best money management move you make all year.
Benjamin Hay
COO and Co-Founder
Collective Benefits

This year, we're challenging our members to track their expenses throughout the year using Finmo's free expense tracker. There are big prizes to be won if you take part, from a £150 John Lewis voucher to secret giveaways each month. But on top of that, it could save you major stress (and money!) in the long term. Keep on reading to find out why.

#1: Managing your taxes will become much less stressful

Independent workers have to deal with a lot of extra finance stuff compared to someone who’s employed by a company. Say you’re a delivery rider and are responsible for paying your own taxes. Not only do you need to keep track of every payment you receive, you need to monitor things like your mileage and other costs associated with running your business.

Providing HMRC with this information can get pretty stressful if you don’t have the right tools in place.

Tracking your finances throughout the year, though, makes this whole process so much more manageable. For example, a delivery rider might want to use a GPS app to monitor their mileage in real-time, which they can then input into a tax management app each week.  

That way, instead of having to go through a year’s worth of payments, mileage and other expenses in one go, you’ll have all the data you need when it comes to doing your tax return.

#2: You’ll be able to manage your cash-flow better

Managing your cash-flow is all about having full visibility of your finances across the year. This becomes much harder when you’re not sure how much tax you’ll owe come the 31st January deadline.

Tracking your income and expenses efficiently throughout the year, on the other hand, means you’ll be much better equipped to make informed financial decisions. For example, if you could do with investing in a new scooter for your job as a delivery rider, you’d be able to confidently make this call, knowing it made sense for you and your money.

#3: You’ll be able to file your tax return early

Tracking your income and expenses as you go also means you’ll be able to file your tax return as soon as the financial year ends. This can be really useful if you need proof of earnings, like if you’re applying for a mortgage or another kind of loan.

#4: Your tax return will take minutes, not hours

Tax returns can get ridiculously time-consuming when you leave everything to the last minute. Receipts get lost, business expenses get forgotten, and payments can get overlooked. While it’s totally understandable why you’d want to put off tax admin when you’re so busy working, spending just ten minutes a week can end up saving you a serious amount of time when it comes to doing your Self Assessment.

This is because you’ll have all the data you need to hand. Plus, you’ll know it’s accurate as it was recorded while the income and expense transactions were fresh in your mind, saving you from losing time trying to figure out what each one means.

You’ll also be freeing up some time that can be spent on actually optimising your taxes rather than trawling through receipts and invoices. For example, when you put the time in, you might find there are ways to write off certain parts of your rent or mortgage interest as a home office expense.

#5: Avoid tax pitfalls and overpaying

Business expenses can easily get missed when you attempt to sort a year’s worth of finances in one go. Sure, it’d be pretty hard to forget about buying a car or scooter for work, but you could end up getting your mileage wrong or missing something smaller like home office expenses.

Missing business expenses means paying more tax than you need to – which is something no-one wants.

By recording what you spend for your business in real-time across the year, you’re much less likely to fall into this trap. You’ll also be far less likely to make other mistakes on your tax return, which can cause administrative nightmares later down the line, or even end up costing you in penalties (and, of course, time).

Working independently doesn’t have to mean dealing with stressful tax and financial admin as a matter of course. You just need the right tools in place. We’d recommend using a tracker app like Finmo, which lets you automate your income and expense tracking (so each time you get a payment, for example, it automatically gets tagged as ‘business’).

By making use of the tech that’s available to keep track of your money through the year, you’ll be saving time, stress and probably money too. That seems like a pretty good reason to us.

April 2, 2021