One of the main advantages of being a freelancer is that you answer to no one, but this also means you’re solely responsible for ensuring the smooth running of your business. No pressure!

Bookkeeping, the process of recording all the transactions in your business, is one area where it can be particularly difficult to keep track of everything all on your own, which is why good software can prove invaluable, simplifying your financial management and saving you precious time in the process.

There are lots of great options out there, though. So how does one know which to pick?

Well, hopefully we can help with that, as we’ve compiled a list of the three best bookkeeping software applications for freelancers based in the UK. We’ll go through the pros and cons of each, and see which one comes out on top.
 

Xero

This is one of the most popular and well-established options in the UK, among businesses and self-employed individuals alike. Some of the key features include:

• Real-time bank feed integration
• Customisable invoicing
• Detailed financial reports (profit and loss, etc.)
• Making Tax Digital (MTD) compliant

Pros

A big factor in Xero’s popularity is its commitment to integrating third-party apps (PayPal and HubSpot, for example). This allows the software to feel somewhat familiar, even if someone’s never used it before.

On top of this, Xero’s overall design is incredibly intuitive, and this further reassures new users, who actually get the sense they know what they’re doing.

Xero is also just a good all-round option, being suitable for businesses of every size, and in every kind of industry.
 

Cons

In spite of the intuitive design, there are some more advanced features which new users might struggle to make proper use of right away.

And then there’s the price. The premium plans offered by Xero are a little more costly than many of those offered by its competitors, and so this is something to take into consideration.

What’s the difference between the standard and premium plans? For starters, the standard plan puts a limit on the number of invoices you can send, as well as the number of bills you can enter.

You also miss out on several key features, such as the ability to track projects and use multiple currencies.

Essentially, the more expensive the plan, the more features you have access to and the less restrictions are placed on you.
 

FreeAgent

This is another leading bookkeeping software specifically designed for businesses, freelancers, and contractors based in the UK. Its key features include:

• Self-Assessment and tax calculation
• Project management (track time and expenses, etc.)
• Real-time bank feeds
• MTD compliant

Pros

The main advantage of using FreeAgent as a freelancer is that it boasts features which are specially tailored for people like yourself. A prime example of this is the project management tool, which is ideal for those who bill by the hour (like most freelancers!).

Pricing is also inclusive, meaning you are able to have unlimited users, clients, and projects. It’s a fixed price at £14.50/month for the first six months, and £29/month thereafter.
 

Cons

FreeAgent is obviously less equipped to handle larger or more complex businesses, but this shouldn’t really be a concern if you’re self-employed.

There are also limited integration options in comparison to software like Xero.
 

Pandle

Last but not least, there’s Pandle, which offers free bookkeeping software for freelancers and business owners. What are some of the key features?

• Send quotes and invoices
• Automated payment reminders
• Bank reconciliation
• Accept invoice payments online
• Mobile app
• Business reports
• Multiple currencies
• MTD compliant

Pros

First of all, ease of use is a priority, with Pandle having been built to be used by pretty much anyone. It even has safeguards in place to help users minimise the risk of making mistakes in their bookkeeping – so even if you think you’re rubbish when it comes to tech stuff, you can rest assured you’ll be fine.

If you do find you need assistance, though, you’ll have access to a support team of specialist bookkeepers.

Another big thing is that it saves you time by automating a lot of the more boring and usually lengthy processes.

In addition, Pandle includes features to assist you in working with customers and suppliers more efficiently, and these are all on top of the standard banking, accounting, invoicing, and reporting tools.

What about pricing? Well, as previously mentioned, the base version is totally free, but even the paid tier (Pandle Pro) is still reasonably priced at £5 + VAT per month. This makes Pandle a more viable option for freelancers than a lot of the other ones on the market.
 

What’s our verdict?

Xero is an excellent one-size-fits-all option, with its real-time financial insights making it a top choice for businesses looking to streamline their bookkeeping.

FreeAgent, on the other hand, is a great choice for freelancers specifically, offering a straightforward tool that simplifies self-employment tax, as well as project tracking.

All in all, though, it must be said that Pandle offers the most comprehensive package at the best price point. It’s not just an affordable alternative; it’s a top-quality service, and the perfect choice for any freelancer who wants to finally take control of their accounts (but without breaking the bank).

 
Head over to our information hub for more guides, news and advice on navigating life as a professional freelancer, from finance to tech and more.

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This process deals with how you record and manage what money is coming into the business (income) and what is going out of it (expenditure). Keeping an eye on this flow of cash (literally known as your cash flow!) is what will help you stay financially healthy, and hopefully improve your chances of making a profit.

With so many different types of bookkeeping software available for freelancers to choose from, we thought we’d take a look at why record-keeping is so important, and what software can do to help.

How can bookkeeping software help freelancers?

There are lots of reasons why freelancers should spend time making sure their bookkeeping is up to date and accurate, but this can be time-consuming. Accounting software can often help freelancers by processing data automatically, rather than relying on entering everything manually. Let’s look at some of the most common advantages of using bookkeeping software below.

Better budgeting and business decisions

Your financial accounts tell the real story of how well your freelancing is going. For example, it might seem like you have lots of money coming in, but if you’re also spending a lot on office space or coworking desks, things might not be as healthy as they seem.

Good record-keeping helps you manage your budget, and make more well-informed decisions about your spending. It’s also a great way to hold yourself accountable for setting money aside to pay your tax bill!

Lots of accounts software will include reporting tools, so you can look at your bookkeeping data in a way that’s easier to digest, rather than a wall of numbers.

Are your customers paying you on time?

As a freelancer, one of your biggest challenges can be battling late-paying clients. Following up can be time-consuming (and frustrating) so some bookkeeping software includes automated reminders.

You can usually set contact intervals and personalise the message, leaving the software to fire out an email reminder until the invoice is marked as paid.

Are you paying the right amount of tax?

Paying too much tax will leave you unnecessarily out of pocket, while underpaying runs the risk of fines on top of the tax bill you still need to pay – neither of which are ideal! Your bookkeeping records are the foundation of everything you tell HMRC about your business, so accuracy is key.

If you decide to use bookkeeping software, you can usually connect it to your bank account and pull information straight into your records. It tends to mean there’s a lower risk of errors or missing anything.

Helps make sure you’re getting as much tax relief as possible

And on the subject of accuracy, good bookkeeping habits also help you record and claim allowable business expenses which will reduce your tax bill.

If you declare income that hasn’t had expenses deducted from it, you’ll end up paying more tax than you should. So don’t!

Using cloud-based bookkeeping software means you can access your accounts from anywhere with an internet connection. This means you can upload receipts as you go, rather than saving and compiling random scraps of paper everywhere.

You can even track your mileage, upload photos of receipts and manage invoices.

You can spot a potential problem before it arises

Bookkeeping records can be compared over time, making it easier to spot trends and patterns over time – or even potential problems as they develop. A good accounting app will include reporting functions which make this easier.

For example, if you can see your cash flow moving into a situation that isn’t so healthy, you can quickly and easily ascertain where you’re overspending and where you need to cut costs for a while to get back on the straight and narrow.

Do I need to hire a bookkeeper for my freelance business?

No, it isn’t a legal requirement to hire a professional bookkeeper or accountant, and lots of freelancers take care of everything by themselves – but there are advantages to outsourcing your accounts to someone else.

Freeing up your time

As a business owner, time is a hot commodity. You really start to understand the true meaning of “there aren’t enough hours in the day”. Outsourcing your accounts to a professional buys you back more invaluable time to spend working with clients, sourcing new work, and building your freelance business.

Maximum tax efficiency

While you’re busy growing your empire, a bookkeeper or accountant will help you spot ways to be more tax-savvy. You’re more likely to capture (and claim) your allowable expenses, as well as take advantage of things like tax relief and allowances.

Better planning for the future

Having a professional in your corner will allow you to evaluate your financial records more effectively and accurately. This, in turn, will help you make more informed decisions about the direction of your freelance business.

How do I choose accounting software?

To make sure you’re reaping all of these benefits, the most important thing to do is find bookkeeping software that works for you.

Do some research, read reviews and even take a few free trials to get a feel for the kinds of features and user interface you want.

If you do sign up for any free trials, don’t forget to cancel the ones you don’t want or else they’ll end up being recorded in your accounts as an outgoing expense and wasting your hard-earned money.

How often do I need to review my bookkeeping as a freelancer?

How often you do your bookkeeping, if you’re doing it yourself, is mostly down to personal preference and how busy your schedule is, although the general rule is to do it as often as possible!

Again, going back to bookkeeping software, automated tools and feeds will help you keep your records closer to real-time without having to do quite so much manual intervention.

The choice is yours but the more meticulous you are with your routine, the easier the whole bookkeeping and accounting process will be.

 
Head over to our freelancer information hub for more guides, tips, and advice.

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A quick update on Making Tax Digital

This digital tax system is intended to make life easier, more seamless and more accurate for all taxpayers. It applies to most businesses, landlords and the self-employed, as well as some individual taxpayers too.

HMRC describes the initiative as being part of efforts to make it “easier for individuals and businesses to get their tax right and keep on top of their affairs”.

The rules are already in place for VAT registered businesses, so we are now looking towards HMRC’s plans to roll out MTD for other tax payers, such as Income Tax.

Making Tax Digital for Income Tax

As with MTD for VAT, Making Tax Digital for Income Tax (or MTD IT) is a new streamlined way of digitally reporting earnings to HMRC. It changes the way in which freelance sole traders and anyone else completing a Self Assessment tax return check in with HMRC.

What changes with MTD IT?

The MTD Income Tax process replaces the traditional Self Assessment tax return. Most freelancers submit Self Assessment, so it’s big news for the freelancing sector.

Rather than an annual return, taxpayers will instead keep digital tax records, and submit these as a series of updates throughout the year.

HMRC will use the information to provide you with a year-to-date overview of how much tax you owe at any given time.

You’ll then submit a final declaration and pay your bill by 31st January the following tax year (a bit like the existing system).

When will MTD IT start for freelancers?

After several delays, MTD for Income Tax is due to launch in April 2026 for sole traders and landlords earning more than £50,000. You’ll still need to submit a Self Assessment tax return for the tax year prior to registration. The MTD threshold reduces to £30,000 in April 2027, and drops again to £20,000 from April 2028.

The benefits of Making Tax Digital for Income Tax

The are actually plenty of advantages for freelancers facing MTD for Income Tax. If you don’t already keep digital bookkeeping records, it’s worth considering making the switch earlier. Not only will it give you more time to get to grips with it, the benefits of digital accounting aren’t to be overlooked.

As the initiative continues to roll out and embed, we’re sure this list will evolve but for the time being, these are the main benefits of making the transition:

• Filing and submitting returns becomes much less time-consuming
• Filing and submitting returns becomes more efficient
• Online billing makes paying tax owed more streamlined
• Less risk of mistakes and human error thanks to automation
• Improved accuracy means less instances of incorrect payments
• Moves towards going paperless are far more sustainable and eco-friendly
• Digital accounting means information can be accessed more readily
• Business owners have a more complete overview of their tax profile
• Tax information is available throughout the year, rather than only at year end
• Less chance of a surprise compliancy check from HMRC which has said it “wants to help businesses get their tax right first time and prevent them from feeling punished for making honest mistakes”

Where do I sign up?

Before you embark on the MTD for Income Tax sign up process, it’s important to note that you will require access to bookkeeping software that is Making Tax Digital compliant.

In order to sign up to the initiative, you will need to have the following information to hand:

• Full business name
• Email address
• National Insurance number
• Unique Tax Reference (UTR) number
• Accounting period information
• The accounting type you use
• Government Gateway log in details used when previously filing Self Assessment returns

You can sign up via the online service or through your accountant.

Once you are registered and signed up, you will be required to keep thorough digital records of all income and business expenses on a quarterly basis. This should be done through your MTD for Income Tax compatible accounting software.

Who is eligible?

To sign up, you will need to fit into all of the following criteria, as outlined by HMRC:

• Resident of the UK
• Registered for Self Assessment (with up to date returns and payments)
• A sole trader making income from one business and/or a landlord renting out property in the UK

Expect this eligibility to change and expand overtime as the scope of MTD widens.

Finding software that is MTD compatible

As we mentioned above, before you can sign up, you will need to find (or already be using) a software which is compatible with Making Tax Digital.

Not all digital records have to be held on the same software, but our experts recommend keeping everything in one place for efficiency and good housekeeping. It’s also essential to make sure the software meets all your other needs!

HMRC says that you “must have links between the software you use” and these links can be forged through things like records sent via email, linked spreadsheet cells and downloaded or uploaded files.

What is the deadline for signing up to Making Tax Digital for Income Tax?

If you are eligible, you are able to sign up to the initiative now and comply on a voluntarily basis. If you do not choose to sign up voluntarily, you will need to do so by April 6th 2026 if your turnover meets the registration requirement.

Staying compliant with Making Tax Digital for Income Tax

In order to remain compliant with MTD for Income Tax, you just need to follow the guidelines outlined above, summarised in these six simple steps:

1. Sign up via the online service or through your accountant
2. Use MTD compatible software
3. Keep digital records of income and expenses
4. Submit Income Tax updates to HMRC every 3 months (or more regularly at your discretion)
5. Finalise your business income accurately, including any personal income and reliefs claimed
6. Submit a final declaration at the end of each accounting period

Following the rules of any MTD practice requires access to technology, the ability to use technology and a satisfactory internet connection. HMRC is reportedly willing to make any business or landlord exempt from the electronic elements of bookkeeping and filing should they be able to prove they are unable to use them. This might be down to factors including (but not exclusive to) age, disability or location.

Preparing your business for the transition to Making Tax Digital

Invest in your software provider – Making the transition from traditional processes to MTD will be made ten times easier with a suitably sophisticated software. It doesn’t have to have a complex interface but it does pay to do your research and invest in something reputable which will provide the necessary support.

Set some budget aside – Although there is no administrative fee for signing up to MTD, HMRC has suggested that there would be an average cost of around £280 to each business making the transition. These costs are likely to be incurred through having to learn new software, investing in new software or updating existing services, upgrading hardware where necessary, and/or any additional accountancy fees. Setting some budget aside ahead of time will ensure your cash flow is covered.

Speak to your accountant – When it comes to moving over to MTD, there is nobody better equipped to offer support than your accountant. They will be able to ensure that you are well prepared and fully compliant, offering you complete peace of mind. If you aren’t yet using an accountant but are considering the benefits of doing so, now might be the perfect time to look into this.

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So, what do you need to know and implement when it comes to bookkeeping? Here are three things you’ll need to know about bookkeeping as a new freelancer.

1. Hire an accountant or sign up for online accounting software.

One of the first steps you should make as a freelancer is to hire an accountant or make use of online software platforms.

When it comes to a traditional accountant, while you may think you only need their services once a year, accountants will undoubtedly be able to give you pointers, recommend useful applications and can help you to structure your bookkeeping.

With an app or online software system such as Pandle, you can use the software every day to keep your paperwork, billing and taxation obligations well organised and compliant with the law.

2. Details you should include

However you choose to manage your books, there is vital information that you need to include whether you devise your own system, use a plan your accountant recommends or specific accounting software. The information you need to make a note of includes;

• Number of jobs completed or hours worked for each client
• Cost of each task or hourly rate
• The payments you make
• The payments you receive
• All expenses (travel, stationery, equipment, ).

3. How you can save on your tax output

When it comes to bookkeeping, you’ll not only want it as a way to provide proof of income; you’ll also want to make sure you are saving all possible tax.

Expenses can offset some of the taxes that you will have to pay, so it is essential to make a note and keep a receipt for every expense. These expenses include your travel, when you are working somewhere that is not your usual place of work, bills for power and utilities, office space (even if you work at home), internet and phone bills and vehicle maintenance if you use a vehicle for business purposes.

With these three steps, you can start to make sure your bookkeeping is simple and stress-free. The next important step is to ensure you stay on top of your books, so you have one less thing to worry about when it comes to year-end settlements.

Are you starting out as a freelancer? What obstacles have you come up against so far? Leave a comment below or get in touch on Twitter!

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