Can I claim expenses for business-related invoicing software?

Can I claim expenses for business-related invoicing software?

If you run a business, work as a freelancer, or manage side-income through self-employment, invoicing software can feel like one of those “non-negotiable” tools. It helps you get paid faster, keeps records tidy, tracks what’s outstanding, and often integrates with your accounting or bank feed. Naturally, the next question is: can you claim the cost as a business expense?

In most cases, yes—business-related invoicing software is a legitimate, claimable business expense, provided it’s used wholly and exclusively for your business activity (or you apportion the cost if it’s mixed use). The details depend on your business structure, your local tax rules, and what exactly you’re paying for (subscription fees, add-ons, training, payment processing charges, hardware, or bundled services). This article walks through the practical rules, the grey areas, and the best habits for keeping your claim clean and defensible.

What counts as “business-related invoicing software”?

Invoicing software covers a wide range of tools, from simple invoice templates to full finance platforms. Generally, you’re looking at software primarily used to create, send, and manage invoices for goods or services you sell. Many products also include:

• Quote creation and conversion to invoices
• Recurring invoices and subscriptions
• Time tracking and billable hours
• Expense capture and receipt storage
• Payment links and online checkout
• Automated reminders and late fees
• Basic bookkeeping features (income/expense categorisation)
• Integrations with accounting packages, CRM systems, or ecommerce stores

The more directly the software supports earning income and managing business administration, the more likely it is to be treated as a business expense.

The core test: is it “wholly and exclusively” for business?

Most tax systems share a similar principle: to be deductible, a cost must be incurred for business purposes and not mainly for personal use. In straightforward cases, invoicing software is clearly a business tool—especially if it’s tied to your business name, used to bill clients, and forms part of your recordkeeping process.

However, the “wholly and exclusively” idea matters because invoicing tools can overlap with personal finances in a few ways. For example:

• You use the same subscription to invoice both business clients and occasional personal projects (like selling used items).
• The software also provides personal budgeting features that you actively use.
• You share the software with another person in a non-business capacity.

When there is mixed use, many tax authorities expect you to apportion the cost—meaning you claim only the business-use share. The key is being reasonable, consistent, and able to explain your method if asked.

Common deductible components of invoicing software

Invoicing software costs aren’t always just a single monthly fee. Here are the typical components that may be deductible when they’re incurred for business:

Subscription fees and licences

This is the most common expense: monthly or annual subscription charges to use the platform. These are usually treated as ordinary operating expenses. If you pay annually, it’s still generally deductible, but some systems handle prepayments differently, especially for larger amounts.

Add-ons and upgrades

Many tools charge extra for features like advanced reporting, multi-currency invoices, automated chasing, custom branding, team access, or additional client limits. If those features serve the business, the incremental cost is typically deductible as well.

Transaction and payment processing fees

If the invoicing software integrates with payment processing (card payments, ACH, bank transfers, “pay now” links), you may pay per-transaction fees, payout fees, or currency conversion fees. These charges are often deductible because they are directly related to receiving business income.

Implementation, setup, and migration

Some providers charge for onboarding or migration—importing contacts, setting up templates, connecting bank feeds, or configuring tax rates. These costs can often be deductible, though the accounting treatment can vary if the setup is substantial or tied to acquiring a longer-term system.

Training and support plans

Paid training to learn the software, premium support subscriptions, or help-desk packages can be deductible if they’re related to operating the business more efficiently.

Related tools bundled into the same subscription

Sometimes invoicing software comes as part of a broader business suite (bookkeeping, payroll add-ons, project management, inventory). If you’re paying for a bundle, it’s still a business expense so long as the bundle is business-focused. If the bundle includes personal services, you may need to separate or apportion.

Where things get tricky: capital vs revenue expenses

One of the most confusing aspects of claiming software costs is whether they’re treated as day-to-day operating expenses (“revenue” expenses) or longer-term investments (“capital” expenses). The labels differ by country, but the concept is similar: routine subscriptions are typically deductible as ongoing costs, while large one-off payments for a lasting asset might be treated differently (sometimes written off over time).

Most modern invoicing tools are Software as a Service (SaaS), which you pay for monthly or annually. These are typically treated as operating expenses because you don’t “own” the software; you’re paying for access.

But there are exceptions:

• You buy a perpetual licence (a one-time purchase) for desktop software.
• You pay a significant one-off fee to develop custom invoicing software or heavily customise an existing platform.
• You purchase a package that includes significant implementation costs that create enduring functionality.

In those cases, some tax rules treat all or part of the expenditure as capital, which may mean you claim it through depreciation/amortisation or capital allowances rather than deducting it immediately. This is highly jurisdiction-specific, so if you’re making a big investment rather than paying a normal subscription, it’s worth checking the correct treatment for your tax regime.

If you’re self-employed or a sole trader

If you operate as a sole trader (or an equivalent individual business structure), invoicing software usually falls under administrative or office expenses. The main considerations are:

• Is it used for your trade/business activity?
• Do you have evidence of the cost (invoice/receipt, bank statement, confirmation email)?
• Is there any personal use? If so, can you reasonably apportion it?

For many sole traders, the simplest and most defensible approach is to use a dedicated business account and pay the subscription from that account. That creates a clean paper trail and reduces the chance of mixing business and personal spending.

If you operate through a limited company (or corporation)

If you run a company, invoicing software paid by the company is typically a business expense of the company, assuming it’s used for the company’s trade. The company should pay the subscription directly, and the invoice should ideally be in the company name.

Complications can arise if:

• The director pays personally and seeks reimbursement (which can still be fine, but keep the paperwork).
• The software is used partly for personal invoicing or non-company activity (which may create a taxable benefit or require apportionment, depending on rules).
• The subscription includes personal services not used for business.

As with any company expense, clarity is your friend: pay from the company account, keep invoices in the company’s name, and document what the tool is used for.

Mixed use: how to apportion fairly

Mixed use is more common than people think. Maybe you’re a freelancer who occasionally invoices for a hobby project, or you use the platform to bill a club you run informally. Tax rules often allow you to claim the business proportion, but you need a method.

Reasonable apportionment methods include:

• Percentage of invoices: If 90% of invoices issued are business-related, claim 90% of the subscription cost.
• Revenue basis: If a portion of income invoiced through the system is business income, apportion based on the share of business revenue versus total revenue processed through the software.
• Feature usage: If specific paid add-ons are used only for business, claim them fully, while apportioning the base subscription if it’s mixed.

The best method is one that you can explain in plain language and apply consistently. Keep a short note (even a dated memo) explaining your approach. This is especially helpful if you ever need to justify your return or reconcile your bookkeeping later.

What about free tiers, discounts, and promotional credits?

Many invoicing tools have free tiers. If you’re not paying anything, there’s nothing to deduct. But paid upgrades, discounted annual plans, or promotional credits can affect how the expense appears in your records.

Here are a few practical points:

• If you receive a discount, claim the amount you actually pay, not the list price.
• If you use credits (for example, a referral credit), the net cost you pay is what typically matters for deduction.
• If the provider bills you in a foreign currency, keep a record of the exchange rate used by your bank or payment processor, or the converted amount shown on your statement.

VAT, GST, sales tax: can you claim the tax portion?

Indirect taxes (like VAT or GST) are handled differently than income tax deductions. Whether you can reclaim VAT/GST depends on your registration status and local rules. In broad terms:

• If you are registered for VAT/GST and the purchase is for business use, you may be able to reclaim the VAT/GST charged, provided you have a valid tax invoice that meets the requirements.
• If you are not registered, you generally treat the tax-inclusive cost as your expense amount.

For digital services purchased from overseas providers, there may be additional rules about reverse charge mechanisms or local tax being added at checkout. The important practical step is to save the invoice showing the tax treatment and your business details where applicable.

What records should you keep to support the claim?

Invoicing software expenses are usually easy to evidence, but you should still keep clear documentation. Useful records include:

• The supplier invoice/receipt showing the product name, date, and amount paid
• Proof of payment (bank statement line, card statement, PayPal transaction)
• The subscription confirmation email or billing history page (export if possible)
• If apportioning for mixed use, a short note explaining your method

Also, maintain a sensible bookkeeping category (for example “Software subscriptions,” “Office expenses,” or “Admin tools”) so it’s easy to spot during tax preparation.

How to treat annual subscriptions and prepayments

Many providers incentivise annual billing. From a cash perspective, you pay once and forget about it for a year. From an accounting perspective, some systems spread the cost across the period it relates to—especially if you prepare accounts on an accrual basis.

For simple self-employed bookkeeping, you may be allowed to claim the cost when paid, depending on the regime you use. For formal accounts, the cost may be allocated over the year of benefit. Either way, it doesn’t usually change whether the expense is allowable—just when it’s recognised.

The practical takeaway: keep the invoice and know what period it covers. If you’re working with an accountant, they’ll handle the timing.

Invoicing software vs accounting software: does it matter?

Invoicing software and accounting software often overlap. Some invoicing tools are “lite” and focus on billing and payments. Others behave like full accounting platforms. For tax deductibility, the label rarely matters as much as the purpose: if it’s a legitimate business tool used for business administration, it is generally an allowable expense.

Where it can matter is in categorisation and recordkeeping. You may want to separate:

• Invoicing subscriptions (billing, reminders, payment links)
• Bookkeeping/accounting subscriptions (ledger, reporting, tax filings, payroll add-ons)
• Payment processing fees (merchant fees)

This makes financial reporting clearer and helps you understand your cost of getting paid.

What if you buy a laptop, tablet, or printer to run the software?

Invoicing software itself is one thing; the hardware used to run it is another. If you purchase equipment primarily for business use—like a laptop for administration or a printer for mailing invoices—those costs may be deductible, but often under different rules than subscriptions.

Hardware purchases can be treated as capital assets, meaning you may claim deductions through depreciation/capital allowances rather than deducting the full cost immediately. In some places, there are simplified regimes or special allowances that allow immediate write-offs up to certain limits, but this varies.

Additionally, if the hardware is used partly for personal purposes, you may need to apportion the claim, similar to mixed-use software.

What about internet, phone, and cloud storage used with invoicing tools?

Many invoicing systems rely on reliable internet access, cloud storage, and sometimes mobile apps. Related costs can be deductible if they are business-related, but again, mixed use is common. Typical associated expenses include:

• Internet service used for business administration
• Mobile data plans used to send invoices or track payments
• Cloud storage for invoice backups or scanned receipts

If these services are shared with personal use, apportion them on a reasonable basis, such as business hours usage or the proportion of data used for business activities.

Can you claim the cost if you’re not yet trading?

Many people start setting up systems before they officially begin trading: choosing software, designing templates, and preparing admin processes. In some tax systems, certain pre-trading expenses that are incurred in preparation for the business can be claimed once the business starts, provided they would have been allowable had the business already been trading.

Invoicing software purchased shortly before launch can sometimes fall into this category if it is clearly for the upcoming business and not for personal use. The closer the purchase is to the start of trading, and the more directly linked it is to the business activity, the easier it is to justify.

Because pre-trading rules vary widely, it’s smart to keep extra documentation here: notes about the business start date, evidence of intent to trade, and proof that the software was set up for business billing.

What if the software is used for multiple businesses?

Some people have more than one business activity—perhaps freelancing plus ecommerce, or consulting plus a small property-related venture. If one subscription supports multiple taxable business activities, it can still be deductible, but you should allocate the cost appropriately in your records.

Practical options include:

• Allocating the cost across activities based on usage (number of invoices per activity).
• Charging the full cost to the primary activity if it is clearly the dominant use and the secondary use is minimal (only if your tax rules allow this and the result is reasonable).
• Using separate subscriptions if separation is important for recordkeeping or compliance.

The aim is to avoid double-counting the same expense and to keep your accounts consistent.

Personal finance apps disguised as business tools

Some tools market themselves as “invoicing” or “small business finance” but lean heavily into personal budgeting, credit-building, or consumer finance features. If a subscription is mainly personal, claiming it as a business expense is risky.

A good litmus test is: would you still pay for this if you didn’t have the business? If the answer is yes, and the business features are incidental, it may not be a clean claim. If the answer is no—because the primary reason is to invoice clients and manage accounts receivable—it’s more clearly business-related.

How to handle bundled banking or card services

Some invoicing platforms bundle in banking services, corporate cards, or cash flow advances. This can blur lines between software fees, account fees, and finance costs. The deductibility of each element can differ:

• Software subscription fees are often deductible as admin expenses.
• Business bank account fees can be deductible as finance/administration costs.
• Interest, financing charges, or advance fees may be deductible, but often have special rules and documentation requirements.

If you’re paying a single bundled fee, try to obtain a breakdown from the provider’s invoice or billing statement. If the platform doesn’t provide one, keep a record of what the fee covers and how you treat it in your books.

Claiming expenses when you use invoice factoring or invoice finance

Separate from invoicing software, some businesses use invoice factoring or invoice finance to access cash faster. Fees for invoice finance can sometimes be deductible as business finance costs, but they are different from a software subscription. If your invoicing software provider also offers financing, ensure you distinguish:

• Monthly/annual software charges
• Transaction fees for payments
• Financing charges, discount fees, or interest

Keeping them separate makes reporting clearer and avoids misclassifying costs.

How to record invoicing software in your bookkeeping

Most small businesses record invoicing software as a software subscription or office/admin expense. If you’re using bookkeeping software, consider these best practices:

• Create a category like “Software subscriptions” and use it consistently.
• Separate “Payment processing fees” if the platform charges them, so you can track the cost of taking payments.
• Attach the supplier invoice to the transaction in your bookkeeping system if possible.
• If you’re VAT/GST registered, record the tax correctly and keep valid tax invoices.

This isn’t just for tax. It also helps you see whether the tool is paying for itself through time saved, fewer late payments, or lower admin stress.

What if your client reimburses your software cost?

Occasionally, a client might reimburse certain admin tools or require you to use a specific platform. If a client reimburses you for software, the accounting treatment matters. In many cases:

• You record the reimbursement as income (or as an offset to the expense, depending on your accounting approach).
• You still record the original software cost as an expense.

In effect, the reimbursement can “net out” the cost, but the exact method depends on your bookkeeping style and tax rules. The critical point is not to claim a deduction for a cost you didn’t ultimately bear without recording the reimbursement appropriately.

Red flags that can trigger questions

Invoicing software is usually a low-risk expense, but certain patterns can raise eyebrows in an audit or review:

• The software is paid from a personal account and there’s no supporting invoice.
• The subscription appears to include personal services (like consumer credit tools).
• The cost is unusually high for the size of the business, without an explanation (e.g., enterprise plan for a tiny operation).
• The software is used heavily for non-business invoicing or personal money management.

None of these automatically disqualify a claim, but they increase the importance of documentation and a clear, reasonable explanation.

Practical steps to make your claim clean and easy

If you want your invoicing software expense to be straightforward to claim and defend, these steps help:

• Use a business account or dedicated card to pay the subscription.
• Ensure the billing details match your business name and address where possible.
• Save invoices/receipts as PDFs in a consistent folder (by month or by supplier).
• Record the cost in your bookkeeping promptly rather than scrambling at year-end.
• If mixed use exists, decide on a simple apportionment method and document it.
• Separate payment processing fees from subscription fees in your records.

These habits take minutes but can save hours later, especially when preparing tax returns or responding to queries.

Examples to bring it to life

Example 1: Freelance designer with a straightforward subscription
A freelance designer pays a monthly fee for invoicing software that sends branded invoices and automated reminders. It’s used exclusively for client invoices. This is typically a straightforward business expense, claimed in full.

Example 2: Side hustle with mixed use
Someone sells handmade crafts online and occasionally uses the same invoicing tool to request money from friends for shared holiday costs. They decide that 80% of usage is business and claim 80% of the subscription. They keep a note explaining how they arrived at 80% (number of invoices per year).

Example 3: Limited company with director reimbursement
A director pays for invoicing software personally for three months before switching the payment to the company card. The company reimburses the director for the three months, backed by invoices in the company name. The expense is recorded by the company, and the reimbursement is properly documented.

Example 4: One-off custom build
A growing business pays a developer to create custom invoicing functionality integrated with its internal systems. The cost is substantial and provides long-term benefit. Depending on local rules, this may be treated as a capital expense and claimed over time rather than immediately.

So, can you claim it?

For most businesses, invoicing software is a sensible, claimable expense because it’s directly connected to billing customers and managing income. The biggest factors are business use, documentation, and the nature of the payment (routine subscription versus major one-off build).

If you keep clean records, pay through the business where possible, and apportion fairly when there’s any personal element, claiming invoicing software is typically one of the simpler and more defensible deductions you can make.

Final checklist before you claim

• Is the software used to invoice clients or manage business billing?
• Do you have an invoice/receipt and proof of payment?
• Is the subscription in the business name (or clearly linked to the business)?
• Is there any personal use? If yes, have you apportioned reasonably and noted your method?
• Have you recorded it under a consistent category in your books?
• If indirect tax applies (VAT/GST), have you treated it correctly based on your registration status?

Tick those boxes and you’ll generally be in a strong position to claim the expense with confidence.