Last editedNov 20224 min read
There’s a lot to juggle as a sole trader in the UK, and a solid accounting foundation is just as important for sole traders as it is for larger businesses. As a sole trader, you need not only to provide services in your area of expertise, but also to handle marketing and manage your own financial accounts such as recording expenses and tracking income. Fortunately, UK sole trader accounting software can help you stay organised.
The best sole trader accounting apps can help you keep accurate records, making it easier to submit your Self-Assessment return to HMRC each year. Here we cover what to look for in the best accounting software for sole traders, and present our pick of the six best accounting apps for sole traders.
Why should you use sole trader accounting software?
As a sole trader, you may find there simply aren’t enough hours in the day. Manually entering all your sole trader bookkeeping and accounting details into spreadsheets takes hours each week, particularly if you deal with a high volume of transactions. Sole trader accounting software is specifically designed to save you time and money by automatically tracking expenses, creating invoices and reconciling bank accounts.
Here are a few benefits of the best accounting software for sole traders:
It keeps all your basic bookkeeping for sole trader details in a single location, so no receipts go missing
It automatically tracks expenses to cut your tax bill
It reduces the risk of human error
It helps with cash flow forecasting
It keeps you on top of sole trader tax obligations
Accounting considerations for sole traders
Any sole trader accounting software can be used, but be aware of your unique tax considerations. One of the biggest advantages of registering with HMRC as a sole trader is that you don’t need to worry about filling out annual accounts or submitting corporate returns. Registration is free, and you don’t need to follow the same rules that a limited company would. This cuts down on the red tape.
However, sole traders must fulfil the following obligations:
Maintain accurate records of invoices and expenses
Submit Self-Assessment tax returns
With the best sole trader accounting software, you’ll meet both targets and stay on top of all tax compliance issues.
Best sole trader accounting software
Fortunately, the self-employed are spoiled for choice when it comes to choosing sole trader accounting software. Here are six of our top picks:
Xero is an all-purpose, cloud-based accounting software founded in 2006. It’s packed full of features to benefit small businesses, including sole traders. Although there are several plans to choose from, the Starter Plan at just £12 per month is suitable for most sole traders. It contains everything needed to keep accounts up to date and submit your tax returns. One potential disadvantage of the Starter Plan is the 20 invoices per month limit, so you would need to keep an eye on your workload in case you need to upgrade. There are many more advantages though, including:
access from anywhere
multiple payments processors
automatic report generation
Sage Business Cloud Accounting is a good fit for those without an accounting background. You can get set up easily, and if you have any questions Sage offers 24/7 online and phone support. As with Xero, the basic Accounting Start Plan will suit the needs of most sole traders at costs just £12 per month, though the limitations may be a disadvantage for those with higher workloads. It includes tools to calculate your VAT returns, if applicable. Other advantages include:
create and send invoices
reconcile bank accounts
KashFlow aims to make accounting as easy as possible for freelancers and sole traders. Its user-friendly dashboard provides an overview of your financial situation, and it integrates with numerous apps including major ecommerce platforms like Amazon and Shopify. It’s also ideal for scaling up as your business grows, though you will eventually need to upgrade from the basic Starter Plan that costs £9 per month, as this only allows you to send ten invoices per month. If you’re not convinced, give it a try first for free. Advantages include:
quick to set up
work from anywhere
automatic VAT updates
With a £19-per-month starter plan specifically designed for sole traders, FreeAgent comes packed with all the tools you need to keep your books balanced. Standard features include a choice of eight professional invoice templates, time tracking sheets for invoicing and automatic expense tracking directly from a live bank feed. You can also use the app to fill in and file your Self-Assessment return.
profit share calculation
QuickBooks is one of the most well-known business accounting software packages, and it’s equally applicable to sole traders as it is for larger companies. It’s easy to use at any level and the Simple Start Plan for £12 per month equips you with everything you need to track cash flow and keep your taxes organised. You can also monitor sent invoices while chasing late payments to improve cash flow.
income and expense tracking
connect multiple bank accounts
6. Zoho Books
Zoho Books is another one of the best accounting software for sole traders, and it comes with a generous 14-day free trial of the product. There are extensive reporting features available and the ability to track all expenses and manage invoices so you always know how your cash flow is looking. The basic paid plan is only £10 per month and can be billed monthly or annually. Other advantages include:
payment link generator
integrated client portal
How to choose the best sole trader accounting software
There’s no shortage of options, so how can you choose the best accounting software for sole traders? Think about the platform’s ease of use and your own comfort with accounting methods, with further considerations such as:
features that match your company’s needs
on-the-go usage and flexibility
automation to save time and improve accuracy
If you’re a complete beginner, you might want to opt for a platform like Sage with comprehensive customer support. Invoicing is also an essential component of running a small business. Sole traders can streamline the payments process by blending accounting software with pull-based payment methods like GoCardless. These take payments automatically from customers when they’re due. You can use GoCardless directly through the self-serve dashboard. We also integrate seamlessly with all six of the accounting platforms mentioned above, as well as other partners.
We can help
One of the most important components of operating a small business as a freelancer or self-employed individual is payment collection. GoCardless makes it easier to get paid using pull-based payment methods like Direct Debit. This allows freelancers and sole traders to get paid automatically on the date of their choosing. When you need to get paid quickly for extra services or add-on products, Instant Bank Pay lets you take one-off, same-day payments via paylink.
GoCardless integrates with all apps on this list alongside numerous major accounting partners, allowing users to raise and reconcile invoices automatically. With automatic payments and complete control over the process, experience less stress while saving time on financial admin.
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.