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How to choose your perfect sole trader accounting software
Sole traders can be some of the most overworked, stretched workers out there, because they're not just focused on the work that earns them money. They also need to be able to handle their finances accurately, or they risk facing penalties and fines from HMRC.
Picking good sole trader accounting software should be high on the list for any freelancer, because it helps them stay organised and meet tax obligations without as much effort or expertise as you might think.
However, sometimes it's easy to get swayed by the advanced features that bigger software packages offer, when all you really need are the essentials and maybe a few added extras.
In this guide, we look at some of the absolute musts to help you decide on the best sole trader accounting software.
What is sole trader accounting software?
This can be broken down into two distinct parts. First, accounting software is designed to act as a central location for all things money. At its simplest, it is a glorified spreadsheet that monitors incoming and outgoing finances.
Good accounting software will also give you more visibility, with dashboards to help you identify trends and reporting tools to help you prepare for tax deadlines.
The sole trader part means the accounting software is designed specifically for the needs of sole traders, freelancers, and contractors — likely those who are comfortably below the VAT threshold but who may still be affected by Making Tax Digital (MTD) requirements, which are being rolled out to additional income brackets.
Much more than keeping track of your cashflow, though, accounting software stands out from other basic bookkeeping software for its fuller suite of offerings, which may include invoice generation, bank account integration, and tax estimations. More on that below.
Why choosing the right sole trader accounting software matters
Most accounting software can be overkill for sole traders, even though they make up a large part of the UK economy. As of 2025, there are around 3.2 million sole proprietorships in the UK, accounting for more than half (57%) of the private sector.
Choosing the right software is crucial to avoid overspending on tools that are mainly useful for larger companies with employees and more complex tax requirements.
On the other hand, reliable software will still ensure you remain compliant when reporting to HMRC under Making Tax Digital (MTD) rules, helping you avoid fines or unexpected correspondence.
Key features to look for
Bank feeds and automation
We know that as a sole trader, you're already stretched pretty thinly. If you can spend more time working on projects that earn you money, you'll be happier.
Third-party integrations and connectors with banks automatically pull in transactions so you don't have to waste time every couple of weeks or months combing through historical transactions.
Not having to manually input the data also ensures accuracy, so there are fewer chances of you making a typo that could totally throw your figures out, leaving you in a costly muddle.
To take this one step further, look for automatic categorisation based on variables like vendors or locations.
Tax estimation tools
Many sole traders choose to hand their finances over to a qualified accountant, while others prefer to complete their self-assessment return themselves.
Whichever route you take, having real-time tax estimates based on live data throughout the year provides greater transparency.
National Insurance calculations, along with alerts for upcoming payments and deadlines, add to the value of good sole trader accounting software.
Invoicing
You can pay separately for invoicing software or find a free alternative, but there are benefits to having this integrated into your accounting suite.
Invoicing and bank integration can work together to automatically update your books when a client pays. You may also want to generate recurring invoices for repeat business and offer clients simple, convenient payment options.
Receipt capture
This is an absolute must for any sole trader, not only for saving time but also for reducing the burden of logging expenses on the go.
Invoices are generally less frequent and can be issued to multiple clients in bulk or in one session, but business owners collect expenses on a daily basis.
Good software will be able to pull information like price, date, merchant, and even category from a receipt using OCR or AI, and you'll even be able to save that receipt as an attachment against the transaction to keep a digital record.
MTD compatibility
This isn't truly necessary for every sole trader, but emerging HMRC rules are pushing MTD requirements on more and more sole traders, and for lower earning thresholds.
You might hit the bracket soon, or evolving rules may scoop you up into the system. Either way, having sole trader accounting software that's MTD-compliant saves a lot of hassle in the future instead of migrating your entire books to another provider.
Mobile access
Finally, consider on-the-go access from your smartphone. This complements the receipt capture feature mentioned above, but it’s also useful for issuing quick invoices, reviewing transactions, or checking dashboards to answer a question.
Apps are fairly common these days, although some accounting software remains desktop-based. Look for apps that are well optimised for mobile use, with a clear user interface (UI) and no important features removed.
How much does sole trader accounting software cost?
It tends to be rare to find free accounting software these days — they do exist, but they usually come with just the bare essentials, and are sometimes supported by ads.
You'll generally expect to pay a fee of around £10-20 per month, but some may be two or three times this.
Watch out for attractive offers to grab your custom — hefty discounts and extended free trials are often followed by a not-so-insignificant monthly fee.
Also, be aware of extra costs for tools you might want to use, like invoicing and tax reporting. At the end of the day, you might end up paying more than expected, but this software is the backbone of an effective business, and it could cover more processes than you'd expect, so you can cut costs elsewhere.
Summary
Sole trader accounting software is an absolute must for many reasons — time-saving efficiency, reduced errors, and government compliance are all major selling points.
Investing in the right sole trader accounting software from the outset will keep you covered for years to come, and it will make one of business’s most daunting tasks a little less intimidating. Consider both your current and future business needs, be prepared to invest in good tools, and choose wisely.
