Saturday, December 10

Best accounting software if you’re a sole trader


Having the right accounting software will help your sole trader business immeasurably.

While you’re handling the day-to-day running of your business, accounting software can save you hours of work and mountains of receipts flooding out of shoeboxes. It’ll also help you cut your tax bills and reduce the risk of making mistakes. Some even make it easier to form a limited company if that’s the direction you want to go in.

With all that in mind, we’ll be taking a look at how to find the right accounting software for your sole trader businesses along with some of the best packages on the market.

How do I find the right accounting software for my sole trader business?

Before you dive right in, you’ve definitely got some factors to consider. What should you be looking for from your accounting software? We spoke to experts from three accountancy and finance firms to find out more.

Free trial

Having a free trial allows you to have a taster of different accounting platforms before you make a decision. This is especially useful if you’re unsure of the functionality you’ll need.

“If you can experiment and try a few out then do,” said Rick Smith, managing director at Forbes Burton. “They all perform a very similar function, but you need to select one that is going to be easy for you to use. The ultimate aim should be not to make life more difficult for yourself for the sake of perceived convenience.” 

Cost

Once you’ve established what you want, cost is the next crucial factor. “Most are evenly priced, but there may be features that you need which aren’t included so make sure you check what features are included. Locking into a contract and finding some elements are limited could well be difficult and expensive down the line,” explained Smith. 

Functionality

As you can see, the functionality itself is hugely important. This can mean many different things – and be careful about having too little or too much functionality.  

“A primary consideration for sole traders looking to invest in new software is the software’s Making Tax Digital (MTD) compatibility, whereby sole traders with a gross income of more than £10,000 will be required to file tax returns electronically from April 6, 2024,” said Joanne Thorne, technical compliance manager at SJD Accountancy. She went on to say that under MTD, sole traders will have to submit these records on at least a quarterly basis. The Self-Assessment Tax Return (SATR) will then be replaced by a Final Declaration.

“In the meantime, it is business as usual, so it’s advisable to use software that will allow them to submit their SATRs, and software that can automatically calculate their SATR based on the digital records that are submitted on the platform can save a lot of admin time.”

>See also: 9 myths about Making Tax Digital busted

Thorne also said that it’s worth considering what you need from your software from an operational perspective, such as the option to run payroll or submit VAT and whether your chosen option supports this. Sole traders should also investigate whether they wish to link their bank accounts to the system.

Then there’s common functionality which is very useful for the everyday running of your business. “The biggest development for sole traders is OCR (optical character recognition) technology, whereby the accounting package self-populates from a photo that the user takes of their receipt. This removes the need for onerous filing of receipts and makes the process instantaneous,” said Clare Bowen, director of Monahans accountancy. “This is invaluable when users are on the road, going from job to job. When linked to a card payment platform, invoices can be sent directly to clients and the user therefore gets paid quicker.”

As we’ll note a bit later, integrations with platforms you already have an account with can streamline your business processes. “You should also look at how easy it is to get data and information out of the software,” said Smith. “For example, can you export the accounts into another package? Is it easy to interact with other platforms? These are the things that will slow you down.”

Ease of use

Of course, having sophisticated functionality isn’t any good if the software is clunky and difficult to use. “Accounting should be something you can do while you’re out and about, anywhere and at any time, instead of in front of a spreadsheet on a Sunday afternoon,” said Bowen. “The key for these platforms to be of use to sole traders is that they need to be relatively basic, without all the high-end capacity that you might otherwise need for a larger corporation.”

She warned of apps that are pared-down versions of bigger platforms which are generally used by those who are VAT-registered, i.e. those whose taxable turnover exceeds the £85,000 threshold. “These are a little pricier and therefore less suited to sole traders,” she added.

>See also: Sole traders and VAT

Evolving with your business

Try and go for software that will suit your business in the future as well as today. “Above all, you should invest in accountancy software that will evolve alongside you and your business, with the agility to grow and include new capabilities as and when required and choosing software which can be easily updated to take account of any changes in tax legislation, such as MTD, is critical,” said Thorne.

How your accountant can help

Your accountant can give you further guidance on the right accounting software for you as a sole trader, but they may also be able to provide you with a software licence at a reduced rate, according to Smith. However, they might prefer for you to use the one that they’re familiar with, so be prepared for that.

Bowen advises having a good relationship with your accountant so you don’t lose track of the numbers. “That’s going to become more important when Making Tax Digital rules are extended to all those who have a self-employed (and property) income of more than £10,000, from April 2024. From this date, you’ll have to submit quarterly returns but with the use of software, the idea is that this process is as efficient as possible. That’s why I’d advise any sole trader who isn’t already on these systems to start using them, so that they’re seeing the benefits and aren’t caught out last minute.”

>See also: Hiring an accountant: A small business guide

Which accounting software is right for me as a sole trader?

Now, on to the accounting platforms themselves. As mentioned, they offer largely similar functionality but there may be features that stand out to you and your business’ needs. Here is an introduction to some of the top products on the market, in order of their cheapest package. More details on each product are listed below.

Software providerFeaturesIntegrationsFree trialPrice
EmberMulti-currency accounting, personalised onboarding, capture expenses on the go, intuitive cash flow reports, receive real-time tax-saving tips, file VAT returns direct to HMRCWise, Tide, Revolut, Zoom, Slack, Hubspot and moreNoStarter (for average monthly revenue up to £1,000): £0
Pro (for average monthly revenue up to £5,000): £7.50 a month
Ultimate (for average monthly revenue over £5,000): £24 month
CoconutWill tell you how much tax to set aside, capture receipts and save paperwork in the cloud, send and track invoices, connect bank accounts from over 25 UK providersMonzo, Barclays, Starling and other banks30-day free trial£7.50 per month including VAT (tax deductible)
IRIS KashFlowCalculate, log and track all your business travel using mileage features, automatic invoicing and reminders, create quotes and estimates and then convert them into an invoice, connect multiple accounts to KashFlow, link directly to HMRC to submit returnsWorldpay, GoCardless, PayPal, Stripe, iwoca and more14-day free trialStarter (ideal for sole traders): £9 a month + VAT
Intuit QuickBooks90-day cash flow forecast, track your invoices on the go, create and send branded invoices direct from your device, upload receipts, VAT error checking featurePayPal, GoCardless, Zettle, Mailchimp, Wix and moreNoSelf Employed: £5 a month for the first four months; £10 a month thereafter
Simple Start: £7 a month for the first four months; £14 a month thereafter
FreshBooksDouble entry function, invite your accountant, automated bank reconciliation, create summary and export it to Excel, track payments, overpayments and credit notesGmail, Dropbox, WooCommerce and more30-day free trial50 per cent off for four months

Lite: £5.50 a month (£11 a month thereafter)
Plus: £9.50 a month (£19 a month thereafter)
Premium: £15 a month (£30 a month thereafter)

ClearBooksCreate and send customised invoices, track business bills and employee expenses, allocate bank transactions to invoices and purchases, share information with accountants and employees, multi-currency accounting, timesheets, free email and phone supportPayPal, Revolut Business, Metro Bank, HMRC, XE, Stripe and moreNoSmall: £6 a month for first three months; £12 a month thereafter
SageCreate and send invoices, track what you’re owed, calculate and submit VAT, automatic bank reconciliation Stripe, GoCardless, Zapier, Square and more30-day free trialAll packages free for the first three months (+ VAT)

Start: £12 a month + VAT
Standard: £26 a month + VAT
Plus: £33 a month + VAT

XeroCalculate VAT returns and file returns securely, tracks expenses and employee spend, connect bank feed to Xero and have transactions flow directly, contact management, capture data, create professional online quotesStripe, PayPal, Square, Planday, Hubspot CRM and moreNo

All have optional add-ons



Starter (best for sole traders): £14 a month
Standard: £28 a month
Premium: £36 a month
FreeAgentSend invoices and payment reminders automatically, record expenses and mileage on the go, automatically generate MTD-compatible VAT returns as you go that then get put over to HMRC, auto populates most of your tax returnPayPal, Shopify, HMRC, Capsule CRM and moreNoMonthly: £9.50 + VAT for six months; £19 + VAT thereafter
Annual: £95 + VAT for first 12 months; £190 + VAT thereafter

Get FreeAgent for free if you have a current account with NatWest, RBS, Ulster Bank or Mettle.

CrunchCreate and send unlimited customised invoices, bank reconciliation, expense management, VAT submission, HMRC registrationBrixx, TripCatcher, Snap app (Shopify and Stripe coming soon)NoSole Trader Pro (ideal for under businesses with under £35K annual turnover): £24.50 + VAT

Ember

www.ember.co/

Features: Multi-currency accounting, personalised onboarding, capture expenses on the go, intuitive cash flow reports, receive real-time tax-saving tips, file VAT returns direct to HMRC

Integrations: Wise, Tide, Revolut, Zoom, Slack, Hubspot and more

Free trial? No

Price

Packages especially for sole traders

Starter (for average monthly revenue up to £1,000): £0
Pro (for average monthly revenue up to £5,000): £7.50 a month
Ultimate (for average monthly revenue over £5,000): £24 month

Coconut

www.getcoconut.com/

Features: Will tell you how much tax to set aside, capture receipts and save paperwork in the cloud, send and track invoices, connect bank accounts from over 25 UK providers

Integrations: Monzo, Barclays, Starling and other banks

Free trial? 30-day free trial

Price

£7.50 per month including VAT (tax deductible)

IRIS KashFlow

www.kashflow.com

Features: Calculate, log and track all your business travel using mileage features, automatic invoicing and reminders, create quotes and estimates and then convert them into an invoice, connect multiple accounts to KashFlow, link directly to HMRC to submit returns

Integrations: Worldpay, GoCardless, PayPal, Stripe, iwoca and more

Free trial? 14-day free trial

Price

Starter (ideal for sole traders): £9 a month + VAT

Intuit Quickbooks

www.quickbooks.intuit.com/uk/

Features: 90-day cash flow forecast, track your invoices on the go, create and send branded invoices direct from your device, upload receipts, VAT error checking feature

Integrations: PayPal, GoCardless, Zettle, Mailchimp, Wix and more

Free trial? No

Price

Self Employed: £5 a month for the first four months; £10 a month thereafter
Simple Start: £7 a month for the first four months; £14 a month thereafter

Freshbooks

www.freshbooks.com/en-gb/

Features: Double entry function, invite your accountant, automated bank reconciliation, create summary and export it to Excel, track payments, overpayments and credit notes

Integrations: Gmail, Dropbox, WooCommerce and more

Free trial? 30-day free trial

Price

50 per cent off for four months

Lite: £5.50 a month (£11 a month thereafter)
Plus: £9.50 a month (£19 a month thereafter)
Premium: £15 a month (£30 a month thereafter)

ClearBooks

Features: Create and send customised invoices, track business bills and employee expenses, allocate bank transactions to invoices and purchases, share information with accountants and employees, multi-currency accounting, timesheets, free email and phone support

Integrations: PayPal, Revolut Business, Metro Bank, HMRC, XE, Stripe and more

Free trial? No

Price

Small: £6 a month for first three months; £12 a month thereafter

Sage

www.sage.com/en-gb/sage-business-cloud/accounting/

Features: Create and send invoices, track what you’re owed, calculate and submit VAT, automatic bank reconciliation  

Integrations: Stripe, GoCardless, Zapier, Square and more

Free trial? 30-day free trial

Price

All packages free for the first three months (+ VAT)

Start: £12 a month + VAT
Standard: £26 a month + VAT
Plus: £33 a month + VAT

Xero

www.xero.com/uk/

Features: Calculate VAT returns and file returns securely, tracks expenses and employee spend, connect bank feed to Xero and have transactions flow directly, contact management, capture data, create professional online quotes

Integrations: Stripe, PayPal, Square, Planday, Hubspot CRM and more

Free trial? No

Price

All have optional add-ons

Starter (best for sole traders): £14 a month
Standard: £28 a month
Premium: £36 a month

FreeAgent

www.freeagent.com/

Features: Send invoices and payment reminders automatically, record expenses and mileage on the go, automatically generate MTD-compatible VAT returns as you go that then get put over to HMRC, auto populates most of your tax return

Integrations: PayPal, Shopify, HMRC, Capsule CRM and more

Free trial? No

Price (for a sole trader)

50 per cent off for the first six months

Monthly: £9.50 + VAT for six months; £19 + VAT thereafter
Annual: £95 + VAT for first 12 months; £190 + VAT thereafter

Get FreeAgent for free if you have a current account with NatWest, RBS, Ulster Bank or Mettle.

Crunch

www.crunch.co.uk/

Features: Create and send unlimited customised invoices, bank reconciliation, expense management, VAT submission, HMRC registration

Integrations: Brixx, TripCatcher, Snap app (Shopify and Stripe coming soon)

Free trial? No

Price

Sole Trader Pro (ideal for under businesses with under £35K annual turnover ): £24.50 + VAT

Read more

Best business bank accounts for sole traders



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