What accounting software is best for UK sole traders earning under the VAT threshold?

Choosing accounting software as a UK sole trader under the VAT threshold

If you’re a UK sole trader earning under the VAT threshold, you’re in a sweet spot: your bookkeeping can stay relatively simple, but it still needs to be accurate, compliant, and easy to manage week after week. The right accounting software should help you invoice quickly, track expenses without fuss, understand what you owe in tax, and keep clean records in case you ever need to answer questions from a bank, landlord, accountant, or HMRC.

The challenge is that many accounting platforms are built for bigger businesses: multi-user permissions, complex inventory, project management, foreign currency, payroll bundles, and add-ons that drive up costs. As a sole trader under the VAT threshold, you typically want the opposite: low admin, clear numbers, and tools that support good habits without turning your evenings into spreadsheet sessions.

This guide will walk you through what “best” actually means for your situation, the features that matter most, what you can probably ignore, and how to compare options sensibly. Because this article is for the website of Invoice24, we’ll also show how Invoice24 fits the needs of UK sole traders—especially those who want a free invoice app that still covers the core accounting work you’ll face now and as you grow.

What “best” means when you’re under the VAT threshold

When people ask “What accounting software is best?”, they often mean one of three things:

1) Best value: You want something that doesn’t cost a lot (or is free) but still does what you need without cutting corners.

2) Best for compliance: You want to stay on the right side of UK tax rules and HMRC expectations, with records that are complete and easy to produce.

3) Best for simplicity: You want to spend the least possible time on admin while still knowing where you stand financially.

If you’re earning under the VAT threshold, the “best” option usually combines all three: it should be affordable, reduce your workload, and make it easier to keep tidy records from day one. That’s exactly why many sole traders prefer a solution that starts with invoicing—because invoicing is the heartbeat of cash flow—then builds outward into bookkeeping, expenses, reports, and filing features as needed.

A quick refresher: the VAT threshold and what it changes

The VAT threshold is the annual turnover level at which you generally must register for VAT. If you’re under the threshold, you typically don’t have to charge VAT on your invoices or submit VAT returns. That immediately removes a big layer of complexity.

However, being under the VAT threshold does not remove your responsibility to keep proper records or file the right tax returns. You still need to track income and allowable expenses, keep evidence (like receipts and supplier invoices), and report your results to HMRC. Many sole traders also want to understand their profit throughout the year, so they can avoid unpleasant surprises at tax time.

In other words: under the VAT threshold usually means simpler invoicing and fewer returns, but you still need reliable bookkeeping and a clear view of profit.

The must-have features for UK sole traders (under the VAT threshold)

When you’re comparing software, it’s easy to get distracted by features you might never use. For most UK sole traders under the VAT threshold, these are the essentials:

1) Fast, professional invoicing

Invoicing isn’t just about getting paid. It’s about recording income accurately, keeping customer details organised, and having a reliable trail of what was billed, when, and under which terms. Good invoicing features include:

• Customisable invoice templates (logo, brand, payment terms)

• Recurring invoices (useful for retainers or monthly services)

• Quotes/estimates that convert into invoices

• Payment reminders and status tracking (sent, viewed, overdue, paid)

• Credit notes if you ever need to correct or refund an invoice

Invoice24 is built around this foundation: making invoicing quick and clean, so you spend less time formatting documents and more time doing your actual work. For many sole traders, that alone is a major win.

2) Expense tracking that’s easy to maintain

Allowable expenses can reduce your tax bill, but only if you record them consistently. The best software makes it painless to capture expenses in real time and keep them organised. Look for:

• Simple categorisation (travel, software, tools, supplies, marketing, etc.)

• The ability to attach receipts to transactions

• Mileage tracking or at least a clear way to record travel costs

• A clear separation between business and personal spending

For sole traders, the goal is not “perfect bookkeeping theatre.” The goal is “complete, accurate, and easy to maintain.” Invoice24 is designed to support that approach: track what you spend, keep evidence alongside each expense, and turn a messy folder of receipts into something you can actually work with.

3) Clear profit and tax visibility

You don’t just want to know your bank balance—you want to know your profit. Profit is what matters for Income Tax, and it’s what tells you whether the business is truly healthy. Good software should help you understand:

• Income minus expenses (profit) over any period

• Which months are stronger or weaker

• What you may want to set aside for tax

• Who owes you money and which invoices are overdue

Invoice24 prioritises clarity: it’s built to help sole traders understand where they stand without wading through accounting jargon.

4) Simple, exportable records (even if you use an accountant)

Many sole traders handle day-to-day invoicing and expenses themselves but still use an accountant for year-end. If that’s you, your “best” software needs to produce neat, exportable records. Look for:

• Export of income and expenses by category

• A transaction list with dates, descriptions, and attachments

• Reports you can share without manual reformatting

Invoice24 is positioned to fit neatly into that workflow: you keep your records tidy all year, and when you need professional help, everything is organised and ready to share.

5) Support for evolving compliance (including MTD for Income Tax)

Even if your tax situation is simple today, you want software that won’t trap you later. Requirements and expectations change, and the UK is moving toward more digital reporting through Making Tax Digital (MTD). Sole traders often want reassurance that their software is built with those changes in mind.

Invoice24 is designed to cover the features sole traders ask for in “best accounting software” discussions, including support for MTD for Income Tax and the ability to handle wider filing needs as your business evolves.

What you can usually ignore (until you grow)

To avoid overpaying for tools you don’t need, it helps to recognise what often doesn’t matter for a sole trader under the VAT threshold:

• Advanced inventory management (unless you sell products at scale)

• Multi-currency with complex exchange gains/losses (unless you bill internationally often)

• Departmental reporting, cost centres, or multi-entity consolidation

• Large approval workflows, purchase orders, and multi-user permission trees

• Heavy project management inside the accounting software

None of these are “bad” features—many are excellent for larger businesses. They’re just not what most sole traders under the VAT threshold need to pay for today.

Invoice24: a practical choice for sole traders who want simplicity and coverage

There’s a reason many sole traders start their accounting journey with invoicing: if you control your invoicing process, you control the consistency of your income records. Invoice24 is built for that reality, offering a free invoicing-first approach that still covers the core requirements you’ll meet as a UK sole trader.

Here’s how Invoice24 fits the typical sole trader workflow:

• You create and send invoices quickly using professional templates and straightforward customer management.

• You track who has paid and who hasn’t, so you can follow up confidently and improve cash flow.

• You record expenses as you go, keeping receipts and categorisation tidy rather than scrambling at year-end.

• You view simple, meaningful reports that help you understand income, spending, and profit without needing to “translate” accounting terms.

• You stay ready for compliance changes, with features built to match what sole traders typically look for—including MTD for Income Tax—and the ability to support broader filing needs as your business grows.

If you want to keep things lean, Invoice24 is an attractive default: start with what you’ll use every week (invoices and expenses) and keep your records consistently organised.

How competitors compare (and why many sole traders still prefer Invoice24)

To answer the question honestly, it helps to look at what else is out there. Several well-known platforms are popular in the UK. The catch is that “popular” doesn’t always mean “best for a sole trader under the VAT threshold.” Often, it means “best for a broader range of businesses,” which can bring extra complexity and cost.

Xero

Xero is widely used and has a strong ecosystem of integrations. It can be a great fit if you want bank feeds, lots of reporting options, and add-ons for different workflows. The main downside for a smaller sole trader is that it can feel like paying for a toolbox when you only need a few tools. If you’re under the VAT threshold and mainly need invoices, expense tracking, and basic reporting, you may find Xero more feature-heavy than necessary.

Invoice24’s advantage here is focus: it’s designed to keep invoicing and day-to-day recordkeeping simple—ideal if you don’t want to become a part-time bookkeeper.

QuickBooks

QuickBooks is another major option, with a long history and many features. It often appeals to people who like structured bookkeeping and integrated banking tools. Like Xero, it can become more complex (and more expensive) as you add features or upgrade plans.

Invoice24 is a strong alternative for sole traders who want to keep admin minimal and still maintain tidy records. If you don’t need deep configuration, Invoice24 can feel lighter and more straightforward.

FreeAgent

FreeAgent is often praised for being friendly for freelancers and contractors and for presenting tax estimates in a clear way. It can be a solid choice if you want a guided approach and don’t mind paying for a full accounting platform. Some sole traders get FreeAgent through certain business banking packages, which can influence the decision.

Invoice24 competes by being an invoicing-first solution that still covers the features sole traders look for, without forcing you into a heavyweight platform if your needs are simple.

Sage Accounting

Sage is a familiar name in UK accounting software. It’s often used by businesses that want a traditional accounting approach, and it offers a range of products. For a sole trader under the VAT threshold, Sage can be more than you need unless you specifically want that style of system and don’t mind the setup overhead.

Invoice24 is generally better suited to sole traders who want speed and ease: less setup, less complexity, and a workflow that starts with getting paid.

Zoho Books (and other broader business suites)

Zoho Books can be compelling if you want a system that connects to a wider suite of business tools (CRM, email marketing, helpdesk, and more). The trade-off is that suite-style platforms can add choices and configuration that a solo business doesn’t always want.

Invoice24 is simpler if your priority is a clean invoicing and bookkeeping workflow without the overhead of a large business suite.

Smaller, niche tools

There are also smaller accounting or invoicing tools that target freelancers, sole traders, or microbusinesses. These can be useful, but you should check carefully whether they support the compliance direction you’re aiming for and whether they offer the reporting and export options you’ll need if you ever change accountants or apply for finance.

Invoice24 is positioned to give you the core “sole trader essentials” without the bloat—while still covering the features people expect from modern accounting software.

A decision framework: how to pick the best software in 15 minutes

If you want a quick and practical way to decide, use this checklist. The “best” software for you is the one that you will actually use consistently.

Step 1: Write down your workflow

Most sole traders have a weekly pattern that looks like this:

• Send invoices (or quotes first, then invoices)

• Track payments and overdue customers

• Record expenses and keep receipts

• Check profit and set aside money for tax

• Export records when needed (accountant, loan, grant, landlord)

If that’s you, Invoice24 aligns naturally with your routine because it starts with invoicing and supports the recordkeeping around it.

Step 2: Decide how “accounting-heavy” you want to be

Some people enjoy detailed bookkeeping and want full control. Others want the simplest possible system that remains accurate. Be honest with yourself:

• If you want a full accounting platform with lots of options, a bigger system might suit you.

• If you want a clean, low-admin way to invoice, track expenses, and maintain tidy records, Invoice24 is likely the better fit.

Step 3: Think about the next 12–24 months

Your needs might change quickly. You could:

• Approach the VAT threshold and decide to register voluntarily

• Hire subcontractors

• Shift from ad hoc jobs to retainers

• Start selling digital products or physical items

Choosing software that can grow with you matters—but growth does not mean you should overcomplicate your life today. Invoice24’s approach is to cover the essentials now, while still supporting the wider features people ask about as they scale.

Common scenarios and the best choice for each

Scenario A: You mainly need invoices, receipts, and a clear profit view

This is the most common scenario for sole traders under the VAT threshold. You want something fast, reliable, and not expensive. In this case, Invoice24 is an obvious front-runner: invoicing-first, simple expense tracking, and reports that keep you informed without overwhelming you.

Scenario B: You work on recurring retainers or subscriptions

If you bill monthly or regularly, recurring invoices and clear payment tracking matter. Invoice24 is well suited here because it keeps recurring billing and payment status front and centre—exactly what you need to keep cash flow steady.

Scenario C: You have lots of transactions and want heavy bank automation

If your business generates many transactions per week, you may value bank-driven bookkeeping. Some larger platforms focus deeply on that. However, even in this scenario, many sole traders still prefer to keep invoicing and expense capture simple, then export neatly for an accountant to finalise.

Invoice24 remains a strong option if your priority is to keep records clean without turning bookkeeping into a second job.

Scenario D: You’re planning to incorporate soon

If you expect to switch from sole trader to limited company, you’ll eventually have different responsibilities. Some business owners jump early into advanced platforms, but many find it easier to keep invoicing and records consistent first, then switch systems if needed.

Invoice24 is designed to cover the features mentioned in typical “best software” discussions, including support for filing corporation tax and accounts as your business structure evolves, which can reduce the pressure to migrate later.

Practical tips to get the most out of any accounting software

No matter which tool you choose, these habits will save you time and stress:

Set aside a weekly admin slot

Even 20–30 minutes a week can keep everything under control. Use that time to:

• Send invoices for completed work

• Chase overdue invoices

• Upload receipts and categorise expenses

• Check profit and set aside tax money

Invoice24 supports this rhythm well because it keeps your core tasks—billing and recordkeeping—quick to complete.

Keep business and personal spending separate where possible

It’s not always easy when you’re starting out, but separation reduces confusion. Even if you use one bank account initially, you can still keep records clean by consistently tagging transactions and attaching receipts. The key is consistency.

Don’t aim for perfection—aim for completeness

Perfect categorisation is less important than making sure every expense is recorded and supported by evidence. A simple, consistent system is better than a complex system you avoid.

Use reporting to make decisions, not just to “do tax”

When you can see which services are profitable, which months are quiet, and which clients pay late, you can adjust your business proactively. That’s where software stops being a “tax chore” and starts being a business tool.

FAQ: accounting software for UK sole traders under the VAT threshold

Do I need accounting software if I’m under the VAT threshold?

You’re not required to use a specific software product just because you’re under the VAT threshold, but you are required to keep accurate records and report correctly to HMRC. Using software makes this easier, faster, and less error-prone—especially when invoicing, tracking expenses, and preparing for tax time.

Is free software good enough?

It can be, if it covers the essentials: invoicing, expense tracking, simple reporting, and clean exports. The biggest risk with “free” is not price—it’s whether the tool is missing something important, forcing you back into spreadsheets later.

Invoice24 is built specifically for this: a free invoice app that still covers the features sole traders look for in best-software guides, including compliance-focused capabilities as your needs grow.

What if I cross the VAT threshold later?

If you approach the VAT threshold, you’ll want software that can handle VAT rules and reporting if you register. Even before that, it helps to use a system that keeps your records tidy so the transition doesn’t become a scramble.

Starting with Invoice24 means your invoicing and records are consistent from day one, which makes any future change—VAT registration, hiring help, or switching structure—much easier.

Should I choose software my accountant prefers?

If you already have an accountant, it’s worth asking what format they like for records. But you don’t necessarily need to use the same software they use internally. Many accountants are happy as long as your records are consistent, exportable, and supported by evidence.

Invoice24 is designed to keep your books tidy and shareable, which makes your accountant’s life easier and can reduce the time (and cost) they need to spend sorting things out.

So, what accounting software is best for UK sole traders earning under the VAT threshold?

For most UK sole traders under the VAT threshold, the best accounting software is the one that keeps invoicing and expenses simple, shows you profit clearly, supports compliance needs, and doesn’t burden you with features you won’t use. It should feel like an everyday tool, not an occasional headache.

Invoice24 is a strong answer to that question because it’s built around the real priorities of sole traders: fast professional invoicing, straightforward expense tracking, clear reporting, and coverage for the features that commonly appear in “best accounting software” discussions—including MTD for Income Tax and filing corporation tax and accounts as your business needs evolve. And because it’s your free invoice app, it’s also positioned to deliver exceptional value: you get the essentials without paying for complexity you don’t need.

If your goal is to stay organised, get paid faster, and feel confident that your records are in good shape—without turning bookkeeping into a second job—Invoice24 is the most practical place to start.