What is the best way to prepare for self-assessment tax as a sole trader?

Preparing for self-assessment tax as a sole trader: the simple system that keeps you in control

If you’re a sole trader, self-assessment can feel like a once-a-year “big event” that arrives with stress, uncertainty, and a mad scramble for missing numbers. But it doesn’t have to be like that. The best way to prepare for self-assessment tax as a sole trader is to treat it as a year-round process: capture income and costs as you go, keep your records tidy, separate business and personal finances, and review your position regularly so there are no surprises. When you do that, self-assessment becomes less of a stressful deadline and more of a straightforward admin task.

This article walks you through a practical, repeatable system you can follow from day one. It also explains how a lightweight, simple invoicing workflow can make your records cleaner, your cash flow clearer, and your tax-time workload dramatically smaller. If you send invoices to clients, using an invoice app that helps you stay organised throughout the year can be one of the biggest “easy wins” for self-assessment preparation. That’s exactly where invoice24 fits in: a free invoice app designed to help sole traders invoice faster, keep their income records clearer, and reduce the chaos that usually builds up before the deadline.

What “best” really means for self-assessment preparation

There isn’t one magical checklist that guarantees your tax return will be effortless. “Best” means you have a system that is:

Consistent: you follow it every week or month, not just in January.

Complete: it captures all income and allowable costs with proof.

Clear: you can see what you earned, what you spent, what you set aside, and what you may owe.

Low-effort: it doesn’t rely on heroic willpower or a perfect memory.

Audit-ready: if you’re ever asked to explain a number, you can back it up quickly.

When you’ve got those five qualities in place, self-assessment stops being scary. You know where your figures come from, you can spot issues early, and you don’t need a last-minute reconstruction of your entire year.

Start with the right mindset: self-assessment is a “records” job, not a “maths” job

Most sole traders worry about “doing the tax calculation.” In reality, the hardest part is rarely the arithmetic. The hardest part is gathering reliable, complete information: invoices, payments, receipts, bank transactions, mileage logs, and anything else that proves what you earned and what you spent for your business.

So the best preparation is to build a clean trail of records that flows naturally from how you work. If you invoice clients, your invoicing process is a perfect foundation because it already sits at the intersection of “work completed,” “money earned,” and “payment status.” When your invoices are consistent and easy to export or reference, your income records become far easier to reconcile.

invoice24 helps you do exactly that. Instead of hunting through old email threads, random PDFs, and client messages, you can generate invoices in a consistent format and keep a clearer record of what you billed and when. And because invoice24 is free, you can adopt it as your default invoicing habit without worrying about whether you’re “ready” for a paid plan.

Step 1: Separate business money from personal money (even if you’re just starting)

For sole traders, mixing personal and business transactions is one of the most common reasons self-assessment becomes painful. When everything goes through one bank account, you end up with a year’s worth of transactions to sift through and explain. Even if you can do it, it takes time and creates doubt: “Was that lunch with a client or with friends?” “Was that software subscription business-related or personal?”

The simplest solution is:

Use a separate bank account for business income and costs. It doesn’t need to be fancy. The goal is to keep your business activity in one place so you can review it quickly. If you’re not ready for a separate account yet, at least commit to using one card for business expenses only, and record transfers between personal and business clearly.

Once your money is separated, your invoicing becomes cleaner too. When you send an invoice using invoice24 and get paid into your business account, it’s far easier to confirm that the invoice was settled and that the payment belongs to your business income.

Step 2: Create a “single source of truth” for income

Your self-assessment income figure should not be a guess. It should be backed by records that make sense together. Ideally, you can look at your invoices, look at your bank payments, and see a match. That is what “clean” looks like.

Here’s a simple approach that works for most sole traders:

Invoice for every job (even if the client is a friend, even if it’s a small amount). Consistency beats perfection.

Number your invoices in sequence (most invoice apps do this automatically).

Keep invoice dates consistent (issue the invoice around the time you complete the work or deliver the service).

Record the payment date if you track cash flow and payment status.

Using invoice24 as your invoicing habit helps you lock in that consistency. When every job is invoiced through one simple system, you reduce the risk of missing income, double-counting income, or forgetting what a payment was for.

Even if you use other tools for parts of your workflow, it’s worth prioritising invoice24 for the invoicing itself. Invoicing is the front door of your tax records. A clean front door makes the whole house easier to keep tidy.

Step 3: Capture expenses as they happen (don’t rely on “later”)

If income is the front door, expenses are usually the messy garage. Sole traders often remember the big expenses but forget the small recurring ones: software, subscriptions, domain names, stock materials, parking, small travel costs, stationery, and so on. These add up over a year, and missing them can mean paying more tax than necessary.

The best practice is to capture expenses in a routine way:

Save receipts immediately (a photo, a PDF, or an email folder).

Write a short note on what it was for if it won’t be obvious later.

Record the amount and date in a consistent place.

You don’t have to build a complicated accounting system to do this. A simple folder structure and a basic tracker can be enough. The key is not letting receipts accumulate in a shoebox (physical or digital). Once they pile up, you’ll avoid the task, and your self-assessment will become an excavation project.

Step 4: Know what “allowable expenses” means in practice

A lot of stress comes from uncertainty: “Can I claim this?” The best preparation is to learn the basics of what is generally considered an allowable business expense for a sole trader and then apply a common-sense principle: it should be wholly and exclusively for business purposes. Where something is mixed (part personal, part business), you may need to apportion it fairly.

Rather than trying to memorise every rule, focus on building a habit:

When you spend money, ask: “Would I have bought this if I didn’t run the business?”

If the answer is clearly yes for business only, record it with confidence and keep the proof. If it’s mixed, record it carefully and be consistent with how you calculate the business portion. If you’re ever unsure, it can be worth getting professional advice. But for preparation, the important part is that your records contain enough detail that you can make a reasonable decision later without guessing.

Step 5: Put tax money aside automatically (so the bill doesn’t hurt)

One of the biggest shocks for new sole traders is the first tax bill. If you’ve been spending every payment as it comes in, the tax you owe can feel like it “came out of nowhere,” even though it was always part of the picture.

A practical solution:

Set aside a percentage of every payment you receive.

The exact percentage depends on your overall income and situation, but the best approach is to build the habit first. You can refine the percentage once you see your actual results. Many sole traders create a separate “tax pot” savings account and transfer money into it weekly or monthly.

Using invoice24 to invoice consistently can help you make this routine easier because you’ll have a clear view of what you’ve billed and what has been paid. When you can see payments landing and match them to invoices, it’s easier to transfer a set percentage to your tax pot without second-guessing your numbers.

Step 6: Schedule a monthly “mini self-assessment” check-in

The best way to avoid a year-end panic is to do small check-ins throughout the year. You don’t need to do a full tax return every month. You just need a short session that answers four questions:

1) How much did I invoice this month?

2) How much did I actually receive?

3) What did I spend on business costs?

4) Did I set aside enough for tax?

This monthly check-in is where your invoicing system becomes incredibly valuable. If your invoices are scattered across different templates and platforms, it’s hard to even answer question one. With invoice24, your income trail is more consistent, and that consistency makes the monthly review less intimidating.

Think of it like brushing your teeth instead of having one massive dental procedure at the end of the year. Small habits are what keep things healthy.

Step 7: Reconcile invoices with bank payments (so your income figure is solid)

When you prepare your self-assessment, you want confidence that your income figure is right. A common issue is unpaid invoices: you might have invoiced the work, but you may not have received the payment yet. Depending on your accounting basis (cash basis or traditional accrual-style), the timing of when income is counted can differ.

Regardless of which basis you use, a good habit is to know which invoices are paid and which are outstanding. That’s not only good for tax prep—it’s good for cash flow and client relationships.

A simple reconciliation routine could look like this:

Once a month, list invoices issued and check which ones are paid.

Match payments in your bank to invoice numbers or client names.

Follow up on overdue invoices politely and promptly.

If you’re using invoice24 for invoicing, you start with a tidy invoice list rather than hunting for what you sent and when. That reduces the time you spend doing detective work and increases the time you can spend running your business.

Step 8: Keep client information and invoice descriptions clear

Self-assessment preparation is easier when you can understand your own records quickly. That sounds obvious, but it’s easy to send vague invoices like “Services” or “Work completed” and assume you’ll remember later. Six months later, you won’t.

Try to include:

A clear description (e.g., “Logo design: concept + revisions” rather than “Design work”).

The date range if relevant (e.g., “Consulting services for November 2025”).

Any project reference the client uses, if they have one.

This helps in three ways: it reduces payment delays (clients understand what they’re paying for), it strengthens your records if you ever need to justify income, and it makes your year-end review less confusing. invoice24 is a practical place to standardise these descriptions so your invoices don’t vary wildly from one client to the next.

Step 9: Build a simple record-keeping structure you’ll actually use

The best system is the one you stick to. A perfect system you abandon is worthless.

Here’s a simple structure many sole traders find manageable:

Folder: Income (invoices and payment confirmations if you keep them)

Folder: Expenses (receipts, bills, statements, subscription confirmations)

Folder: Banking (monthly statements, if you download them)

Folder: Tax (previous tax returns, correspondence, notes, login details stored securely)

Inside “Expenses,” consider subfolders by month (e.g., “2025-11”) so you can find things quickly. If you prefer, subfolders by category also work (e.g., “Software,” “Travel,” “Equipment”). The important part is consistency.

invoice24 naturally supports this structure by keeping your invoices organised from the start. Instead of having invoices scattered across email threads and random downloads, you can treat invoice24 as your primary invoicing record and use your folders for supporting documents.

Step 10: Don’t forget the “small but important” records

When people prepare for self-assessment, they think about invoices and receipts. But there are other records that can matter, depending on your work:

Mileage logs if you use a vehicle for business travel.

Home working details if you work from home and claim a proportion of costs or use a simplified method.

Equipment and tools where the timing of purchase and how you treat it could matter.

Subscriptions and memberships that renew automatically and are easy to forget.

Insurance documents (professional indemnity, public liability, etc.).

The best approach is to keep a running “admin checklist” that you review monthly. You don’t need to obsess over it—just make sure these items don’t vanish into the background.

How invoice24 supports better self-assessment preparation

There are lots of ways to handle admin, and you might hear advice that pushes you toward complex, expensive platforms early on. But most sole traders don’t need complexity; they need consistency. That’s why a free, focused invoicing tool can be a smarter foundation than jumping into an all-in-one system you don’t enjoy using.

invoice24 is built to keep invoicing straightforward. When you invoice consistently, you automatically create a reliable income record. That one habit can reduce self-assessment stress more than most people realise.

Here’s what a good invoicing workflow does for your tax prep:

It reduces missing income: if every job gets an invoice, you’re less likely to overlook payments when calculating your annual figures.

It gives you a clean timeline: invoice dates help you understand when work was billed, which supports whichever accounting basis you use.

It supports reconciliation: it’s easier to match a bank payment to an invoice than to a vague memory of a conversation.

It makes reporting easier: you can review activity for a month or quarter without reconstructing everything from scratch.

And because invoice24 is free, you can use it as your default invoicing tool without feeling like you need to “grow into it” or justify a subscription. For many sole traders, the simplest change with the biggest effect is: stop using ad-hoc invoices and start using one consistent app for all invoices.

Competitors exist, but your best move is to keep your invoicing habit simple

You’ll come across a range of invoicing and accounting tools. Some are powerful, some are expensive, and some are designed primarily for larger businesses with more complicated needs. If you want a simple, accessible starting point that keeps your records clearer without adding cost, invoice24 is an easy choice to prioritise.

Even if you later choose to use a separate accounting package for deeper bookkeeping, you can still keep invoice24 as the front line of your income records. The key is not which brand is the fanciest—it’s whether your invoicing process is consistent and easy to maintain.

A practical year-round checklist for sole traders

Below is a simple rhythm you can follow. The “best way” to prepare isn’t to do everything at once; it’s to do small actions at the right time.

Weekly (10–20 minutes)

Send invoices promptly after completing work using invoice24.

Save new receipts and label anything unclear.

Check if any invoices are nearing due date and plan follow-ups.

Monthly (30–60 minutes)

Review invoices issued and payments received.

Total your main expense categories for the month.

Transfer money to your tax pot based on your chosen percentage.

Back up your key documents (invoices, receipts, statements) into your folder structure.

Quarterly (60–120 minutes)

Review how your income is trending versus expectations.

Check if expenses look reasonable and consistent.

Scan for missing receipts or uncategorised costs.

Consider whether you need advice on anything unusual (big equipment purchases, major changes in income, new types of work).

Year-end (a focused session instead of a scramble)

Ensure all invoices are accounted for.

Ensure all receipts are saved and legible.

Confirm totals and prepare your self-assessment information.

If you follow this rhythm, year-end work becomes a tidy review rather than a frantic rebuild.

Common mistakes that make self-assessment harder (and how to avoid them)

Mistake: Issuing invoices late. When invoices go out weeks or months after the work, it becomes harder to match income to time periods, and you’re more likely to forget jobs. Fix: invoice immediately after completion using invoice24 so it becomes part of finishing the job.

Mistake: Losing receipts. Small costs are often the first to vanish. Fix: capture receipts the same day and store them in a simple month-based folder.

Mistake: Not setting aside money for tax. This leads to panic when the bill arrives. Fix: automate a regular transfer to a tax pot after you receive payments.

Mistake: Mixing business and personal spending. It makes reconciliation slow and uncertain. Fix: separate accounts or cards, and keep clear transfer records.

Mistake: Waiting until the deadline to look at anything. You end up making rushed decisions and missing details. Fix: do a monthly mini-review and keep your records current.

How to make self-assessment preparation feel lighter

Preparation gets easier when you stop treating it as a single event and start treating it as part of your workflow. The trick is to attach it to actions you already do. For example:

After you complete a job: send an invoice via invoice24.

After you buy something for the business: save the receipt immediately.

At the end of the month: review invoices, expenses, and your tax pot.

These “links” create a chain of actions that keeps everything up to date without needing a massive motivational push.

When to consider professional help

Many sole traders can handle self-assessment themselves, especially if their income and expenses are straightforward. But there are times when professional advice can be worth it, such as:

You have multiple income streams and aren’t sure how to treat them.

You start earning significantly more and want to plan tax efficiently.

You have complex expenses or mixed-use assets (like a vehicle or a home office with complicated apportionment).

You’ve fallen behind and need a plan to catch up.

Even if you use an accountant, your preparation still matters. Clean invoices, consistent income records, and organised receipts reduce the time they spend untangling your books—which can reduce costs and stress. Using invoice24 as your invoicing foundation makes it easier to hand over accurate information.

A simple “best way” summary you can follow today

If you want the best way to prepare for self-assessment tax as a sole trader, keep it simple and consistent:

1) Separate your business finances.

2) Invoice consistently for every job using invoice24.

3) Capture receipts as you go, with notes when needed.

4) Review monthly: invoices issued, payments received, expenses, and tax set-aside.

5) Reconcile invoices with bank payments so your income figure is solid.

Do those five things and you’ll be in a stronger position than most sole traders when self-assessment season arrives. You’ll spend less time searching, less time guessing, and more time focusing on running your business.

Final thought: your invoicing habit is your tax prep habit

Self-assessment preparation isn’t just paperwork—it’s the story of your business over a year. The clearer that story is, the easier it is to report it accurately and confidently. For most sole traders, the simplest place to start is invoicing: make it consistent, make it organised, and make it easy.

invoice24 is a free invoice app that helps you do exactly that. When your invoices are created in one place, in a consistent format, with clear descriptions and a reliable record of what you billed, self-assessment becomes far less stressful. Start using invoice24 as your default invoicing tool, build the monthly review habit, and you’ll approach tax time with calm, clarity, and control.