Bsrgvty

We ALL found that hard at one point: counting up from the F and down from the G. You need another reference-point, and there IS one.

The note on the second leger line above the treble clef is a C and the note on the second leger line below the bass clef is ALSO a C. Familiarize yourself with those by writing them down, perhaps using a variety of long and short notes.

Two lines above = C. Two lines below = C.

Soon they will be as recognizable as middle C, and you might remember how easy it was - once you had learned to recognize middle C - to identify its neighbours.

Also, it may be worth remembering that if you see a 2-note chord below the bottom line of the bass clef, its lowest note way down among a heap of leger lines, the chord is probably an octave. So you only need to identify its top note, not its bottom note. (Chords below the bass clef - certainly in music prior to the 20th century - were generally octaves.)

I'm struggling with the idea that you are considering taking grade 8 when you still have trouble recognizing notes on a stave. If that really is the case I think you may need to step back and put in some serious practice time playing everything that you can find for a few months to really firm up your reading ability.

Talk to your teacher. You have identified a weakness - well done, that's half the battle - now accept it and tackle it. Grade 8 will still be available later.

Good luck.

The only way to get better is to do it more, and challenge yourself to get outside your comfort zone. Not only do you need to identify the note correctly (including the key signature) but you need to identify it on the instrument so the task of reading may be easier/harder on some instruments. One thing that worked for me was a commitment to read one new thing every day as a warm up. It does not have to be complicated, or an entire piece, perhaps just one page or a few lines of something chosen at random. Take it slow at first and gradually challenge yourself to read faster. It's better practice to read slowly and try to play what you see correctly than to rush through and stop often. Reading music is like reading words, the more practice you get as a beginner the better you get and the more automatic it becomes in later years. Also, it is important to use new music and not something you have been working on for weeks or months since you are not really sight reading those pieces. You have read the music to learn them and now the sheet music is just a guide. This is a common misunderstanding among new music students. They think that if they are figuring out pieces by reading then they are sight reading. There is some truth to that but you are not really building the skills to "sight read" something new in the moment.

Another thing that works, and is in many guitar books, is to literally read the music out loud with your voice. Not as notes (note singing) but as letter names. This may help with immediate identification of the notes on the ledger lines. Then the issue is getting your hand in the right place.

If there is something specific that is more of an issue, such as ledger lines, or complicated keys, then you need to work on whatever basic skills are required to master those issues.

These things take time to produce dividends. If you reading is really poor it can take several months to a couple years of regular practice to get good at it.

Bear in mind that the two lots of five lines with a floating leger line in between them form a continuum. So any notes above the bass clef, on additional leger lines, and any notes below the treble clef, on leger lines, can be read as if they're on the other clef, if that makes sense.

For those above the treble clef, again, it's a continuum, the leger line notes being A C E and so on.

For those below the bass clef, going down on lines, it's E C A, which is the same as those in the para. above.

Any more leger lines really needed to be corrected with 8va/8vb and sensibly placed dots on the staves.

As far as general sight-reading goes, do some every day, but don't repeat anything. Go through tapping timing with each hand separately. Eventually, you should get good enough to tap timing with both hands, as the dots say.

Before playing anything, check the key sig. and establish key. Then play up and down scales in that key. That ensures you're thinking in that key rather than any old random notes. You're hardly likely to find D♯ in key C - and if you do, it'll have an accidental attached.

There have been many questions about sight-reading already, but maybe not involving leger lines. Check out answers.

Practice.
You had to learn the locations of keys inside the staff first too, learning the ledgers isn't that different.

I am afraid that "picking a song and playing it" is your best bet.
print out the song and write the note names above (or below, whereever there is room) the notes, then play the song.
Once you can play it, print a new version (without note names) and play that.
Rinse and repeat with other songs. In time, you will naturally recognise the ledger notes just as easily as the ones in the bars.

One method that I've found to be helpful is to memorise the location of certain specific notes on the staff and compare the notes you read to those "landmarks". For example, memorise where middle C is, obviously, but you'll want to know also that two ledger lines above the treble staff is also C, two octaves higher. You should also know that two ledger lines below the bass staff is also the note C, and the note one ledger line below the bass staff is an E. This, combined with knowing the notes inside the two clefs, should be very helpful in pinpointing notes quickly with multiple ledger lines.

Another helpful one I've found is the G below middle C (resting under two ledger lines below the treble staff). Very helpful when reading low notes for instruments that use the treble clef.

As a quick example, suppose there's a note written just under a single ledger line under the bass staff. Well, you know that one ledger line below the bass staff is an E, and it's one spot below, so it's a D!

And of course, let me put in a good word for practice. I get my fair share of questions about how I sight-read so well (I'm not great, but I'm the best out of some of my groups). I tell them that there's no silver bullet to being good at sight-reading. Just like regular reading, it comes with practice. I didn't lock myself in a cave and study the Grand Staff until my eyes hurt or anything, but I've exposed myself to a lot of written music over the years (a little bit here and there adds up!), and slowly (it's not something you notice immediately), I got better.

"Sight-reading, like talking and reading for infants, is learned primarily by means of osmosis." -user45266

To second the other answers: practice.  It's painful and frustrating, but it generally works.  Stick with ‘just picking a random song and playing it’!

Related anecdote: sight-reading was always my worst skill, even though I'm pretty musical.  (I'm more of a play-by-ear person.)  Then I joined an early music group for fun: six of us, singing madrigals &c — sight-reading, at full speed, one voice per part, often in foreign languages, with all the dynamics and speed variations and tricky timings and stuff.  When I first joined, I often couldn't even follow where they were, let alone sing along!  But over a couple of months, my sight-singing improved tremendously, to the point where I could hold my own.  And to this day, I have little trouble reading a single part.  (I still can't sight-read piano music to save my life, though…)

So find all the music you can of a suitable standard (your teacher should be able to help), and keep trying to play new pieces every day.  Stick at it, and try to ignore the feelings of failure and frustration.  (After all, if you've got to the point of preparing for Grade VIII, then you're pretty skilled already, and have nothing to be ashamed of!  You should also know from experience how you can improve with practice.)

(This should also help with recognising ledger lines.  As another answer said, being able to recognise the Cs may help.  Or you may find your own approach.)

Part of that is in keeping up to speed.  When playing (or singing) on your own, there's a tendency to slow down as needed to get every note right.  And while slow practice is great when learning music, it's not so good for sight-reading, where playing confidently with the occasional wrong note is often better than playing hesitantly or irregularly, even if all the notes are (eventually) correct*.

Without other people to force you to keep up, it may help to use a metronome.  Obviously you should pick a speed that gives you some chance — but whatever speed you pick, do all you can to stick with it even when it means skipping notes or playing them wrong.

Another technique that helped me with performing set pieces was to tape-record my playing.  That made me much more aware of my mistakes and wobbles, and I found much more improvement than when practising without.  I don't know if that's likely to help as much with sight-reading, but it might be worth a try.

Eventually, you should get to a point where sight-reading is less scary, and you might even start to enjoy it a little.  (And that enjoyment shows in your performance.)  Good luck!

_{(* That works in performance, too!)}

I only scraped by my Grade 8 AMEB, in part (but, obviously, not in full) because my sight-reading was atrocious. I did not sight-read much, and my teacher always told me -- although I was not dedicated enough to listen -- that I needed to sight-read more.

That's literally it. Sight-read more. Do it five hours a day every single day if you have to. There is no short-cut to learn this skill.

I'm editing this answer because it's a little bit trivial and useless if I'm to be honest with myself: the single most useful piece of knowledge to internalize is that line-to-line or space-to-space is 3rd/5th/7th; and conversely, line-to-space/space-to-line is 2nd/4th/6th/octave. Learn "roughly what an octave looks like" and you're part of the way to fully processing the information as quickly as you can. Also, understand music; sightreading isn't an abstract and irrelevant skill or an exercise, it's what you do whenever you play a piece of music for the first time. You just played a dominant chord and you're right near the end of the section? Well, if the next set of notes looks kinda like the tonic, it's probably the tonic.

Why has a staff only 5 lines? Because our brain can differ between max. 5 elements at one sight. The same problem we have with the ledger lines. We can recognize and differentiate normally not more than 5.

Now you know the 2nd ledgers is c’’’ above the treble clef and C below the bass clefs. By drawing a pointed or red colored mark (like you have in mind for the middle c) you can give the reference line for a new staff by tying the next five ledgers (imagination!) where the notes are the same as you already know, but an 8va higher (respectively deeper).

Evidence for just spending enough hours with that many ledger lines:

Beethoven instructed his publishers to typeset pitch names (E, F, etc) when he used more ledger lines than most pianists had ever seen, because pianos were still getting wider then.

But by the time Brahms used half a dozen more lines than Beethoven had ever imagined, Brahms felt no need to coddle tremulous performers. He knew that anyone tackling his music was familiar with all 88 keys.