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Accounting Software Guide UK — Best Options for Small Businesses

Compare the best UK accounting software for sole traders, freelancers, and small limited companies. Features, pricing, MTD compliance, and which to choose.

· 3 min read

Accounting software transforms how you manage your business finances — from manual spreadsheets to automated bank feeds, invoicing, and tax calculations. With Making Tax Digital expanding, digital record keeping is becoming essential.

Top UK Accounting Software Compared

Software Best For Monthly Cost MTD Compatible
FreeAgent Freelancers, sole traders, small Ltd £9.50–£24/month Yes
Xero Growing businesses, Ltd companies £15–£47/month Yes
QuickBooks Sole traders, small businesses £6–£35/month Yes
Sage Traditional businesses, payroll £12–£40/month Yes
Wave Budget-conscious start-ups Free Limited
Crunch Contractors (includes accountant) Free–£30/month Yes

Detailed Comparison

FreeAgent

Feature Detail
Price £9.50/month (micro); £24/month (full)
Free with NatWest, RBS, Mettle bank accounts
Best for Freelancers, contractors, small Ltd companies
Key features Self Assessment filing, bank feeds, invoicing, expense tracking, project tracking
MTD VAT and Income Tax compatible
Payroll Basic payroll included
Mobile app Yes

Xero

Feature Detail
Price Starter £15/month; Standard £30/month; Premium £47/month
Best for Growing businesses, multiple users, app integrations
Key features Bank feeds, invoicing, bills, payroll (add-on), multi-currency, 1,000+ app integrations
MTD VAT and Income Tax compatible
Payroll Add-on (Xero Payroll)
Mobile app Yes

QuickBooks

Feature Detail
Price Self-Employed £6/month; Simple Start £12/month; Essentials £22/month; Plus £35/month
Best for Sole traders (Self-Employed); growing businesses (Simple Start+)
Key features Bank feeds, invoicing, receipt capture, mileage tracking, Self Assessment
MTD VAT and Income Tax compatible
Payroll Add-on
Mobile app Yes

Sage

Feature Detail
Price Accounting Start £12/month; Accounting £26/month; Accounting Plus £40/month
Best for Businesses needing robust payroll, traditional businesses
Key features Bank feeds, invoicing, payroll (built-in), purchase orders, VAT
MTD VAT and Income Tax compatible
Payroll Included in higher tiers
Mobile app Yes

Feature-by-Feature Comparison

Feature FreeAgent Xero QuickBooks Sage
Bank feeds ✓ ✓ ✓ ✓
Invoicing ✓ ✓ ✓ ✓
Receipt scanning ✓ ✓ (Hubdoc) ✓ ✓
Self Assessment ✓ Via accountant ✓ Via accountant
Corp Tax filing ✓ Via accountant No Via accountant
Multi-currency Limited ✓ ✓ (Plus) ✓
Payroll Basic included Add-on Add-on Included
Stock/inventory No ✓ ✓ (Plus) ✓
Project tracking ✓ ✓ No No
Number of users Unlimited Depends on plan 1–25 1–unlimited
MTD VAT ✓ ✓ ✓ ✓
MTD Income Tax ✓ ✓ ✓ ✓

Choosing the Right Software

By Business Type

Business Type Recommended Software
Sole trader (simple) FreeAgent or QuickBooks Self-Employed
Freelancer FreeAgent
Contractor (Ltd) FreeAgent or Crunch
Small limited company FreeAgent or Xero
Growing business (5+ employees) Xero or Sage
E-commerce Xero (with app integrations)
International business Xero (best multi-currency)

By Priority

Priority Best Choice
Cheapest Wave (free) or QuickBooks Self-Employed (£6/month)
Easiest to use FreeAgent
Most integrations Xero (1,000+ apps)
Best payroll Sage
Contractor-specific Crunch or FreeAgent
Free with bank account FreeAgent (NatWest/RBS/Mettle)

Making Tax Digital (MTD)

Requirement From When
VAT-registered businesses Already in effect
Self-employed income over £50,000 April 2026
Self-employed income over £30,000 April 2027
Below £30,000 Under review

MTD requires:

  • Digital record keeping (no paper ledgers)
  • Quarterly updates to HMRC
  • End-of-period statement
  • Final declaration

All software listed above is MTD-compatible for VAT. Most are preparing for MTD Income Tax.

What Your Accountant Prefers

Software Accountant Support
Xero Most widely used by UK accountants
FreeAgent Popular with smaller practices
QuickBooks Solid accountant support
Sage Long-established; familiar to many

Tip: Ask your accountant which software they prefer before choosing — collaboration is easier when you use the same platform.

Tips for Getting Started

  1. Start early — set up software when you start your business
  2. Connect your bank account — auto mated bank feeds save hours
  3. Use receipt scanning — photograph receipts immediately
  4. Reconcile regularly — weekly is ideal
  5. Set up recurring invoices — for regular clients
  6. Use the free trials — test before committing

For related guidance, see our invoicing guide and self-assessment guide.