Finding the best accounting software for your business is one of the most important decisions you will make. The right small business accounting software automates tasks, reduces errors, and gives you a clear vision of your business finances — so you can spend less time on admin and more time running your business. The wrong choice means switching later, transferring data, and losing time.
Today, most small business owners use online accounting software to send invoices, track expenses, monitor cash flow, and file returns directly to HMRC. This guide reviews six of the most widely used packages, Xero, QuickBooks, and Sage as the top picks, plus FreshBooks, FreeAgent, and Zoho Books as strong alternatives — with honest assessments of features, pricing, and Making Tax Digital (MTD) compatibility.
I have been working with accounting software for over 30 years, am Xero Certified and an Intuit QuickBooks ProAdvisor, and have personally tested these platforms. All six packages reviewed here are HMRC recognised for Making Tax Digital. UK plan prices are shown throughout; for international pricing, always check the provider’s website directly.
Small Business Accounting Software 2026:
- Xero – Best all-rounder; clean interface, unlimited users, 800+ app integrations
- QuickBooks – Best for sole traders and self-employed; lowest entry price, GPS mileage, strong MTD support
- Sage UK – Best for UK compliance; purpose-built for UK tax and payroll, free plan for sole traders and small businesses
- FreshBooks – Best for freelancers and service businesses; outstanding invoicing and expense tracking
- Zoho Books best value for growing businesses; generous free plan, strong automation, integrates with Zoho ecosystem
- FreeAgent – best for freelancers and service businesses; outstanding invoicing and expense tracking
- All six are HMRC recognised and MTD-compatible for VAT; all except FreshBooks are approved for Making Tax Digital for Income Tax.
- All providers offer free trials — try before you commit
![Best Accounting Software for Small Business in [year]](https://www.businessaccountingbasics.co.uk/wp-content/uploads/image-6.png "Best Accounting Software for Small Business in [year]")
Growing companies
| From £18 per month |
| FREE Sole Trader & Trial |
| Sage Copilot Ai |
| 90% Discount – 6 Months |
Best Free Software
From £12 per month |
| 1,000 invoices PA Free |
| Integrate with Zoho Apps |
| No Discount |
Accounting Software Comparison: Six Packages at a Glance
The table below compares all six online accounting software packages on the factors that matter most to small businesses and the self-employed. Each package has different strengths; the right choice depends on your business type, whether you are VAT-registered, and how closely you work with an accountant. Full details are in the sections below.
Disclosure: This content may contain affiliate links, which means if you click on them, I may get a commission (without any extra cost to you).
Xero | QuickBooks | Sage | FreshBooks | FreeAgent | Zoho Books | |
|---|---|---|---|---|---|---|
Entry Price | £7 Simple | £10 Sole-Trader | Free Sole-Trader | £16 | * Free | Free |
MTD for VAT | ✅Ignite + | ✅Simple Start + | ✅Start + | ✅All plans | ✅All plans | ✅All plans |
MTD for Income Tax | ✅HMRC Approved | ✅HMRC Approved | ✅HMRC Approved | No – as of 2026 | ✅HMRC Approved | ✅HMRC Approved |
Send Invoices | 10/mo on Simple, unlimited Grow+ | Unlimited all plans | 5/mo free, unlimited paid | 5 clients | Unlimited all plans | 1,000/yr free, unlimited paid |
Track Expenses | Grow + | ✅All plans | Standard + | ✅All plans | ✅All plans | ✅All plans |
Payroll Included | Add-on | Add-on | Add-on | Add-on | ✅Included | Add-on |
Stock Management | Ignite + | Plus + | Plus | Not available | Not available | Professional + |
Best For | Teams, accountants, growing businesses | Self-employed, SMBs | UK compliance, VAT, simple sole-trader | Freelancers | Contractors, Landlords | Budget-conscious |
*FreeAgent is free for life with NatWest, RBS, Ulster Bank, or Mettle business accounts. Prices are UK rates, excluding VAT, as of March 2026 — always verify on providers’ websites before purchasing.
Top Recommended: Xero, QuickBooks and Sage
Sage UK, Xero, and QuickBooks are the three most widely used and recommended small business accounting software packages in the UK. Each is fully HMRC recognised, MTD-compatible, and well-established with a large network of UK accountants. All three provide the core accounting tools businesses need from self-employed and freelancers through to limited companies and growing small businesses. If you are unsure where to start with business accounting software, one of these three will suit the majority of situations.
Xero — Best All-Round Accounting Software
Xero is one of the leading online accounting software platforms worldwide, used by over four million small businesses. It offers a clean, intuitive interface (updated 2026) that simplifies financial management even for those without an accounting background. From the dashboard, you can see your business finances at a glance — cash flow, outstanding invoices, and bank transactions all in one place. You can send invoices, reconcile bank transactions, and submit VAT returns to HMRC without ever needing to log into a separate system.
One of the key benefits of Xero as small-business accounting software is unlimited users across all plans. Most packages charge per user, so adding your accountant or bookkeeper increases the monthly cost. With Xero, they can access your financial data at no extra charge on any plan. Xero updated its UK plan names in September 2024 — you may still see the old names (Starter, Standard, Premium) on older pages across the internet.
Xero Pricing
Plan | Price/Month | Key Features | Best For |
|---|---|---|---|
Ignite | £16 | Invoices (up to 20/month), bank reconciliation, MTD VAT returns & ITSA, 10 bills, unlimited users | Very small businesses with low invoice volumes |
Grow | £37 | Unlimited invoices and bills, payroll (1 included), expenses & Mileage, all Ignite features | Small businesses with regular invoicing needs |
Comprehensive | £50 | Multi-currency, expense management, analytics, payroll (up to 5), all Grow features | Businesses with international clients or complex needs |
Ultimate | £65 | Advanced analytics, payroll (up to 10), project tracking, all Comprehensive features | Established businesses needing full payroll and reporting |
Xero accounting package is fully HMRC recognised and MTD-compatible for VAT on all paid plans. It is also on HMRC’s approved list for Making Tax Digital for Income Tax, mandatory from April 2026 for self-employed people and landlords with qualifying income over £50,000. CIS support is available as an add-on. A 30-day free trial is available. Our affiliate link includes the current best introductory offer.
Tip: Xero’s unlimited users policy means your accountant, bookkeeper, and employees can access your account on any plan.
Verdict – Best for businesses working with an accounting team. The user interface is one of the cleanest and most intuitive on the market, and 800+ app integrations make it the most connectable package on this list.
QuickBooks Online — Best for Sole Traders and Self-Employed
Intuit QuickBooks Online is one of the most popular business accounting software platforms in the world, with over 6 million subscribers. For sole traders and small businesses in the UK, it offers a practical set of tools covering automated invoicing, the ability to manage expenses, track cash flow, accept online payments, and file VAT returns directly to HMRC. The mobile app is among the best available, with GPS mileage tracking built in as standard across all plans.
QuickBooks Online is well-regarded for its reporting features, which provide valuable insights into your business finances — profit and loss, tax summaries, and expense reports are all clearly presented. The Sole Trader plan is one of the most affordable entry points in the market for self-employed people who need to manage Self Assessment records digitally.
Important: The Sole Trader plan does not include VAT management. If your business is registered for VAT, you need the Simple Start plan (£16/month) or above.
QuickBooks Pricing
Plan | Price/Month | Key Features | Best for |
|---|---|---|---|
Sole Trader | £10 | Bank feeds, income and expense tracking, send invoices with online payments, Self Assessment, GPS mileage, CIS, MTD ITSA. No VAT. 1 user. | Non-VAT-registered self-employed |
Simple Start | £16 | All sole trader + MTD VAT returns, 1 user. | VAT-registered small business owners |
Essentials | £38 | All simple start + Bill management, multi-currency, recurring invoices, time tracking. Up to 3 users. | Businesses with suppliers and staff |
Plus | £56 | All essentials + Stock management, purchase orders, sales orders, project management, and budgeting. Up to 5 users. | Product-based businesses |
Advanced | £123 | All plus + Custom reporting, workflow automation, forecasting, auto track fixed assets, up to 25 users. | Larger SMEs |
The platform is fully MTD-compatible for VAT on all plans from Simple Start upwards and is listed on HMRC’s approved software list for Making Tax Digital for ITSA. This makes it one of the most cost-effective MTD-ready solutions available for sole traders. Invoice processing is simple and efficient, and every paid subscription includes phone and live chat support. Payroll is available as a paid add-on. Our affiliate link includes the current best introductory offer.
Verdict: Best for sole traders and the self-employed. Lowest entry price on the market, GPS mileage tracking on every plan, and phone support included. Watch out for tight user limits on lower plans and prices that have risen sharply in recent years.
Sage: Best for UK Compliance, Sole Traders and Small Business Accounting
Sage UK is the only major accounting software on this page built specifically for the UK market. With over 40 years of history, it has become one of the most trusted names in business accounting software for UK small businesses and the self-employed. Unlike Xero and QuickBooks, which are global platforms adapted for UK requirements, Sage is designed from the ground up around UK tax, VAT, and HMRC compliance. It is a fully MTD-approved software provider with particularly strong financial management tools for VAT-registered businesses, and its optional payroll software integrates closely with the main accounting product.
Sage UK lets you raise invoices, record expenses, reconcile bank feeds, monitor cash flow, and manage stock through one platform. The Sage Copilot AI assistant — included on all plans, which helps automate routine bookkeeping tasks and flags potential issues in your accounts.
Tip: Free plan available: Sage offers a genuinely free accounting plan for non-VAT-registered sole traders. It includes digital record-keeping, bank feeds, Self Assessment support, and MTD quarterly submissions — making Sage one of only two major providers with a free.
Sage Pricing
Plan | Price/Month | Key Features | Best For |
|---|---|---|---|
Sole Trader | Free | Digital records, bank feeds, Self Assessment, MTD ITSA updates. Up to 5 invoices/month. Non-VAT only. | Self-employed starting with digital record-keeping |
Sole Trader | £7 | Free + unlimited invoices, Sage Copilot AI, automated Self Assessment, expert webchat. | Self-employed wanting more features and support |
Accounting Start | £18 | Send invoices, bank reconciliation, MTD VAT return, and payroll (1 person). 1 user. | VAT-registered micro-businesses |
Accounting Standard | £39 | Start + Expense management, multi-currency, up to 3 users, cash flow forecasting, purchase invoices, CIS, quotes, snap and scan receipts. | Small businesses needing full bookkeeping |
Accounting Plus | £59 | Standard + stock management, budgeting, multi-currency, unlimited users. | Businesses managing stock or projects |
Sage Accounting is UK-only. The Accounting Start plan does not include expense tracking; this is available from Accounting Standard upward. MTD quarterly submissions for Making Tax Digital are supported on the Sole Trader plans and on Accounting Standard and above. Always verify current plan details on the Sage website. Our affiliate link includes the current best introductory offer.
Tip: If you need both VAT returns and expense tracking in one plan, make sure your chosen Sage plan includes them before signing up.
Verdict: Best for UK compliance and businesses needing payroll. The only major package built specifically for UK tax and HMRC requirements. The free sole trader plan is a genuine standout.
Visit Sage UK
Also Worth Considering: FreshBooks, FreeAgent and Zoho Books
These three accounting software packages are strong choices for specific types of businesses. They offer solid features and competitive pricing, and suit growing businesses and freelancers particularly well, but are less commonly used by UK accountants than the top three. FreshBooks and Zoho Books are available worldwide; FreeAgent is UK-focused. For some small businesses, one of these will be a better fit than the main three.
FreshBooks — Best Invoicing Software for Service Businesses and Freelancers
FreshBooks is a cloud accounting software platform designed primarily for freelancers, consultants, and service-based small businesses. Its standout strengths are invoicing and billing — you can send invoices, accept online payments, and manage costs more easily than almost any other package on the market. Invoice processing is straightforward, with scheduled recurring invoices and built-in automatic payment reminders. UK plans range from £16 to £42 per month (ex VAT). There is no permanent free plan, but a 30-day free trial is available.
FreshBooks Pricing
Plan | Price/Month | Key Features |
|---|---|---|
Lite | £16 | Send invoices (up to 5 active clients), track expenses, time tracking, MTD VAT returns, and a single user. |
Plus | £30 | Up to 50 clients, double-entry reports, bank reconciliation, accountant access, retainers, proposals. |
Premium | £42 | Unlimited clients, accounts payable, project profitability, and customisable email templates. |
Select | Custom | Dedicated support, lower transaction fees, and 2 users included. |
FreshBooks is MTD-compatible for VAT on all plans and is an HMRC-recognised software provider for VAT submissions. It supports online payments via Stripe, GoCardless, and PayPal. Expense management is included in all plans. Additional users cost £8 per month each, which can increase total costs quickly for larger teams. There is no built-in payroll; this requires a third-party integration.
Note on Making Tax Digital for Income Tax: At the time of writing, FreshBooks has not been confirmed on HMRC’s list of approved software for MTD for Income Tax. If MTD quarterly submissions are your priority, verify the current status with FreshBooks directly before signing up.
Verdict: FreshBooks is an excellent choice for freelancers and service businesses who prioritise invoicing over inventory and complex reporting. Small businesses that mainly bill clients for time or services will find it the easiest package on this page to use.
Visit Freshbooks
5. FreeAgent — Best for Contractors and Landlords – Free with some Bank Accounts
FreeAgent is a UK-focused cloud accounting software platform built to help sole traders, contractors, and small businesses manage their finances without complexity. You can send invoices, track expenses, view financial data in real time, and submit returns directly from the software. It covers the full range of small business accounting requirements: VAT returns, Self Assessment, Making Tax Digital, payroll, and project management — all included at no extra cost in a single flat monthly fee.
FreeAgent is MTD-approved for both VAT and Making Tax Digital for Income Tax. It is designed to mak financial management easier for business owners who want to automate tasks like bank reconciliation, invoice matching, and expense categorisation without needing accounting knowledge. Real-time tax estimates in the dashboard show exactly how much to set aside throughout the year.
For those who do not bank with qualifying providers, FreeAgent charges a single flat monthly fee: £10/month for landlords, £19/month (ex VAT) for self-employed, £27/month for partnerships, and £33/month for limited companies. A 50% introductory discount applies for the first six months. All plans include the complete feature set with no tiers or add-ons for core features.
Tip: Free with qualifying bank accounts: FreeAgent is completely free for life with a NatWest, Royal Bank of Scotland, or Ulster Bank business current account, or with a Mettle account that has at least one transaction per month. This is a permanent arrangement — not a trial — and includes full access to all features, including MTD quarterly submissions.
Verdict: FreeAgent is an outstanding option for contractors, landlords, and self-employed people who bank with NatWest, RBS, Ulster Bank, or use Mettle — the free access makes it hard to beat. For businesses without these bank accounts, the flat monthly fee is reasonable, and the all-in pricing, including payroll, compares well with competitors’.
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6. Zoho Books — Best Value Accounting Software
Zoho Books is an online accounting software platform that delivers one of the best combinations of features and value available. As small-business accounting software, it includes a comprehensive set of accounting tools to send invoices, automate tasks such as payment reminders and bank reconciliation, monitor cash flow, and manage VAT — at a lower price point than most competitors. Expense management features are included across all paid plans, and the software integrates naturally with Zoho CRM, Zoho Payroll, and Zoho Projects for businesses already using the Zoho suite.
Zoho Books is MTD-approved for VAT and Making Tax Digital for Income Tax. Core reports include a profit and loss statement, a full balance sheet, and cash flow statements. Higher-tier plans add inventory tracking and more advanced expense features. For small businesses looking for a cost-effective alternative to Xero or Intuit QuickBooks, Zoho Books is well worth considering.
UK pricing is available in GBP on the Zoho website. Plans start from free and move through Standard, Professional, and Premium tiers. The free plan supports up to 1,000 invoices per year and is one of the most capable no-cost options available. A 14-day free trial is available on all paid plans.
Note on the free plan: The Zoho Books free plan is well-featured but has limits on invoices, expenses, and users. Check the current limits on the Zoho UK pricing page (zoho.com/uk/books/pricing) before relying on the free plan for your business in the long term.
Verdict: Zoho Books is an excellent choice for cost-conscious small businesses seeking robust features at a lower monthly cost, or for businesses already using other Zoho products. Less familiar to UK accountants than Xero or QuickBooks, so check with your accountant before committing.
Visit Zoho Books
Making Tax Digital — What Software Do You Need?
Making Tax Digital (MTD) is HMRC’s programme to move tax record-keeping and submissions online. All six packages reviewed here are MTD-compatible and HMRC-approved. For small businesses and self-employed people, there are two elements to understand.
MTD for VAT
MTD for VAT has applied to all VAT-registered businesses since April 2022, regardless of turnover. If your business is registered for VAT, you must keep digital VAT records and submit returns using MTD-compatible online accounting software. All six packages on this page qualify. The old HMRC VAT portal is no longer available. Always check GOV.UK for the latest requirements.
MTD for Income Tax
Making Tax Digital for Income Tax replaces the annual Self Assessment tax return for those in scope with digital quarterly updates and a Final Declaration. The rollout is:
- From 6 April 2026: mandatory for qualifying gross income over £50,000 (based on the 2024/25 tax return)
- From 6 April 2027: mandatory for qualifying gross income over £30,000
- From 6 April 2028: mandatory for qualifying gross income over £20,000 (confirmed October 2024 Autumn Budget)
Qualifying income means gross income before expenses from self-employment and property rental. Income from employment, pensions, or dividends does not count. Partnerships are not currently included; no date has been confirmed. Switching to compatible accounting software now will simplify financial management at year’s end and make the transition to digital quarterly reporting straightforward when your start date arrives. Always check GOV.UK for the current thresholds and dates, as these are subject to change.
How to Choose the Best Accounting Software
The best small business accounting software depends on your circumstances. The key questions are: Are you VAT-registered? Do you have staff or a payroll requirement? Do you work with an accountant? How important is inventory or expense tracking to your day-to-day financial management? Use the table below to find the right starting point, then check the provider website to confirm the plan that covers your needs.
Your Situation | Best starting point |
|---|---|
Non-VAT-registered self-employed wanting free software | Sage Sole Trader Free or Zoho Books free plan — both MTD-approved for quarterly submissions |
Self-employed, banks with NatWest, RBS, Ulster Bank or Mettle | FreeAgent — free for life with these bank accounts, full MTD support included |
Small business owner needing VAT returns | QuickBooks Simple Start or Xero Ignite — both £16/month, both fully MTD-compatible |
Businesses with an accounting team | Xero – unlimited users on all plans |
UK business needing payroll software | Xero, QuickBooks, Sage (add-on Sage Payroll) or FreeAgent (payroll included as standard) |
Freelancer or consultant focused on invoicing | FreshBooks — outstanding invoicing designed specifically for freelancers and service businesses |
Business needing inventory management | Xero Comprehensive (£47/month), QuickBooks Online Plus (£38/month), or Sage Accounting Plus (£59/month) |
Already using other Zoho products | Zoho Books — seamless integration with Zoho CRM, Payroll, and Projects |
Accounting Software Best Deals for UK Businesses
Every provider offers significant introductory discounts for new subscribers. These are the current deals on offer from Business Accounting Basics and may differ from the deals available on the website. Always verify the current offer on the provider’s website before purchasing, as these change regularly.
Accounting Software Best Deals
Sage UK – 3 Months FREE + FREE plan for Sole-Traders, AI tools for bookkeeping automation
XERO – 90% Discount for 6 Months – Cloud accounting, unlimited users, smart bank feeds
QuickBooks – 90% Discount for 7 Months – Invoicing, expense tracking, payroll, financial reports
FAQ
Which is the best small business accounting software?
The best small accounting software depends on your specific needs. Xero is the best all-rounder for businesses working with an accountant. QuickBooks Online is best for self-employed people and smaller businesses wanting the lowest entry price. Sage is best for UK compliance and payroll. FreshBooks is best for freelancers and service businesses. FreeAgent is best if you bank with NatWest, RBS, or Ulster Bank. All are MTD-compatible and HMRC-approved.
Do I need accounting software for Making Tax Digital ITSA?
If your qualifying gross income is above £50,000 from April 2026, above £30,000 from April 2027, or above £20,000 from April 2028, you will need MTD-approved accounting software (or a digitally linked spreadsheet with bridging software) to submit quarterly updates.
Is QuickBooks Online or Xero better?
Both are excellent accounting software packages. Intuit QuickBooks Online is generally better for self-employed people due to lower entry pricing and GPS mileage tracking on all plans. Xero tends to be better for businesses with a team as unlimited users are included on all plans at no extra cost.
What does accounting software actually do?
Online accounting software lets you send invoices to customers, record expenses as they happen, connect your bank account to automatically import transactions, prepare and submit VAT returns to HMRC, run financial reports, and manage payroll. The better packages also automate tasks like payment reminders, bank reconciliation, and expense categorisation, reducing the amount of manual bookkeeping you need to do.
Is there free business accounting software?
Yes. Sage Sole Trader Free is free for non-VAT-registered businesses and is MTD-approved for quarterly submissions. Zoho Books offers a free plan for businesses that process up to 1,000 invoices per year. FreeAgent is free for life for NatWest, RBS, Ulster Bank, and Mettle business account holders. These are the three best options for genuinely free business accounting software for self-employed and small businesses.
Conclusion
- Xero, QuickBooks Online, and Sage are the top accounting software picks for UK small businesses — all MTD-compatible and HMRC-approved.
- Xero is the best all-rounder, with unlimited users on all plans, a clean interface, and 800+ app integrations.
- QuickBooks is best for the self-employed, offering the lowest entry price, GPS mileage tracking, and strong MTD support across all plans.
- Sage is the only major accounting software built specifically for the UK and offers a free option for sole traders, has a strong payroll add-on, and is trusted by UK accountants.
- FreshBooks is the best choice for freelancers and service businesses focused on invoicing — but verify MTD quarterly submission status before committing.
- FreeAgent is free with NatWest, RBS, Ulster Bank, and Mettle accounts — payroll included, excellent for contractors, landlords, and growing businesses.
- Zoho Books offers strong features at a competitive price, a generous free plan, good automation, and it works well with other Zoho products.
• Always take advantage of free trials before committing. Always check GOV.UK for the latest MTD rules and thresholds.
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