Why businesses should rethink their accounting software for Making Tax Digital

Here, Mariah Tompkins scrutinises eight accounting software options for small businesses in preparation for Making Tax Digital.

Prepare well in advance for tax returns and save stress

Prepare well in advance for tax returns and save stress

Though Making Tax Digital is not here yet, small businesses should consider switching to using online/cloud accounting software so that they are ready for when the new regulations are fully introduced. From the consultation documentation available HMRC has no plans to provide their own free software, which is going to force the majority of businesses to obtain a software which will be suitable for business use.

The question then is: Which accounting software?

At this stage, this is a tricky question to answer as it will largely depend on the type of business. Each business will have to decide based on their personal circumstances – SMEs, for example, will be in a position to shop around for software already out there but larger organisations may require more bespoke software to suit their needs. For SMEs specifically there are a number of different cloud software systems currently out there which are capable of recording transactions online. Although we don’t yet know whether these will be compatible with the Making Tax Digital regulations, here are some to consider:


Xero has several plans which businesses can choose from depending on the their needs. Xero accounting software packages are as follows:

Starter £10.00 + VAT per month. This package is suitable for small businesses or contractors as it only allows you to send up to five invoices and reconcile up to 20 bank transactions per month.
Standard – £22.00 + VAT per month. Does not restrict you on the number of transaction you can input, but you don’t get the multi currency with this package.
Premium – £27.50 + VAT per month. This package is similar to standard one but you do get multi-currency with the premium package.

With Xero, you can add payroll package to any of the above pricing plans for an extra £5 per month.


QuickBooks’ three packages include:

Self employed: £6.00 + VAT per month. This is suitable for the self employed/freelancer as it only contains the features they will need (i.e. nothing to do with payroll and tracking and billing for employee time).

Essential: £15.00 + VAT per month. More suited to SMEs. Includes the ability to import customer and supplier details from Excel, Outlook and .csv, generate P45s and P60s for your staff and calculate PAYE and National Insurance – with free access for your accountant.

Plus: £25.00 + VAT per month. Provides all the features QuickBooks online software has to offer, including stock control, creating budgets and classifying transactions by business area.

One thing you will need to bear in mind with QuickBooks is that you are restricted on number of users. With the Self Employed package only one user is allowed; the Essential package allows three, and the Plus allows up to five.


FreeAgent offers three different accounting software packages to suit different business structures:

Sole trader: From £19 + VAT per month. Gives you access to all the features of the software – including expense tracking, automatic bank feeds and corporate tax forecasting, plus self assessment filing.

Partnership/LLP: From £24 + VAT per month. Access to all of the features plus profit-sharing calculations.

Limited company: £29 + VAT per month. Everything else plus corporation tax and dividend vouchers.


KashFlow also comes in three packages which are as follows:

Starter: £7 + VAT per month. Suitable for contractors, sole traders and small businesses. Features include: Invoicing, banking, quotes and estimates (single currency), credit control, customers and suppliers, purchases and reports.

Business: £13.00 + VAT per month. Idea for many Limited companies and those that are fast-growing. With this package invoices, bank transactions and repeat transactions are unlimited, with multi-currency available.

Business and Payroll: £18.00 + VAT per month. Provides a similar package to business one with a payroll package added to it.

For small businesses that don’t want to incur any costs there are a number of free software systems that are worth checking out. Here are my thoughts on a few:


I find Wave software very reliable and useful especially for small businesses and contractors. It provides a lot of free functionality including an app where you can take photos of your receipts and upload them to the software ready for you to update which accounts the expenses relates too.

The only downside to Wave is it does not provide a payroll services for UK-based businesses.


I have used Capium for a while now and find it very easy to use; some of my clients says they like it because it’s user friendly too. Capium provides a free bookkeeping and payroll package for small businesses with up to three employees and 100 clients. The downside is that it doesn’t offer free bank feeds, although this has recently been introduced at the cost of £5 + VAT per month. There are other features available for a monthly cost including accounts production, corporation tax, self assessment (SA100, SA800, SA900), advanced payroll (auto enrolment, P11D) and practice management.


InvoiceBerry offers a free of charge package suitable for small businesses/sole traders with up to three clients. There are paid-for Solo and Pro packages available for those that have more clients and want more users to be able to access the software. Both of those packages offer a 30-day free trial. Features across all account plans include: Unlimited invoices, invoices in multiple languages and invoices in over 200 currencies. Users are also able to keep track of expenses, view a variety of reports and create and send quotes.


QuickFile has a number of free packages, most suitable for SMEs. However they do have a limit on the number of nominal transactions allowed over the previous rolling 12-month period, and for the Medium account that figure is 1,000. Large and Extra Large accounts cost £45 + VAT per year. Invoicing, purchase/receipt management, banking automation, estimates/quotations, full multi-currency support and reporting are all features available for free.

Mariah Tompkins is founder of WKM Accountancy.

Further reading on accounting software and accounts

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