UPDATED: As every entrepreneur knows, with everything going digital, more and more is being pushed onto the poor small business owner.
HMRC rolled out its Making Tax Digital initiative in 2019, compelling 1.2 million VAT-registered businesses which earn £85,000 plus in turnover to file returns online. Those businesses now must submit their quarterly VAT returns under the new system.
However, it’s not going to stop there – MTD will be widened to include income tax and corporation tax from 2021 onward.
Given that moving to small business accounting software is inevitable for every SME, surely, it’s time to put away your paper and pencil (or your standalone Excel spreadsheet).
To help you decide, we’ve looked at the best UK small business accounting software packages on the market.
Best UK small business accounting software
Every small business is different. Most small businesses can make do with basic functions like invoicing, bank reconciliation, income and expense tracking and financial report generation.
Indeed, most UK small business accounting software offers the same features, it’s just that you may feel more comfortable with how one is designed over another – and then of course, there’s the cost.
Best accounting software for UK small businesses 2021
|FreeAgent||Sage Business Cloud Accounting||QuickBooks||Xero||Zoho Books||ClearBooks||FreshBooks|
|Estimates and invoices||x||x||x||x||x||x||x|
|Billable time tracker||x||x||x||x||x||x|
|Connect your bank||x||x||x||x||x||x||x|
|Online filing of CIS||x||x|
|Mobile||iOS, Android||iOS, Android||iOS, Android||iOS, Android||iOS, Android, Windows||iOS, Android||iOS, Android|
|Cost (monthly)||New users get a 50% discount for first 6 months, then it goes full price. Sole trader: £9:50 a month + VAT for 6 months; then £19 a month + VAT||Accounting Start for sole traders and microbusinesses: free for three months then £12pm + VAT a month||Quickbooks is offering a 50% discount for the first six months.||Starter £10pm allows you to send 5 invoices and quotes, enter 5 bills, reconcile 20 bank transactions||Free: for businesses with less than £35,000 turnover pa, 1 user, up to 1,000 invoices||Small business £12pm + VAT with 50% discount for first three months if you sign up during one-month free trail||Lite: £11pm + VAT with first three months 50% discount|
|Partnership/LLP: £12 a month + VAT for 6 months; then £24 a month + VAT||Standard (includes invoicing and cash flow management): free for three months then £24pm + VAT||Simple Start is £6 for four months, rising to £12pm + VAT; Essentials is £10 for the first four months, rising to £20pm + VAT;||Standard £24pm||Standard: £10 pm with 2 users and up to 5,000 invoices||Large business £24pm + VAT with 50% discount for three months if you sign up during one-month free trial||Plus: £19pm + VAT with first three months 50% discount|
|Limited company: £14:50 a month + VAT for 6 months, then £29 a month + VAT||Plus (adds multicurrency invoicing and inventory management) free for three months then £30pm + VAT||Plus is £15 a month for the first four months, rising to £30pm + VAT||Premium £30pm includes Starter functionality plus handling multiple currencies||Professional: £20pm with 5 users||Premium: £30pm + VAT with first three months 50% discount|
|*in online compliance||Premium: £25pm with 10 users|
|**bank feed only|
First, make a list of what you need to do in terms of bookkeeping and accounting.
- Do you need to track inventory and purchase ordering?
- Do you need to invoice payment deadlines?
- Are you a sole trader and do you plan to do self-assessment?
- Do you have staff and a payroll to run?
- Do you need foreign currency transactions?
- Do foreign currency transactions convert to sterling?
- How many users will need to use the accounting software?
How much can you afford?
Although there are free options available, when it comes to UK small business accounting software – and especially something as sensitive as financial information – it’s probably wise to pay for a package. Back in the 1970s, the US television industry coined the phrase, “If you’re not paying for the product, you are the product.” These days that means that the software provider sells on your data.
The other change that has happened is the rise of monthly subscription as opposed to a one-off software licence. On the plus side, Software-as-a-Service (SaaS) means your tech is always up to date. The downside is that, as the months roll on, you eventually end up paying more than if you’d bought a one-off licence.
4 questions you need to ask your UK small business accounting software supplier
- How do you back up data?
- Tell me about customer support. What are your hours and how quickly should I expect a response if I raise an issue?
- Can you tell me about a similar client who’s signed up to your software?
- Does your platform support foreign currency payments and convert them into sterling?
Pick a small business accounting software solution that will grow with you
Don’t be tempted to buy the most basic licence only to find you’ve outgrown what’s provided within a year. Ask your would-be supplier to explain how its small business accounting software can scale with your growing business.
FreeAgent – best for freelancers
FreeAgent calls itself “mission control for your business” and they’re not joking.
UK FreeAgent began life over a decade ago in 2007 when three freelance developers, frustrated with the mess and inefficiency of bookkeeping, decided to create their own digital bookkeeping solution.
Today, FreeAgent employs a team of 170 and has helped over 70,000 small businesses, freelancers and their accountants with bookkeeping chores.
Its model proved so attractive that Royal Bank of Scotland bought the founders out for £53m in 2018.
- Emailing estimates and invoices
- Recording expenses
- Time tracking
- Self-assessment filing
- Making Tax Digital VAT
- Corporation tax calculator
- Bank account connectivity
- Dashboard overview of cash flow, live profit and loss, HMRC deadlines and an invoice timeline.
- FreeAgent is a good option for project-based small businesses and freelancers who need to invoice billable hours and expenses to their clients.
- Its inventory management features may be too basic for businesses that sell multiple product lines.
Sole trader: £9:50 a month + VAT for 6 months; then £19 a month + VAT
Partnership/LLP: £12 a month + VAT for 6 months; then £24 a month + VAT
Limited company: £14:50 a month + VAT for 6 months, then £29 a month + VAT
Mobile: iOS, Android
QuickBooks – best for fast-growing businesses
Parent company Intuit was founded in 1983 and the QuickBooks brand was introduced in 2002, with QuickBooks Online following two years later. Today, QuickBooks has 2.2 million users across 225 countries.
Nifty features include a client portal, where customers can view, print and pay invoices and a customer relationship management (CRM) system, which helps you keep on top of your customer database.
Where QuickBooks stands out is the quality of its reporting, with punchy snapshots of how your business is performing financially. Its reporting facility is ahead of rivals such as Xero when it comes to customisation.
- QuickBooks’s user experience (UX) is easy to understand and pleasing to the eye
- QuickBooks is mindful of scaling businesses and its software can have anything up to 25 users
- Professional accountants rate the professionalism of QuickBook’s reports and its bank reconciliation features
- QuickBooks can be difficult to navigate with some features hidden in settings
- It’s a steep learning carver for anybody who’s not technically literate
- There have been complaints that QuickBooks online is still buggy with long waiting times for telephone customer support
Mobile: iOS, Android
QuickBooks is offering a 50 per cent discount for the first six months.
Simple Start is £6 per month, rising to £12.
Essentials is £9 for the first six months, rising to £18.
Plus is £14 a month for the first six months, rising to £27.
FreshBooks – best for sole traders
Overview: Back in January 2003 FreshBooks founder Mike McDerment, who at the time was running a design studio, lost hours of work, having saved the wrong invoice using Word and Excel. He decided there had to be a better way and over the next fortnight coded what became the beginnings of FreshBooks.
He and two colleagues then spent the next four years working out of McDerment’s parents’ basement building the company, which basically adapted double-entry bookkeeping for the internet age but more importantly was specifically designed for small business.
Today, the Toronto-based company has over 500 employees and more than 24m people in over 160 countries have used FreshBooks.
FreshBooks offers nearly all of the features every other accounting software platform offers in 2021 but with one caveat: you have to pay to add clients outside of those allowed on its two lower-priced plans. The £11 a month basic plan means you can only use FreshBooks with five clients.
Another issue that might be off-putting for a UK small business owner is that telephone support only works during US daytime (8am to 8pm EST/-5hrs GMT), which means that no telephone help is available before 1pm.
- Specifically designed for small businesses
- Colourful and intuitive UX
- Lower-level plans have client limits
- Charge for additional users
- Phone support only during US business hours (8am to 8pm EST/-5hrs GMT)
- Lacks functionality larger businesses need
FreshBooks offers the below when it comes to pricing:
Lite: £11pm + VAT with first three months 50 per cent discount
Plus: £19pm + VAT with first three months 50 per cent discount
Premium: £30pm + VAT with first three months 50 per cent discount
Mobile: iOS, Android and Windows
Sage Accounting – best for micro businesses with limited stock
Overview: Another UK-based payment-processing platform, Sage began life in 1981 when its founder got in touch with Newcastle University students asking them to help him develop an automatic accounting processes program. Jump forward nearly 40 years and Sage now has 13,000 employees across 23 countries serving over three million businesses using its software. Sage says that every month it helps UK firms create over 500,000 invoices, process 700,000 transaction and sell 1.5 million products.
Like all the other small business accounting software packages listed here, Sage is cloud based and links seamlessly to your bank account for real-time reporting.
Features it offers include:
- Estimates and invoicing
- Corporation Tax calculator,
- Multi-currency support
- Bank account connectivity
- Stock management
- Linked to Stripe payments processing system.
- Sage Business Cloud Accounting’s bottom Accounting Start tier is well priced, simple and easy to navigate.
- Sage Business Cloud Accounting’s user experiences looks dated compared with other small business accounting software and some of the terms it uses are clunky, better suited to accountants than small business owners
- Its inventory app is not the best choice if you have a business dealing with hundreds of product lines
Start for sole traders and microbusinesses: free for 3 months then £12pm + VAT
Standard (includes invoicing and cash flow management): free for 3 months then £24pm + VAT
Plus (adds multicurrency invoicing and inventory management) free for 3 months then £30pm + VAT
Mobile: iOS, Android
Xero – best for larger SMEs with multiple users
Xero describes itself as “beautiful accounting software” offering unlimited users with free upgrades. It offers an ecosystem of over 1,000 third-party apps and 300 plus connections to banks and other financial partners.
Established in 2006, New Zealand-based Xero has over 2.7m subscribers in 180 countries and is used by over 16,000 accountants.
Like FreeAgent and QuickBooks, Xero offers the following as standard:
- Connects straight to your bank account enabling automatic reconciliation
- Generates quotes and invoices that customers can pay online
- Manages purchase orders, bills and supplier payments digitally
- Helps track stock
- Keeps your account up to date as you buy and sell
- Customisable reports
- Range of apps in marketplace including Shopify, Stripe, PayPal and Square
However, you have to pay extra as bolt-ons if you want to do your payroll on Xero or enable staff to submit expenses, track expense claims.
- Xero is popular with small businesses and especially sales-oriented businesses that need basic stock management built in.
- Its usability, features, extendibility, and network of “Xero certified” accountants make it one of the best small business accounting websites available.
- The Starter plan is extremely limited, offering an improbably low allowance of monthly invoices and quotes.
- The drop-down menus on Xero can be a bit clunkier than, say QuickBooks.
- And its reporting functions can be more difficult to navigate. For example, Unlike QuickBooks, Xero lacks any facility to bunch together creditors and debtors by name in its reports, an omission which mystifies some accountants.
- Xero has improved its functionality dramatically but these improvements have come at the cost of dropping built-in payroll with its monthly subscription plans. And you must subscribe to its most expensive £30 a month tier if you want multicurrency transactions.
- There is no telephone customer support and users complain that the online-only support has deteriorated, despite the monthly subscription hike.
Starter: £10pm allows you to send 5 invoices and quotes, enter 5 bills, reconcile 20 bank transactions, submit VAT to HMRC for Making Tax Digital and offers automatic calculations and reports; there are optional bolt-one for payroll, expenses, projects and submitting CIS returns from Xero.
Standard: offers all of the above for £24pm with unlimited invoicing, bills, bank reconciliation. As with Starter, there are bolt-ons for payroll, expenses, projects and adding a CIS contractor.
Premium: only the top tier Premium option handles multiple currencies for £30pm but payroll, expenses, projects and adding a CIS contractor are all paid-for bolt-ons.
Mobile: iOS, Android
Zoho Books – best for micro businesses on a budget
Indian tech company Zoho has 45m users worldwide for its Google-like suite of business products, which include email and word processing.
Zoho Book is its MTD-compliant cloud-based accounting package that integrates with 44 other apps in the Zoho family such as its popular Customer Relationship Management (CRM) program.
In terms of functionality, Zoho equals or surpasses its UK small business accounting software brethren, connecting with your bank accounts and generating estimates and invoices, enabling you to reconcile turnover and payments. Its standard features are rare to find in entry-level accounting suites.
One special feature is that Zoho throws in multicurrency conversions – only available on the top tier of Xero – enabling you to invoice overseas customers in their currency and convert payments back into your own currency for accounting purposes.
Another nifty feature is its auto-scan function, which allows you to scan and upload invoices directly. Other small business accounting software packages often have you buying add-on software to enable scanning and uploading.
Zoho’s company logo is a set of child’s building blocks and there’s something simple and childlike about the Zoho Books user experience and interface. It’s intuitive and equals more expensive rivals when it comes to UX. The opening dashboard displays graphs and charts that show you an overview of your cash flow, receivables, payables, expenses, projects and bank accounts.
Like Xero, which puts you in touch with Xero certified accountants, Zoho Books offers a similar scheme whereby those who watch a one-hour webinar are certified as a Consulting Partner.
- It’s good value for money with its top Professional tier costing £18 per month compared with £30 for its equivalent in Xero and £27 per month for QuickBooks Plus.
- Multicurrency support, only available at the highest tier on Xero, is available on its entry-level tier, which is great for microbusinesses with overseas customers.
- Unlike Xero, Zoho Books does offer telephone support as well as online.
- Zoho’s biggest drawback is that it does not handle payroll.
Free: for businesses with less than £35,000 turnover pa, 1 user, up to 1,000 invoices
Standard: £10pm with 2 users and up to 5,000 invoices
Professional: £20pm with 5 users
Premium: £25pm with 10 users
Mobile: iOS, Android and Windows
ClearBooks – best for wholly UK small businesses
Overview: Tim Fouracre, then an accountant at KPMG, founded ClearBooks in July 2008 working out of his spare room. He had developed a simple web-based double-entry accounting system to look after the accounts of the small web-development company he was running in his spare time. He then realised there would be thousands of small UK businesses looking for that same kind of software. Fouracre spent nine years building up ClearBooks before stepping down as CEO in 2017.
Today, Clear Books provides clear and simple cloud accounting and payroll software to thousands of small businesses in the UK.
- Simple to use
- Designed for British businesses
- Support team sits alongside developers
- Value for money
- Some functions can be overly complicated
- Not suitable for enterprise level businesses
- Continual UI updates do frustrate some customers
Small business: £12pm + VAT with 50 per cent discount for three months if you sign up during one-month free trial
Large business: £24pm + VAT with 50 per cent discount for three months if you sign up during one-month free trial
Mobile: iOS, Android and Windows