Bookkeeping is the bane of every small business owner’s life. Sitting down for an hour or an afternoon a week, going through invoices and receipts, can be incredibly tedious. After all, you didn’t go into business for yourself to become a bookkeeper. Happily, there are plenty of small business software options out there to make life easier.
Bookkeeping vs accounting
Bookkeeping is the process of keeping accurate records of the financial activities of your business – in simplest terms – keeping track of the money your business makes and spends and keeping tabs on how much cash you’ve got in the bank.
Accurately and regular bookkeeping is important because it helps a small business to:
- Keep track of overall profitability as well as understanding which parts of the business are less profitable than others
- Ensure it has accurate records as proof of expenses incurred and to help support and submit its self-assessment returns
- Plan for tax liabilities and avoid unnecessary penalties
- Budget for expenses
- Manage cashflow
- Keep track of revenue to ensure you register for VAT when you need to
- Calculate their VAT liabilities (if they’re VAT registered)
If you’re VAT registered, unless you register for Flat Rate VAT, your bookkeeping will get a bit more labour intensive as you’ll need to track and record VAT paid on relevant expenses.
Accounting is the process of interpreting financial records and forecasting business performance in the coming months and years.
This helps you understand how well your business is performing whether purely financially or in overall growth. It’s best to work with a chartered accountant, as they can often become your most trusted adviser.
How can bookkeeping software help my small business?
There are many small business bookkeeping software solutions out there to help you keep track of what’s coming in and out. And when you consider the time spent doing bookkeeping on paper or using generic spreadsheets, the money you save using up-to-the-minute HMRC-compliant software means it pays for itself.
Best accounting software if you’re a sole trader – Here, we explore how to find the right accounting software for you as a sole trader, along with some of the best platforms around
Which software features to look out for
When deciding what software to choose, consider how much support is offered, as this will be key if bookkeeping is new to you.
Features to look out for to see if they’re included as part of the package:
- Digital record capture – Some solutions allow you to use your smartphone or desktop scanner to capture everything that’s on a receipt and automatically upload it into your system.
- Automatic reconciliation – Software that integrates directly with banks automatically reconciles transactions between your bookkeeping system and your bank accounts.
- Mobile functionality – Being able to access the software on your smartphone means you can do bookkeeping on the move. Especially helpful if you’re a tradesman or someone who works out of the office.
- Tax automation – Software should be compliant with the latest HMRC regulations.
- Secure cloud storage – Cloud based software will securely store and back-up your data, meaning you don’t have to worry about it being lost.
- Ability to upload receipts or invoices easily – or integrate with something like Dext or Hubdoc. To save time you should looking for uploads that include optical character recognition (OCR), which means it reads the invoices and pre-populates lots of fields.
- Integration capabilities – make sure that your small business bookeeping software integrates with other software you use, such as your EPOS system or inventory tracker.
- Budgeting – if you can put a budget in your accounting software, you’re more likely to keep tabs on how well your business is performing against expectations.
- Reports – does the software offer easy-to-understand reports?
- Is it Making Tax Digital compliant? – HMRC has a list of software providers its MTD reporting works seamlessly with.
Try a free trial – how does it feel? Is it intuitive? What is the support like?
Top 5 accounting software providers for UK small businesses – Looking for a new accounting software provider for your UK small business? Here are 5 accounting software providers to choose from
Small business bookkeeping software
Sage Business Cloud Accounting
Sage Accounting is a cloud-based bookkeeping solution designed specifically for small businesses. Recognised by HMRC and enhanced with AI-powered features, it simplifies everything from invoicing and VAT submissions to payroll and expense tracking. Whether you’re a sole trader or running a growing company with employees and inventory, Sage offers flexible plans to support your needs.
Key Features
- AI-Powered Automation: Sage Copilot assists with task automation, real-time insights, and communication streamlining
- Smart Invoicing: Create and personalise invoices, send reminders, and track payments with ease
- Bank Integration: Connect your bank accounts and automatically pull in transactions
- VAT Returns: Easily calculate and submit VAT directly to HMRC.
- Self Assessment: Generate a fully completed SA103 form and calculate totals automatically
- Cash Flow Management: Visual dashboards show real-time money in and out
- Reporting Tools: Generate detailed, configurable financial reports.
- Payroll and HR (Add-on): Manage pay runs, track leave, and sync HR data (from £10/month)
- Receipt & Invoice Capture: Use AI to extract and record key details automatically
Pros and Cons
| Pros | Cons |
|---|---|
| HMRC-recognised and MTD-compliant | Entry-level plan lacks some advanced features |
| Powerful AI automation (Sage Copilot) included in all plans | Receipt capture only available from Standard plan |
| Bank syncing, VAT submission, invoicing, and reporting tools included | Payroll and HR not included – available as a paid add-on |
Pricing
| Plan | Price (excl. VAT) | Key Features |
|---|---|---|
| Accounting Start | £18 per month (90% off for 12 months) | Unlimited invoices, bank reconciliation, VAT calculation and submission (MTD-ready) |
| Accounting Standard | £39 per month (90% off for 12 months) | All Start features + CIS, purchase invoice management, cash flow forecasting, quotes, and advanced reports |
| Accounting Plus | £59 per month | All Standard features + Inventory, multi-currency, budgeting, exchange rate tracking, and stock control |
Xero
Xero is a cloud-based accounting software that’s trusted by millions of businesses worldwide. Known for its clean interface, robust integrations, and HMRC recognition for Making Tax Digital (MTD), Xero is ideal for sole traders, small businesses, and growing companies that want real-time financial visibility and flexible add-ons.
Key Features
- MTD for VAT & Income Tax: Fully compliant with HMRC’s Making Tax Digital requirements.
- Invoicing & Quotes: Send quotes and track 10–20 invoices per month depending on the plan.
- Bank Reconciliation: Automatically match transactions with your bank feed.
- Bill Capture & Management: Upload and track bills using Hubdoc, included with all plans.
- Cash Flow Tools: Short-term forecasts and real-time business snapshots.
- CIS Management: Automate CIS calculations and reporting (optionally add HMRC CIS filing).
- Add-on Payroll: Pay 1 to 10 employees with simple £1 per-person pricing.
- Project Tracking & Multi-Currency: Available on higher-tier plans.
- Highly Modular: Choose add-ons for expenses, projects, bill payments, and more.
Pros and Cons
| Pros | Cons |
|---|---|
| Simple, modern interface suitable for non-accountants | Bill and invoice volume limited on lower-tier plans |
| HMRC-recognised for MTD VAT and MTD ITSA | Many features (e.g., expenses, CIS filing, payroll) are paid add-ons |
| Highly scalable with extensive app integrations | Per-user and per-bill costs can add up |
Pricing
| Plan | Price (excl. VAT) | Key Features |
|---|---|---|
| Simple | £0.70 per month (for 6 months, then £7) | For sole traders and landlords. Quotes, MTD for ITSA, bank reconciliation, Hubdoc receipt capture, automated CIS calculations, short-term cash flow |
| Ignite | £1.60 per month (for 6 months, then £16) | All Simple features + enter bills, VAT filing to HMRC, optional bill payments and CIS returns (£5 per month), 1-person payroll (£1 per additional person) |
| Grow | £3.30 per month (for 6 months, then £33) | All Ignite features + pay up to 5 bills, expenses & mileage for 5 users (£2.50 per additional user), 5-person payroll, optional project tracking (£5 per user) |
| Comprehensive | £4.70 per month (for 6 months, then £47) | All Grow features + bill payments for 10, multi-currency support, project tracking (for 10 users), analytics plus cash flow forecasts |
| Ultimate | £5.90 per month (for 6 months, then £59) | All Comprehensive features + bill payments for 15, advanced analytics, up to 10-person payroll, enhanced budgeting and insights |
FreshBooks
FreshBooks is a cloud-based accounting platform tailored to the needs of freelancers, small business owners, and growing teams. With a focus on ease of use, client communication, and flexible billing options, it also supports MTD-compliant VAT returns and powerful financial reporting. FreshBooks is ideal for service-based businesses that value automation, invoicing versatility, and client relationship tools.
Key Features
- Unlimited Invoicing & Quotes: Send branded, customised invoices and quotes to clients with ease.
- Client Management Tools: Manage up to unlimited clients, store credit cards, and give clients portal access.
- Recurring Billing & Retainers: Automate recurring invoices and manage ongoing client relationships efficiently.
- Automatic Receipt & Bill Capture: Automatically extract and categorise expense and bill data from uploaded documents.
- Time and Expense Tracking: Track project time and expenses with mobile mileage logging and bank imports.
- Project Profitability: Available on higher tiers, this lets you track margins across client work.
- Double-Entry Accounting: Ensures compliance and accuracy with standard bookkeeping principles.
- VAT and MTD Compliance: Submit VAT returns directly to HMRC and manage tax-time reports with ease.
Pros and Cons
| Pros | Cons |
|---|---|
| Intuitive and user-friendly interface | Features like project profitability only available in higher tiers |
| Includes automated client emails and proposals | Add-ons like Advanced Payments and extra users add to cost |
| MTD-compliant VAT submissions built-in | Lite plan limited to 5 clients |
Pricing
| Plan | Price (excl. VAT) | Key Features |
|---|---|---|
| Lite | £7.50 per month (50% off for 3 months, then £15) | For up to 5 clients. Unlimited invoices & quotes, expense tracking, VAT returns, mileage tracking, mobile app, basic reporting, MTD-ready |
| Plus | £12.50 per month (50% off for 3 months, then £25) | For up to 50 clients. All Lite features + recurring invoices, proposals, accountant access, double-entry reports, automated receipt capture, e-signatures, bank reconciliation |
| Premium | £17.50 per month (50% off for 3 months, then £35) | Unlimited clients. All Plus features + bill capture, project profitability, email customisation, lower payment fee cap, accounts payable |
| Select | Custom pricing (Consultation required) | Unlimited + 2 team users. All Premium features + onboarding services, phone support, branding removal, data migration, 2 users included, subscription payments, secure card storage |
Intuit Quickbooks
QuickBooks by Intuit is one of the most widely used cloud-based accounting platforms in the UK. With powerful features across invoicing, VAT submission, project management, and real-time insights, QuickBooks is suitable for sole traders through to complex small and medium-sized businesses. It’s also HMRC-recognised for Making Tax Digital (MTD) and uses AI to simplify bookkeeping.
Key Features
- AI-Powered Income & Expense Tracking: Automatic categorisation for personal or business transactions.
- MTD Compliance: File VAT and Income Tax directly with HMRC.
- Advanced Reporting: Generate custom reports, profit & loss, and real-time dashboards.
- Invoicing & Payments: Send invoices with payment links, track CIS, and submit VAT and CIS returns.
- Project Profitability & Budgeting (Plus & Advanced): Track job costs, profitability, and set budgets.
- Multi-Currency & Multi-User Access: Supports up to 25 users and 145+ currencies on higher tiers.
- Excel Reporting Sync (Advanced): Connect QuickBooks reports to Excel for in-depth analysis.
- Workflow Automation: Automate reminders, invoices, and backups (Advanced plan only).
- Free onboarding and human support are included with all plans.
Pros and Cons
| Pros | Cons |
|---|---|
| Wide scalability from sole traders to complex multi-user setups | Full feature set requires the higher-cost Advanced plan |
| AI-powered categorisation for faster bookkeeping | Payroll, stock management, and time tracking are limited to higher tiers |
| VAT and CIS return submission directly to HMRC | Plans can become expensive once the 6-month discount ends |
Pricing
| Plan | Price (excl. VAT) | Key Features |
|---|---|---|
| Sole Trader | £1 per month (for 6 months, then £10) | 1 user. Invoicing, estimates, cash flow insights, MTD for Income Tax, AI income & expense tracking, CIS (subcontractors only), Self Assessment prep, receipt & mileage tracking |
| Simple Start | £8 per month (for 6 months, then £16) | 1 user. All Sole Trader features + MTD VAT submissions, CIS returns, VAT error checker, payable invoices, accountant access, 250 chart of accounts |
| Essentials | £16.50 per month (for 6 months, then £33) | Up to 3 users. All Simple Start features + multi-user access, manage bills, time tracking, multi-currency, supplier management |
| Plus | £23.50 per month (for 6 months, then £47) | Up to 5 users. All Essentials features + stock tracking, project profitability, budgets, classes/locations (up to 40), advanced user permissions |
| Advanced | £46 per month (for 6 months, then £115) | Up to 25 users. All Plus features + unlimited chart of accounts, batch invoicing, advanced Excel analytics, workflow automation, data backup/restore, unlimited classes/locations |
Tide
Tide combines business banking and accounting into a single, seamless platform. Designed for sole traders and small businesses, it’s ideal for those who want to handle invoicing, VAT returns, bookkeeping, and tax insights all within the Tide app. HMRC-recognised for Making Tax Digital (MTD) VAT and Self Assessment, Tide is a great option for users who value automation, mobility, and simplicity.
Key Features
- All-in-One App: Accounting software directly integrated with your Tide business bank account—no need for third-party connections.
- MTD for VAT & Income Tax: HMRC-recognised for VAT submissions and Self Assessment preparation (SA103S).
- Automated Bookkeeping: Auto-categorisation of transactions and bulk-editing tools reduce manual entry.
- Live Bookkeeping Score: Real-time task tracking helps you stay on top of accounting responsibilities.
- Financial Insights: Get profitability insights, interactive charts, and standard reports (P&L, balance sheet, trial balance).
- Custom Invoicing: Create and send invoices from your phone or desktop. Unlimited invoicing on most plans.
- Multi-Bank Sync: Connect up to three external business accounts for full financial visibility.
- Accountant Access: Invite your accountant for collaboration and compliance support.
- Tax Management Tools: See your VAT liabilities and tax deadlines, and set savings goals using the Tide Tax Account.
Pros and Cons
| Pros | Cons |
|---|---|
| Seamless banking and accounting in one app | Requires a Tide business bank account to use |
| HMRC-recognised for MTD VAT and Self Assessment | VAT filing and tax tools not available on lowest-tier plan |
| Real-time transaction categorisation and reconciliation | Limited invoicing on lower-tier plans |
Pricing
| Plan | Price (excl. VAT) | Key Features |
|---|---|---|
| Invoice assistant | £5.99 per month | Basic bookkeeping, invoice creation, real-time sync with Tide bank account |
| Accounting | £9.99 per month | Add live Bookkeeping Score, real-time reconciliation, categorisation tools |
| Admin Essentials | £12.99 per month | Income/expense tracking, tax estimates, 1 bank sync, accountant access |
| Accounting Extra | £19.99 per month | VAT submissions, up to 3 bank accounts, advanced insights, reports |
| Admin Extra | £22.99 per month | Auto invoice chasing/matching, profitability insights, full reporting suite |
Zoho Books
Zoho Books is a powerful cloud-based accounting platform designed for small to mid-sized businesses. Known for its extensive features, real-time insights, and deep customisation options, it’s MTD-compliant and trusted by thousands of UK businesses and accountants. With scalable plans and affordable pricing, it suits everyone from sole traders to fast-growing SMEs with complex needs.
Key Features
- MTD for VAT: File HMRC-compliant VAT returns directly from Zoho Books.
- Invoicing & Quotes: Create and send unlimited professional invoices and quotes.
- Bank Reconciliation: Connect feeds and categorise transactions with automation rules.
- Inventory Tracking: Real-time stock updates, reorder points, and warehouse management (from Professional plan).
- Project & Time Tracking: Log billable hours, manage budgets, and invoice for tracked time (from Professional plan).
- CIS Filing: Submit CIS returns directly to HMRC (from Professional plan).
- Multi-Currency Support: Send invoices, accept payments, and reconcile accounts in multiple currencies.
- Custom Reports & Dashboards: Build custom financial reports, track KPIs, and automate delivery.
- Automation & Workflows: Set triggers, custom actions, and reminders to reduce manual tasks.
- Vendor & Client Portals: Share quotes, invoices, and statements securely for faster approvals and payments.
Pros and Cons
| Pros | Cons |
|---|---|
| Very feature-rich across all plans, even entry-level | Interface can feel dense for new users |
| MTD-compliant and ICB-accredited | Some advanced tools only in higher-tier plans |
| Includes CIS returns, inventory, and project tracking | No native payroll — requires integration |
Pricing
| Plan | Price (billed annually) | Key Features |
|---|---|---|
| Free | £0 per month | For sole traders and micro-businesses. Includes VAT tracking, client portal, online payments, mileage, automation |
| Standard | £10 per month | All Free features + recurring invoices/expenses, bank feeds, custom reports, EC Sales List |
| Professional | £20 per month | All Standard features + sales/purchase orders, multi-currency, CIS filing, time billing, inventory |
| Premium | £25 per month | All Professional features + budgeting, asset management, vendor portals, custom domains |
| Elite | £85 per month | All Premium features + advanced warehouse management, reorder automation |
| Ultimate | £165 per month | All Elite features + business intelligence dashboards, deep insights and forecasting |
ClearBooks
ClearBooks is easy-to-use UK-based online accounting software designed specifically for small businesses. Fully HMRC-recognised for MTD VAT and MTD Income Tax, it offers a wide range of built-in features including CIS submissions, project accounting, and automated bank reconciliation — all with a clean interface, strong support, and scalable pricing.
Key Features
- MTD for VAT & Income Tax: Submit VAT returns and prepare for Income Tax digital filing, all HMRC-recognised.
- Invoicing & Quotes: Create and customise invoices, send automatic reminders, and set up recurring billing.
- Instant Bank Payments: Get paid faster via secure payment links integrated into your invoices.
- Auto Bills & OCR: Upload bills and receipts for fast, automated data entry using Clear Books Auto Bills.
- Bank Feeds & Auto Coding: Connect to your bank and categorise transactions instantly using AI-powered Auto Code.
- Project Tracking: Monitor profitability and performance across multiple projects (Large plan).
- Budget vs Performance Reporting: Compare actual results with budgets, forecasts, or project goals.
- CIS Management: Fully compliant Construction Industry Scheme tools – verify subcontractors, apply deductions, and submit returns to HMRC.
- Fixed Assets: Automate depreciation and asset tracking with built-in tools.
- Multi-Currency: Invoice, pay, and track expenses in 170+ currencies (Large plan).
- Dividends & Journals: Generate dividend vouchers and automate complex journal entries with accountant-friendly tools.
- Payroll & Expenses: Optional add-on for unlimited employees, plus built-in employee expense tracking and approvals.
Pros and Cons
| Pros | Cons |
|---|---|
| MTD-compliant for both VAT and Income Tax | Payroll is a separate add-on |
| Includes CIS filing, project tracking, and Auto Bills | Limited app integrations compared to competitors |
| UK-focused support with free phone & email help | Some reports and tools only available on higher plans |
Pricing
| Plan | Price (excl. VAT) | Key Features |
|---|---|---|
| Free MTD ITSA | £0 per month | For sole traders and landlords with basic needs. MTD Income Tax, invoice creation, bank feeds, basic reports, expense tracking. |
| Small | £6.75 per month (for 3 months, then £13.50) | All Free features + quotes, recurring billing, stock, payment reminders, integrations, Power Editor, user roles |
| Medium | £13.95 per month (for 3 months, then £27.90) | All Small features + MTD VAT filing, CIS submissions, unlimited budgets, PO approvals |
| Large | £18.45 per month (for 3 months, then £36.90) | All Medium features + project tracking, multi-currency, employee expenses, fixed assets |
What is the best small business bookkeeping software?
You’ll never be short of accounting software providers to choose from.
While it can be tempting to go with the cheapest or free one, make sure you do your research first, so you can find something which not only helps you keep accurate records but also helps you save time and make better business decisions.
Begin by asking fellow small business owners which bookkeeping software they use, what they like about it, and whether they’d recommend it to others. Then you can see if the features, pricing structure and allowances on things like invoices match up to your business requirements.
Further reading
What are the best business bank accounts in the UK? – Make the right decision about your small business bank account, whether you’re just starting out or you’re more established
