Best Accounting Software UK: Small Business Guide

Choosing accounting software can feel overwhelming. This guide helps UK small businesses find the right tool for bookkeeping, invoicing, and tax preparation.

What to Look For

Essential Features

FeatureWhy It Matters
Bank feedsAutomatic transaction import
InvoicingSend professional invoices
VAT trackingMTD compliance
ReportingProfit & loss, balance sheet
Export optionsTrial balance for CT600

Nice to Have

  • Receipt scanning
  • Multi-currency
  • Project tracking
  • Payroll integration
  • Inventory management

Free/Low-Cost Options

SoftwareCostBest For
WaveFreeFreelancers
Zoho BooksFree (basic)Startups
PandleFreeSimple businesses
Coconut£9/monthSelf-employed

Mid-Range Options

SoftwareCostBest For
FreeAgent£19-34/monthSmall companies
Xero£15-47/monthGrowing businesses
QuickBooks£12-32/monthEstablished SMEs
Sage Accounting£14-33/monthTraditional businesses

Enterprise Options

SoftwareCostBest For
Sage 50£££/yearMedium businesses
NetSuite££££/yearLarge companies
SAP Business One££££/yearEnterprise

Top Picks by Business Type

Freelancers & Sole Traders

Recommended: Wave (free) or FreeAgent

Why:

  • Simple invoicing
  • Expense tracking
  • Self Assessment integration
  • No complex features you don't need

Limited Companies (Micro-Entity)

Recommended: Xero or QuickBooks + TinyTax

Why:

  • Full double-entry bookkeeping
  • Trial balance export
  • Free CT600 filing with TinyTax
  • MTD-ready for VAT

Growing Businesses

Recommended: Xero or QuickBooks

Why:

  • Scalable features
  • Multi-user access
  • Extensive integrations
  • Strong reporting

Key Features Explained

Bank Feeds

Connect your bank account for automatic transaction import:

Pros:

  • Saves hours of data entry
  • Real-time cash position
  • Fewer errors
Cons:
  • Monthly cost (some providers)
  • Bank compatibility varies
  • Security considerations

MTD Compatibility

Since April 2022, VAT-registered businesses must use MTD-compatible software.

MTD-compatible options:

  • Xero ✓
  • QuickBooks ✓
  • FreeAgent ✓
  • Sage ✓

Trial Balance Export

For CT600 filing, you need trial balance export capability:

SoftwareExport Format
XeroCSV, PDF
QuickBooksExcel, CSV
FreeAgentCSV
SageExcel, CSV
TinyTax accepts: CSV trial balance from all major software.

Cost Comparison

Annual Costs (Basic Plans)

SoftwareMonthlyAnnual
Wave£0£0
Pandle£0£0
QuickBooks Simple Start£12£144
Xero Starter£15£180
FreeAgent£19£228
Sage Accounting Start£14£168
Note: Prices change frequently. Check provider websites for current pricing.

Software Deep Dive

Xero

Strengths:

  • Excellent bank feeds
  • Huge app marketplace
  • Strong multi-currency
  • Clean interface
Weaknesses:
  • No free tier
  • Can be complex for beginners
  • Pricing has increased
Best for: Growing businesses needing integrations.

QuickBooks

Strengths:

  • Well-known brand
  • Good mobile app
  • Solid payroll integration
  • Regular promotions
Weaknesses:
  • Interface can be cluttered
  • Support quality varies
  • Feature limitations at lower tiers
Best for: Established businesses wanting familiar software.

FreeAgent

Strengths:

  • UK-focused
  • Excellent Self Assessment
  • Simple interface
  • Free with some banks
Weaknesses:
  • Limited customisation
  • Basic inventory
  • Less suitable for larger businesses
Best for: Freelancers and micro-businesses.

Sage Accounting

Strengths:

  • Trusted UK brand
  • Good support
  • Comprehensive features
  • Strong compliance
Weaknesses:
  • Interface feels dated
  • Can be complex
  • Higher cost for full features
Best for: Traditional businesses wanting established software.

Integration with TinyTax

The Combined Approach

Use accounting software for bookkeeping, TinyTax for filing:

  1. Year-round: Track income/expenses in accounting software
  2. Year-end: Export trial balance as CSV
  3. Filing: Import to TinyTax
  4. Submit: File CT600 + accounts (free for micro-entities)

Why This Works

Accounting SoftwareTinyTax
BookkeepingCT600 generation
InvoicingiXBRL accounts
Bank reconciliationHMRC submission
VAT returnsCompanies House filing
Result: Best of both worlds at lower cost.

Frequently Asked Questions

Do I need accounting software?

For limited companies: highly recommended. While spreadsheets can work, software provides:

  • Better accuracy
  • Audit trail
  • Easier compliance
  • Time savings

Can I switch software mid-year?

Yes, but it's easiest to switch at year-end. You'll need to:

  • Export all data from old software
  • Import into new software
  • Verify opening balances

What about free software?

Free options like Wave work well for simple businesses. Limitations:

  • Fewer features
  • Limited support
  • May show ads
  • Data concerns

Do accountants prefer specific software?

Many accountants prefer:

  • Xero (most popular with modern practices)
  • QuickBooks (well-known)
  • Sage (traditional practices)
Ask your accountant before choosing.

Making Your Choice

Decision Matrix

If You Need...Consider
Free optionWave, Pandle
SimplicityFreeAgent
IntegrationsXero
Familiar brandQuickBooks, Sage
UK focusFreeAgent, Sage

Our Recommendation

For most micro-entity limited companies:

  1. Xero Starter or QuickBooks Simple Start for bookkeeping
  2. TinyTax (free) for CT600 and Companies House filing
This gives you:
  • Professional bookkeeping
  • MTD compliance
  • Free tax filing
  • Total cost: ~£150-180/year

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