# Bookkeeping software for small business

Accounting is a complex but essential part of running a business. Without proper financial oversight, businesses risk serious issues, including compliance problems with **HMRC** and other regulatory bodies. Errors in recording transactions can lead to financial instability and potential penalties.

Bookkeeping software simplifies accounting, reduces mistakes and helps you keep to UK tax rules and accounting standards. For many businesses, software that works with **Making Tax Digital (MTD)** is now a requirement rather than a convenience. The right tools help you manage invoicing, expenses and tax filing efficiently.

## An overview of bookkeeping software

Which accounting software is right for you? Our overview table compares all featured programs and their key features side by side. All information is up to date as of October 2026.

<table>
  <thead>
    <tr>
      <th><strong>Software</strong></th>
      <th><strong>Price</strong></th>
      <th><strong>CRM</strong></th>
      <th><strong>Inventory Management</strong></th>
      <th><strong>Payroll Management</strong></th>
      <th><strong>Cloud-Based</strong></th>
      <th><strong>Mobile Application</strong></th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td><strong>FreshBooks</strong></td>
      <td>££</td>
      <td>–</td>
      <td>–</td>
      <td>–</td>
      <td></td>
      <td></td>
    </tr>
    <tr>
      <td><strong>QuickBooks Online</strong></td>
      <td>£</td>
      <td>–</td>
      <td>()</td>
      <td>()</td>
      <td></td>
      <td>–</td>
    </tr>
    <tr>
      <td><strong>Xero</strong></td>
      <td>££</td>
      <td>–</td>
      <td>–</td>
      <td>–</td>
      <td></td>
      <td>–</td>
    </tr>
    <tr>
      <td><strong>Sage Accounting</strong></td>
      <td>££</td>
      <td>–</td>
      <td>()</td>
      <td></td>
      <td></td>
      <td>–</td>
    </tr>
    <tr>
      <td><strong>Zoho Books</strong></td>
      <td>£ (free plan available)</td>
      <td>–</td>
      <td>()</td>
      <td>–</td>
      <td></td>
      <td>–</td>
    </tr>
    <tr>
      <td><strong>FreeAgent</strong></td>
      <td>££</td>
      <td>–</td>
      <td>–</td>
      <td></td>
      <td></td>
      <td></td>
    </tr>
    <tr>
      <td><strong>QuickFile</strong></td>
      <td>£ (free plan available)</td>
      <td>–</td>
      <td>–</td>
      <td>–</td>
      <td></td>
      <td>–</td>
    </tr>
    <tr>
      <td><strong>Odoo</strong></td>
      <td>free plan (one app); paid plans per user</td>
      <td>–</td>
      <td></td>
      <td>–</td>
      <td></td>
      <td>–</td>
    </tr>
  </tbody>
</table>

= available, () = only in certain plans or as an add-on, – = not confirmed on the provider’s website at the time of writing. The price column refers to the cheapest paid plan per month (list price excluding VAT, no promotions): £ = up to £15, ££ = £15 to £35, £££ = over £35. Odoo’s paid plans are priced in euros only, so no tier is given. Some providers also offer a free plan or a free trial. The price tiers are only a rough guide: they are based on list prices at the time of writing and may differ depending on billing period, number of users or VAT, so please check the provider’s current offer.

## What to know about VAT and Making Tax Digital

Key UK rules for businesses and software

- **VAT registration:** You must register for VAT if your taxable turnover over the last 12 months exceeds £90,000 (source: [GOV.UK](https://www.gov.uk/register-for-vat)). Below that, registration is voluntary.
- **Making Tax Digital for VAT:** According to [GOV.UK](https://www.gov.uk/government/collections/making-tax-digital-for-vat), all VAT-registered businesses should be signed up for MTD for VAT and should keep VAT records and submit VAT returns using compatible software. Some businesses can apply for an exemption.
- **Making Tax Digital for Income Tax:** Sole traders and landlords with qualifying income above £50,000 had to start using MTD for Income Tax from 6 April 2026. The threshold falls to £30,000 from 6 April 2027 and to £20,000 from 6 April 2028. You must keep digital records and send quarterly updates to HMRC using compatible software (see [GOV.UK](https://www.gov.uk/guidance/find-out-if-and-when-you-need-to-use-making-tax-digital-for-income-tax)). HMRC lists compatible products in its [software finder](https://www.gov.uk/guidance/find-software-that-works-with-making-tax-digital-for-income-tax).
- **Record keeping for limited companies:** Company and accounting records generally have to be kept for 6 years from the end of the last company financial year they relate to; longer periods apply in some cases (see [GOV.UK](https://www.gov.uk/running-a-limited-company/company-and-accounting-records)).
- **E-invoicing (planned):** According to the government’s consultation response, the UK will introduce mandatory e-invoicing for all VAT invoices from 2029. Check the current position in the [government’s consultation response](https://www.gov.uk/government/consultations/promoting-electronic-invoicing-across-uk-businesses-and-the-public-sector/outcome/promoting-electronic-invoicing-across-uk-businesses-and-the-public-sector-consultation-response).
- **Filing company accounts (planned):** Companies House has announced that from April 2028 all UK registered companies will have to file their accounts in iXBRL format using commercial software, and its web and paper-based filing for accounts will close (see [GOV.UK](https://www.gov.uk/government/news/companies-house-to-bring-in-changes-to-accounts-filing-from-april-2028)).

If a provider describes its software as “MTD-ready” or “compliant”, that is the provider’s own statement. Check the HMRC software finders ([VAT](https://www.gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-vat), [Income Tax](https://www.gov.uk/guidance/find-software-that-works-with-making-tax-digital-for-income-tax)) and, if in doubt, ask your accountant.

## What to consider when choosing bookkeeping software

There are different types of accounting software. Some are available as downloads and installed locally, while others run as online accounting solutions in the **cloud**. Cloud-based software allows access from anywhere with just a browser and an internet connection.

To effectively support your business, accounting software should include these essential features:

- **Expense and receipt management**: The software should allow you to easily upload, scan and categorise receipts for accurate expense tracking.
- **Bank integration**: To manage finances efficiently, the software should connect with your business bank account and support automatic bank feeds.
- **Invoicing and payments**: A good accounting tool lets you create professional invoices, send payment reminders and integrate with payment processors.
- **VAT and MTD compliance**: Since [VAT (Value Added Tax)](https://www.ionos.co.uk/digitalguide/startup/grow-your-business/value-added-tax-vat/) applies to VAT-registered businesses, the software should support MTD-compatible VAT returns and, if you are a sole trader or landlord, MTD for Income Tax.
- **Inventory management**: If you sell physical products, look for software with inventory tracking features. Some plans include this, while others require third-party add-ons.
- **Payroll integration**: If you have employees, choose software that supports payroll processing, including PAYE and National Insurance, or connects to a payroll tool.
- **Order and expense tracking**: Many businesses use separate tools for order and expense tracking, but some accounting solutions include built-in features to streamline financial reporting.

If your accounting software includes these functions, it will help you efficiently manage your business finances and stay on top of your UK tax obligations.

## Here are eight bookkeeping software options for UK businesses

With so many different offers available, it can be quite daunting trying to choose the right bookkeeping software for your company. We have narrowed it down to eight options to make your decision a little easier. Prices and plan contents change regularly, so always check the provider’s website.

### FreshBooks

[FreshBooks](https://www.freshbooks.com/en-gb/ "FreshBooks website") is an accounting software designed for freelancers, self-employed professionals, agencies and small businesses. It offers invoicing, expense tracking, time tracking, project management, payments, estimates and reporting. The plans are **Lite**, **Plus** and **Premium**, plus a custom **Select** plan. Users can try the software free for 30 days. According to the provider, MTD-compliant VAT returns can be filed with HMRC on all plans, and the software has a mobile app for iOS and Android. The plans limit the number of billable clients (Lite up to 5, Plus up to 50). FreshBooks often runs introductory discounts, but the price scale in this article uses the list price.

[![Image: FreshBooks website](https://www.ionos.co.uk/digitalguide/fileadmin/_processed_/1/4/csm_freshbooks-dashboard_5287cf1453.webp "FreshBooks website")](https://www.ionos.co.uk/digitalguide/fileadmin/StartupGuide/Screenshots/freshbooks-dashboard.png) FreshBooks often has deals where you can save money on the software.

<table>
  <thead>
    <tr>
      <th><strong>Advantages</strong></th>
      <th><strong>Disadvantages</strong></th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td>30-day free trial available</td>
      <td>Client limits on the lower plans</td>
    </tr>
    <tr>
      <td>MTD-compliant VAT returns (according to the provider)</td>
      <td></td>
    </tr>
    <tr>
      <td>Mobile app for iOS and Android</td>
      <td></td>
    </tr>
  </tbody>
</table>

### QuickBooks

[QuickBooks Online](https://quickbooks.intuit.com/accounting/ "QuickBooks website") is cloud-based accounting software from Intuit. In the UK it is offered in five plans: **Sole Trader Plus**, **Simple Start**, **Essentials**, **Plus** and **Advanced**, with a 30-day free trial and no contract. According to the provider’s pricing page, inventory tracking is included from the Plus plan, and payroll is available as a paid add-on. According to the provider’s pricing page, **Sole Trader Plus** (one user) is the entry-level plan and is described as ready for MTD for Income Tax, while VAT submission to HMRC is listed from **Simple Start** upwards. The price scale in this article uses the cheapest paid plan, Sole Trader Plus, at its list price; the provider often runs introductory discounts, which are ignored here.

[![Image: QuickBooks website](https://www.ionos.co.uk/digitalguide/fileadmin/_processed_/9/c/csm_quickbooks-uk-dashboard_ce56bbb16a.webp "QuickBooks website")](https://www.ionos.co.uk/digitalguide/fileadmin/StartupGuide/Screenshots/quickbooks-uk-dashboard.png) QuickBooks offers a 30-day free trial.

<table>
  <thead>
    <tr>
      <th><strong>Advantages</strong></th>
      <th><strong>Disadvantages</strong></th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td>Free 30-day trial</td>
      <td>Inventory tracking only in higher plans</td>
    </tr>
    <tr>
      <td>Inventory tracking in higher plans</td>
      <td>Payroll costs extra</td>
    </tr>
    <tr>
      <td>Payroll available as an add-on</td>
      <td></td>
    </tr>
  </tbody>
</table>

### Xero

[Xero](https://www.xero.com/uk/ "Xero website") offers cloud-based accounting software designed for freelancers and small to medium-sized businesses.

Xero has four plans: **Ignite**, **Grow**, **Comprehensive** and **Ultimate**, billed monthly. Ignite is limited to 20 invoices and 10 bills a month, while the higher plans have no such limits. Xero often runs introductory discounts, but the price scale in this article uses the list price.

[![Image: Xero website](https://www.ionos.co.uk/digitalguide/fileadmin/_processed_/0/3/csm_xero-uk-dashboard_f63ec3ced8.webp "Xero website")](https://www.ionos.co.uk/digitalguide/fileadmin/StartupGuide/Screenshots/xero-uk-dashboard.png) Xero offers cloud-based accounting software for small businesses.

<table>
  <thead>
    <tr>
      <th><strong>Advantages</strong></th>
      <th><strong>Disadvantages</strong></th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td>Several plans to suit various business needs</td>
      <td>The base-level (Ignite) plan limits invoices and bills</td>
    </tr>
    <tr>
      <td>Unlimited invoices on the higher plans</td>
      <td></td>
    </tr>
  </tbody>
</table>

### Sage Accounting

[Sage Accounting](https://www.sage.com/en-gb/sage-business-cloud/sage-accounting/) is cloud-based accounting software for small businesses. It is offered in three plans: **Start** (one user), **Standard** (three users) and **Plus** (unlimited users). According to Sage, all plans are Making Tax Digital ready and include payroll, with a per-employee charge beyond the employees included, and stock and inventory management is included in Plus. According to Sage, you can try Sage Accounting free for one month.

[![Image: Sage website](https://www.ionos.co.uk/digitalguide/fileadmin/_processed_/b/3/csm_sage-uk-dashboard_c61c00e1a7.webp "Sage website")](https://www.ionos.co.uk/digitalguide/fileadmin/StartupGuide/Screenshots/sage-uk-dashboard.png) Sage Accounting is cloud-based accounting software for small businesses.

<table>
  <thead>
    <tr>
      <th><strong>Advantages</strong></th>
      <th><strong>Disadvantages</strong></th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td>Plans from one user to unlimited users</td>
      <td>Per-employee charge for payroll beyond the employees included</td>
    </tr>
    <tr>
      <td>MTD ready and payroll included in all plans (according to Sage)</td>
      <td>Stock and inventory management only in the Plus plan</td>
    </tr>
    <tr>
      <td>Free trial for one month (according to Sage)</td>
      <td></td>
    </tr>
  </tbody>
</table>

### Zoho Books

[Zoho Books](https://www.zoho.com/uk/books/ "Zoho Books website") offers cloud-based accounting software designed for small to medium-sized businesses. There is a **free plan** (limited to 1,000 invoices a year), which according to the provider is ready for MTD for Income Tax. Paid plans are **Standard**, **Professional**, **Premium**, **Elite** and **Ultimate**; annual billing is cheaper than monthly billing. Inventory management is included from Professional.

[![Image: Zoho Books website](https://www.ionos.co.uk/digitalguide/fileadmin/_processed_/2/a/csm_zoho-books-uk-dashboard_396a94ffeb.webp "Zoho Books website")](https://www.ionos.co.uk/digitalguide/fileadmin/StartupGuide/Screenshots/zoho-books-uk-dashboard.png) Zoho Books offers cloud-based accounting software for small to medium-sized businesses.

<table>
  <thead>
    <tr>
      <th><strong>Advantages</strong></th>
      <th><strong>Disadvantages</strong></th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td>Free plan available</td>
      <td>Free plan limited to 1,000 invoices a year</td>
    </tr>
    <tr>
      <td>MTD for Income Tax support on the free plan (according to the provider)</td>
      <td>Inventory only from Professional</td>
    </tr>
  </tbody>
</table>

### FreeAgent

[FreeAgent](https://www.freeagent.com/ "FreeAgent website"), a UK-based cloud accounting software, is designed for **freelancers, small businesses and contractors**. It offers automated invoicing, expense tracking, bank reconciliation and tax tools. According to the provider, it is an HMRC-recognised product for MTD-compatible VAT returns, and sole traders and landlords can see their Self Assessment position in real time. Payroll (PAYE and National Insurance filing with HMRC) and a mobile app are available.

According to the provider, users can explore the software with a 30-day free trial. Pricing depends on your business type: there are separate plans for **sole traders**, **partnerships/LLPs**, **limited companies** and **unincorporated landlords**. The price scale in this article uses the sole trader plan. FreeAgent is free if you hold a business account with **NatWest, Royal Bank of Scotland, Ulster Bank or Mettle**; eligibility conditions apply, so check the provider’s page.

[![Image: FreeAgent website](https://www.ionos.co.uk/digitalguide/fileadmin/_processed_/3/b/csm_freeagent-dashboard_f43fec47cc.webp "FreeAgent website")](https://www.ionos.co.uk/digitalguide/fileadmin/StartupGuide/Screenshots/freeagent-dashboard.png) FreeAgent is cloud accounting software for freelancers, small businesses and contractors.

<table>
  <thead>
    <tr>
      <th><strong>Advantages</strong></th>
      <th><strong>Disadvantages</strong></th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td>HMRC-recognised for MTD-compatible VAT returns</td>
      <td>Pricing depends on business type</td>
    </tr>
    <tr>
      <td>Self Assessment overview for sole traders and landlords</td>
      <td></td>
    </tr>
    <tr>
      <td>Payroll available</td>
      <td></td>
    </tr>
    <tr>
      <td>Free for customers of selected banks (conditions apply)</td>
      <td></td>
    </tr>
  </tbody>
</table>

### QuickFile

[QuickFile](https://www.quickfile.co.uk/ "QuickFile website") is a UK cloud accounting service. According to the provider, there is a free plan for smaller accounts (limited by the number of ledger entries; check the current limit on the provider’s pricing page), and larger accounts need a paid plan. Automated bank feeds are an optional paid add-on. The provider also mentions multi-currency support, VAT compliance, API access and integrations, and states that it supports MTD for Income Tax.

<table>
  <thead>
    <tr>
      <th><strong>Advantages</strong></th>
      <th><strong>Disadvantages</strong></th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td>Free plan for smaller accounts</td>
      <td>Payroll, inventory and CRM not confirmed on the provider’s website</td>
    </tr>
    <tr>
      <td>Bank feeds and API access</td>
      <td>Paid plan needed for larger accounts</td>
    </tr>
    <tr>
      <td>MTD support according to the provider</td>
      <td></td>
    </tr>
  </tbody>
</table>

### Odoo

[Odoo](https://www.odoo.com/app/accounting "Odoo website") is a modular business software suite for freelancers, small enterprises and large corporations, with an accounting app. It offers a free **One App** plan (unlimited users) and paid **Standard** and **Custom** plans billed per user. The provider’s pricing page shows prices in euros only, with no separate UK price in pounds, so no price tier is given here; check the provider’s website for UK pricing and to confirm that its UK accounting set-up meets your MTD needs. Costs can rise as you add apps and users.

[![Image: Odoo website](https://www.ionos.co.uk/digitalguide/fileadmin/_processed_/e/b/csm_odoo-dashboard_5f4cb32adf.webp "Odoo website")](https://www.ionos.co.uk/digitalguide/fileadmin/StartupGuide/Screenshots/odoo-dashboard.png) Odoo offers a free plan with one app, for example accounting.

<table>
  <thead>
    <tr>
      <th><strong>Advantages</strong></th>
      <th><strong>Disadvantages</strong></th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td>Free One App plan with unlimited users</td>
      <td>Costs can increase with additional apps and users</td>
    </tr>
    <tr>
      <td>Modular: further apps such as inventory can be added</td>
      <td>UK pricing and MTD set-up to be checked with the provider</td>
    </tr>
  </tbody>
</table>

Tip Our article [comparing accounting apps](https://www.ionos.co.uk/digitalguide/startup/productivity/accounting-apps/) might also be of interest to you.

## FAQ

The following answers summarise the key points of this comparison (as of October 2026).

### Do I need accounting software that supports Making Tax Digital?

If you are VAT-registered, MTD for VAT requires compatible software. Sole traders and landlords with qualifying income above £50,000 had to start MTD for Income Tax from 6 April 2026; the thresholds fall to £30,000 from 6 April 2027 and £20,000 from 6 April 2028. Check the HMRC software finder for compatible products.

### When do I have to register for VAT?

You must register if your taxable turnover over the last 12 months exceeds £90,000. Voluntary registration is possible below that level.

### How much does accounting software cost?

Prices range from free plans with limited features to several tens of pounds per month, excluding VAT. The tiers in our overview table show where the cheapest paid plan of each provider falls. Prices and plan contents change regularly, so check them on the provider’s website.

### How long do limited companies have to keep accounting records?

Generally 6 years from the end of the last company financial year they relate to, with longer periods in some cases. See GOV.UK for details.

### Will I need to send e-invoices in future?

According to the government’s consultation response, the UK will introduce mandatory e-invoicing for all VAT invoices from 2029. Check GOV.UK for updates.

Please note the [legal disclaimer](https://www.ionos.co.uk/digitalguide/startup/disclaimer/) for this article.


This is a markdown version of: [https://www.ionos.co.uk/digitalguide/startup/grow-your-business/accounting-software/](https://www.ionos.co.uk/digitalguide/startup/grow-your-business/accounting-software/) for AI/LLM consumption.