How to choose accounting software for a UK small business.

Start with what the law asks of you

Before comparing features, work out which Making Tax Digital rules apply to your business. That narrows the list straight away.

• VAT-registered businesses. Making Tax Digital for VAT applies to VAT-registered businesses, unless HMRC agrees you are exempt. You must keep certain VAT records digitally and send returns through software that connects to HMRC.
• Sole traders and landlords. Making Tax Digital for Income Tax applies if your qualifying income is over a threshold. It was £50,000 for 2024/25, so those people should have started from 6 April 2026. It is £30,000 for 2025/26, with a start date of 6 April 2027. It is £20,000 for 2026/27, with a start date of 6 April 2028.
• Limited companies that are not VAT registered. Neither scheme applies to them. You still have to keep proper accounting records, so software is still worth having.

If you are a sole trader who is also VAT registered, check both. GOV.UK says you should check whether your VAT software is compatible, or whether the product you choose for Income Tax can also meet your VAT needs.

Check compatibility on the GOV.UK software finder

HMRC publishes two tools to help:

• For VAT, the finder searches record keeping software and bridging software that work with Making Tax Digital for VAT.
• For Income Tax, you answer a few questions and get a personalised list of compatible products. You can also check whether software you already use works.

Two points from the GOV.UK guidance are worth knowing:

• HMRC does not recommend any product or software provider. The list tells you what is compatible, not what is good for your business.
• For Income Tax, GOV.UK says you should choose your software before you sign up. Once you have chosen, signing up is the next step.

GOV.UK also notes that free products are available for people with simple tax affairs, but there may be limits on how they can be used, such as a cap on the number of transactions.

Full software or bridging software

Most small businesses choose full accounting software, where records are kept and returns are sent from the same product. The other route is bridging software. It connects records you already keep, such as a spreadsheet, to HMRC's systems.

Bridging can work if you are happy in a spreadsheet. But the digital link rules are strict. For VAT, HMRC does not accept copy and paste as a way of moving data between programs. Linked cells, CSV import and export, and API transfers are accepted. Every submission to HMRC must go through an API.

Bank feeds

A bank feed brings your transactions into the software automatically. It saves a lot of typing, and it is the base for bank reconciliation.

Questions to ask:

• Does it connect to every account you use, including business credit cards, savings accounts and payment platforms?
• Does it suggest matches, or remember how you coded a payee last time?
• Can you add receipts and invoices on the same screen where you reconcile?

Check your own bank by name on the vendor's site before you commit. A feed that drops out every few weeks costs more time than it saves.

Receipts and bills

Every purchase needs paperwork behind it. To reclaim VAT you need a valid VAT invoice, so missing receipts can cost real money. Look at how each product gets documents in:

• Can you photograph a receipt on your phone?
• Can suppliers email bills straight into the software?
• Does it read the supplier, date and amount for you, or do you type them?
• Does it link with a separate capture tool, such as Dext, if you prefer one?

If receipts are already a problem, read our guide on how to organise receipts before you choose. The software only helps if the habit is there.

Users and access

Count everyone who needs to log in. That may be you, a co-director, an office manager, staff who claim expenses, your bookkeeper and your accountant. Products and plans differ here, and some set a fixed number of users per plan.

Also check what each person can see. Staff who submit expenses do not need to see payroll. Your accountant needs full access at year end. Good permission settings keep this tidy.

Other features to weigh up

• Invoicing. Can customers pay online from the invoice? Can you send reminders automatically?
• Payroll. Is it built in, an add-on, or a separate product? Is there a limit on headcount?
• Stock. If you sell goods, check whether stock tracking is included and on which plan.
• Foreign currency. Needed if you buy or sell abroad. It is often only on higher plans.
• Construction. If you work under CIS, check the software handles CIS deductions. See how CIS tax works.
• Apps. If you sell online or use a till system, check it connects to the software you choose.

How some common products describe themselves

These notes come from each vendor's own UK website in October 2026. Features and plans change, so check the current details before you buy. We do not list prices here for the same reason.

Xero

Xero says every plan includes reconciling transactions, smart document capture and submitting VAT returns to HMRC. It describes every plan as ready for Making Tax Digital for Income Tax. When you reconcile, it says it can suggest matches and learn from how you coded similar transactions before. Each plan covers payroll for a set number of people, with extra people charged on top. Multiple currencies are only on the Comprehensive and Ultimate plans, and it says it integrates with over 1,000 apps. It tends to suit limited companies and growing businesses that want to connect other tools.

QuickBooks

QuickBooks says it connects to most UK banks and building societies, with transactions imported each day. Its plans include a fixed number of users, from 1 on Sole Trader Plus and Simple Start up to 25 on Advanced, plus access for your accountant. It says direct VAT submission is not available on its Sole Trader Plus plan. Payroll is an add-on, not part of the plans, and inventory features start on the Plus plan. It suits businesses that want a clear upgrade path as headcount grows.

FreeAgent

FreeAgent offers plans for sole traders, limited companies, partnerships and LLPs, and landlords. It says it can submit VAT and Self Assessment returns to HMRC, and it offers Smart Capture for bills and receipts. It also says it is free for customers with a NatWest, Royal Bank of Scotland or Ulster Bank business current account, and for Mettle customers who make at least one transaction a month. Some add-ons may still be charged. It tends to suit freelancers, contractors and smaller owner-run businesses.

Sage and others

Sage, Zoho Books, QuickFile, Pandle and others are worth a look too. Search for each on the GOV.UK finder, then compare them on the same checklist. Some businesses also use desktop software such as VT Transaction+.

A simple way to decide

1. Write down which Making Tax Digital rules apply to you, now and in the next two years.
2. Use the GOV.UK finder to get a list of compatible products.
3. Cut the list to products that connect to all your bank accounts.
4. Check receipt capture, users and the extra features you need.
5. Take a free trial if one is offered. Connect a bank account and process a week of real transactions.
6. Ask your accountant which products they can log in to.

The trial matters most. A product can look right on paper and still feel slow for the way you work.

Already have software?

Switching software is a big job. You move opening balances, customer and supplier lists, and often history. If your current product is compatible and does what you need, staying put is usually sensible. Problems with messy books are more often about how the software is used than which one it is.

That is why Wenzo works in the software you already use. Xero, QuickBooks, Sage, FreeAgent and the others above are all fine for us, so the choice is yours.