Xero vs Sage Accounting for UK small businesses.

A quick note before you compare

We have left subscription prices out on purpose. Both vendors change their prices and run introductory offers often, so any figure here would soon be wrong. Check each vendor's own pricing page on the day you decide.

Feature lists also change. Everything below is taken from what Xero and Sage say on their own UK websites, as reviewed on the date above. Where a feature depends on the plan, we say so.

One more point. Sage sells more than one product. This guide covers Sage Accounting, its cloud product for small businesses. Sage 50 is a separate product, and Sage also offers a separate Sage Sole Trader app for Making Tax Digital for Income Tax.

What both products do

For most small businesses, the core jobs are the same in either product:

• Bank feeds. Both connect to your bank so transactions come into the software, ready to reconcile.
• Sales invoices and quotes. Both let you send invoices and quotes, and both offer automatic reminders for late payers.
• VAT under Making Tax Digital. Both say they can calculate and submit VAT returns to HMRC.
• Receipt capture. Both offer a way to snap or upload receipts and bills, although the allowance depends on the plan.
• Your accountant or bookkeeper. Both are built so your accountant or bookkeeper can work in the same file as you.

So for a simple business, either will do the basics. The useful question is what happens once your needs grow.

How the plans are split

This is the biggest practical difference. The two vendors draw their plan lines in different places.

Xero

Xero's UK plans are Ignite, Grow, Comprehensive and Ultimate. Ignite has limits on the number of invoices and bills you can enter. Grow and above remove those limits and add automated bill entry. Comprehensive adds multi-currency. Ultimate adds project time and cost tracking. Xero also says there are no per-user licence fees.

Sage Accounting

Sage Accounting's plans are Start, Standard and Plus. Sage describes Start as for VAT-registered sole traders or small businesses just getting started, with 1 user. Standard is for small businesses working with suppliers, CIS or accrual accounting, with 3 users. Plus is for businesses managing inventory or working in multiple currencies, with unlimited users. Receipt capture is not included on Start.

Feature by feature

• Users. Xero: no per-user licence fees. Sage: 1, 3 or unlimited users depending on plan.
• Bills. Xero: limited on Ignite, automated entry from Grow. Sage: supplier management listed on its plans.
• VAT. Both: submit VAT returns to HMRC. Sage also lists assisted VAT submissions.
• CIS. Xero: automated CIS calculations and reports, with contractor CIS returns as an add-on. Sage: manage and submit CIS, with Standard described as the plan for businesses working with CIS.
• Payroll. Xero: an add-on on Ignite, with a set number of people included on higher plans. Sage: payroll now included in all Accounting plans, with a number of employees included.
• Multi-currency. Xero: Comprehensive and Ultimate. Sage: Plus.
• Stock. Xero: offers inventory tracking. Sage: stock and inventory management on Plus.
• Projects. Xero: project time and cost tracking on Ultimate.
• Cash flow forecast. Xero: a forecast on every plan, with a longer window on higher plans. Sage: lists cash flow forecasting.
• Apps. Xero: says it integrates with over 1,000 apps, including Shopify and Stripe. Sage: runs its own marketplace of connected apps.

Construction and CIS

If you are a contractor in the Construction Industry Scheme, CIS is a monthly job. Contractors must send their monthly returns to HMRC by the 19th of every month following the last tax month. You can read more in our guide on how CIS tax works.

Both products handle CIS, but in different ways. Sage lists managing and submitting CIS as a feature, and positions its Standard plan for businesses working with CIS. Xero offers automated CIS calculations and reports on its plans, with contractor CIS returns as an optional add-on. If CIS is central to your business, check exactly what each plan includes before you sign up.

Payroll

Sage now includes payroll in all its Accounting plans, with a set number of employees included and more charged per employee. Xero includes a number of people on its Grow, Comprehensive and Ultimate plans, and offers payroll as an add-on on Ignite. Xero says it files Real Time Information reports with HMRC after every pay run.

Many businesses run payroll in a separate payroll product anyway. If you already do, this difference may matter less.

Making Tax Digital

All VAT-registered businesses should now be signed up for Making Tax Digital for VAT. That means keeping VAT records and filing VAT returns through compatible software. Both Xero and Sage Accounting say they support this.

Making Tax Digital for Income Tax is now arriving for sole traders and landlords:

• Qualifying income over £50,000 in 2024/25: you should have started from 6 April 2026.
• Qualifying income over £30,000 in 2025/26: you will need to use it from 6 April 2027.
• Qualifying income over £20,000 in 2026/27: you will need to use it from 6 April 2028.

Xero says its plans are ready for Making Tax Digital for Income Tax. Sage offers a separate Sage Sole Trader app for it, which Sage describes as ideal for sole traders who are not VAT registered. For more on the dates, see the Making Tax Digital deadlines.

Which suits which kind of business

Neither product is right for everyone. Here is how the features line up with common situations.

Xero may suit you if

• You sell online and want to connect apps such as Shopify or Stripe, since Xero highlights its large app range
• Several people need access, as Xero says it has no per-user licence fees
• You run projects and want time and cost tracking in the same system
• Your accountant or bookkeeper already works mainly in Xero

Sage Accounting may suit you if

• You are a construction business that wants CIS submissions built into the main plan
• You want payroll included in your accounting plan rather than added on
• You hold stock or trade in several currencies and want both in one plan
• You are a non-VAT-registered sole trader looking at Sage's separate Making Tax Digital app

If you are already in one of them and it works, switching is rarely worth the disruption on features alone. Moving software means migrating balances, history and bank feeds, and that takes time.

Questions to ask before you choose

• How many invoices and bills do you handle each month?
• Do you run payroll, and do you want it in the same product?
• Are you a CIS contractor, a subcontractor, or neither?
• Do you buy or sell in foreign currencies?
• Do you track stock?
• Which other apps, such as an online shop or payment provider, need to connect?
• How many people need their own login?

Write your answers down, then check each vendor's current plan page against them. The right plan is usually the lowest one that covers every answer.

The software matters less than keeping it current

Whichever you choose, the software only reflects what goes into it. Bank lines still need matching. Receipts still need collecting. Unexplained payments still need an answer. A well-chosen product with three months of unreconciled transactions is no more useful than a spreadsheet.

Wenzo works in both Xero and Sage, as well as the other common packages. The choice of software is yours. We keep whichever one you use up to date.