Best accounting software for small business UK 2026/27

There is no single best accounting software, but since April 2026 the situation is a little different: if you are within Making Tax Digital for Income Tax, your software has to be able to file to HMRC, and most spreadsheets cannot. The good news is that compliant software does not have to cost anything. HMRC’s own finder lists 159 compatible products, 36 of which have a free version, including offerings from Sage, Zoho, ANNA and four banks.

For most sole traders the honest answer is that the free tier of a recognised product will do the job. For a limited company with employees, stock or multiple currencies, it will not, and the paid tiers start at around £10 to £20 a month.

All prices and product details were checked on 2 October 2026 and exclude VAT.

The question changed in April 2026

Making Tax Digital for Income Tax began on 6 April 2026. It replaces the single annual Self Assessment return with quarterly updates submitted from compatible software, plus a final declaration.

That changes what “best” means. Until 2026 you could run a small business on a spreadsheet and type the numbers into a tax return once a year. Within MTD you cannot, unless you add bridging software to the spreadsheet.

From	Who it applies to	Based on qualifying income in
6 April 2026	Qualifying income over £50,000	2024/25
6 April 2027	Qualifying income over £30,000	2025/26
6 April 2028	Qualifying income over £20,000	2026/27

 

Qualifying income means gross income from self-employment and property before expenses, not profit. Someone turning over £55,000 and making £20,000 of profit is inside the April 2026 group.

HMRC checks your Self Assessment return each year and writes to you if you are brought into scope for the following year.

Making Tax Digital for VAT is separate and already applies to every VAT-registered business, whatever its turnover. If you are VAT registered you are already using compatible software or bridging software.

Do you need to pay for software at all?

Often not.

HMRC stopped publishing a table of compatible products on 31 July 2025 and replaced it with a finder tool. That tool currently lists 159 products compatible with Making Tax Digital for Income Tax, and it has a filter for products (36) with a free version.

The free tier is a real one in several cases, not a trial:

Product	What the free tier does
Sage Sole Trader Free	Record keeping and MTD for Income Tax filing, permanently free
Zoho Books Free	One user plus an accountant, 1,000 invoices a year, MTD for Income Tax and VAT, and Self Assessment
ANNA Money Free	Free MTD for Income Tax filing on every tier including the free one
FreeAgent	Free for NatWest, RBS and Mettle business account customers

 

Four banks also appear on HMRC’s free list in their own right: Monzo, Starling, Tide and Lloyds. If you already bank with one of them, check what is included before paying for anything.

A free tier is genuinely enough if you are a sole trader or landlord with straightforward income, no employees, no stock and no VAT complexity. The limits bite when you need payroll, multi-currency, purchase orders, inventory or more than one user.

What the main paid options cost

Checked on 2 October 2026. Prices are monthly and exclude VAT.

Product	Entry plan	Standard price	Full range
QuickBooks	Sole Trader Plus	£10	£10 to £123
FreeAgent	Landlord	£10	£10 to £33
Zoho Books	Standard	£12	Free, then £12 to £199
Xero	Ignite	£18	£18 to £70
Sage Accounting	Start	£20	£20 to £59
Coconut	MTD filing	£12.99	£12.99 to £159.99 a year
FreshBooks	Lite	£16	£16 to £42

 

Treat introductory discounts with care. At the time of checking, Xero, QuickBooks and Sage were all running 90% off for six months, and FreshBooks 50% off for three. Those offers bring the first invoice down to a pound or two and then the price returns to the figures above.

One product on that list does not do what this article is about. FreshBooks supports Making Tax Digital for VAT but does not appear on HMRC’s compatible list for Making Tax Digital for Income Tax. If you are within MTD for Income Tax, it will not file your quarterly updates.

What you actually need it to do

Feature lists run to hundreds of items. In practice a small business needs some subset of eight things, and which ones decide your price band.

Function	Who needs it
Digital record keeping and quarterly MTD updates	Anyone within Making Tax Digital for Income Tax
A live bank feed	Everyone. It is the feature that saves the most time
Invoicing and payment chasing	Anyone who invoices rather than taking payment at the point of sale
Expense capture from photographed receipts	Everyone, though free tiers often cap the number per month
VAT returns	Anyone VAT registered, which means turnover above £90,000
Self Assessment or corporation tax filing	Depends on structure, and is often a paid add-on
Payroll	Anyone with employees, including a single director on a salary
Multi-currency, inventory, projects, purchase orders	Fewer businesses than the marketing suggests

 

The first five are covered by most free tiers. Payroll is usually the line where free stops being enough, followed by multi-currency and inventory. If you need none of the last two rows, you are probably being sold more than you need.

How to choose

Work through these in order. The first question eliminates most of the field.

1. Are you within Making Tax Digital for Income Tax? If yes, the product must be on HMRC’s compatible list. Check the finder rather than taking a vendor’s word for it, because marketing language such as “MTD ready” is not the same as being listed.

2. Do you have employees? Payroll is the commonest reason a free tier stops being enough. Check whether payroll is included or costs extra per employee.

3. Are you VAT registered, or close to the £90,000 threshold? If so you need MTD for VAT as well, and you want the two handled in one place.

4. Does it connect to your bank? A live bank feed is the single feature that most reduces the time you spend on bookkeeping. Most paid tiers have it. Some free tiers do not.

5. Does your accountant use it? If you have an accountant, ask before you buy. Most work in one or two products and will do the job faster and cheaper in the one they know.

6. Can you get your data out? Check the export options before you commit, not after. Products do leave the UK market, as the next section shows.

7. Only then, consider the interface. Ease of use matters, but it is the last filter, not the first. Free trials are the only way to judge it, and most offer 14 to 30 days.

Some products that no longer serve UK small businesses

Several products that appear in older recommendations are no longer usable in the UK, and in some cases no longer exist. Checked on 2 October 2026.

Product	Status
Bokio	Closed to UK users on 7 July 2026. bokio.co.uk now serves only a closure notice directing users to support for refunds and data exports
GoDaddy Bookkeeping	Discontinued on 18 June 2022. GoDaddy migrated customers to QuickBooks Online. The product pages now return 404
Wave	Withdrew support outside the US and Canada in November 2020. Prices are in US and Canadian dollars only, non-US users can no longer send invoices through it, and Wave directs other users to Zoho Books
17hats	Still trading, but it is a US client-management and CRM tool priced in dollars. It has no VAT, HMRC or Making Tax Digital functionality and is not UK accounting software

 

None of these four appears on HMRC’s compatible list for Making Tax Digital for Income Tax.

A caution about HMRC’s own lists. The finder for Making Tax Digital for Income Tax is current. The separate list for Making Tax Digital for VAT is not maintained to the same standard: it still carried Bokio at the time of checking, nearly three months after the product closed to UK users. Treat presence on the VAT list as weaker evidence than presence on the Income Tax finder.

Frequently asked questions

What is the best accounting software for a small business?

There is no single best. For a sole trader within Making Tax Digital for Income Tax with straightforward affairs, a free tier from Sage, Zoho or ANNA will usually do the job. For a limited company with employees, Xero, QuickBooks, Sage and FreeAgent are the established options, starting at £10 to £20 a month.

Do I legally have to use accounting software?

Not in itself, but if you are within Making Tax Digital for Income Tax you must keep digital records and file quarterly updates from compatible software. That applies from April 2026 for qualifying income over £50,000, April 2027 over £30,000, and April 2028 over £20,000. Every VAT-registered business is already within Making Tax Digital for VAT.

Is there genuinely free accounting software in the UK?

Yes. HMRC’s own finder has a filter for products with a free version, and 36 of the 159 compatible products pass it, including Sage Sole Trader Free, Zoho Books Free and ANNA. Four banks also offer free filing, and FreeAgent is free for NatWest, RBS and Mettle customers.

Can I still use a spreadsheet?

Only with bridging software that connects the spreadsheet to HMRC. Bridging software is on HMRC’s compatible list as its own category. It works, but it adds a step and a cost, and for most people a free compliant product is simpler.

What does accounting software cost in the UK?

Entry plans run from free to about £20 a month excluding VAT, and rise to £70 or more for larger feature sets. Introductory discounts of 50% to 90% for the first few months are common, so check what the price becomes after the offer ends.

How do I know if software is really MTD compatible?

Check HMRC’s finder tool rather than the vendor’s marketing. Phrases like “MTD ready” are not the same as appearing on the list, and at least one widely used product supports Making Tax Digital for VAT while not appearing on the Income Tax list at all.

What happens if my software provider leaves the UK?

You export your data and move. It is a real risk rather than a theoretical one: Bokio closed to UK users in July 2026 and GoDaddy discontinued its bookkeeping product in 2022. Check the export options before you commit to a product, and keep your own copies of anything you would need to reconstruct your records.