YF Accounting7 min read
If you are choosing accounting software in 2026, the honest answer is that Xero, QuickBooks and FreeAgent will all handle the basics well, so the right one usually comes down to price, how you bank, and whether you need payroll. As a rough guide, Xero suits growing limited companies, QuickBooks suits VAT registered businesses that want a strong mobile app, and FreeAgent is often the cheapest option for contractors and sole traders, especially as it is free with some business bank accounts. The choice matters more this year because Making Tax Digital for Income Tax started on 6 April 2026 for sole traders and landlords with qualifying income over £50,000, and keeping digital records in compatible software is now part of staying compliant.
Below is a plain English comparison of the three most popular cloud accounting packages in the UK, who each one suits, and what they cost, so you can pick with confidence rather than going in circles.
Why the software choice matters more in 2026
Making Tax Digital is HMRC’s push to move tax record keeping online, and it changes how a lot of businesses need to work. For VAT it is already here: every VAT registered business has to keep digital records and file returns through compatible software. For income tax it is now arriving in stages.
If your combined self employment and property income is over £50,000, you need to use Making Tax Digital for Income Tax from 6 April 2026. The threshold drops to £30,000 from 6 April 2027, and to £20,000 from 6 April 2028. HMRC has confirmed it will not charge penalty points for late quarterly updates during the first year for the £50,000 group, but the sensible move is to get set up on software you are comfortable with well before your start date rather than in a rush.
The good news is that all three packages in this guide are on HMRC’s list of recognised software for Making Tax Digital, so any of them will keep you on the right side of the rules. You can always check the current list on the GOV.UK software finder.
The short version
- Choose Xero if you run a growing limited company, want the widest range of add-ons, and like a clean, well designed interface.
- Choose QuickBooks if you want strong VAT tools, a genuinely good mobile app, and often the lowest headline price.
- Choose FreeAgent if you are a contractor or sole trader, especially if you bank somewhere that gives it to you free.
Xero: best for growing limited companies
Xero has become the default choice for a lot of UK accountants, and for good reason. It is clean, easy to learn, and it connects to hundreds of other apps, from stock systems to expense tools. If you plan to grow, take on staff, or add tools over time, Xero gives you the most room to expand.
Bank feeds are reliable, reporting is strong, and the layout makes it easy to see how the business is doing at a glance. Payroll is available as an add-on rather than being built into every plan, so factor that in if you run a salary. The lower priced plans also cap the number of invoices and bills you can enter each month, which most small businesses will not notice but growing ones can.
QuickBooks: best for VAT and mobile
QuickBooks is Xero’s biggest rival and often comes in a little cheaper on the headline price. Its VAT tools are excellent, the mobile app is one of the best on the market, and it handles Making Tax Digital for VAT smoothly. If you spend a lot of time working from your phone, or you want to snap and store receipts on the go, QuickBooks is hard to beat.
Some users find the interface a touch busier than Xero, and the very cheapest plans are quite limited, so check that the tier you are looking at actually covers what you need. For most sole traders and small limited companies, though, it does everything you are likely to ask of it.
FreeAgent: best for contractors and tight budgets
FreeAgent is built with freelancers, contractors and small businesses in mind, and it shows. It is friendly, it walks you through Self Assessment, and it has neat touches like tax timelines that tell you what is due and when. For a one person limited company or a sole trader, it often covers everything you need without the extra features you will never touch.
Its standout feature is the price. FreeAgent is free for as long as you hold a business current account with NatWest, Royal Bank of Scotland, Ulster Bank or Mettle. If you already bank with one of those, that can make it the cheapest fully featured accounting software available. It is less suited to larger businesses with complex needs or big inventory, but for its target user it is excellent value.
How the prices compare
| Software | Best suited to | Guide entry price | Payroll | Making Tax Digital |
|---|---|---|---|---|
| Xero | Growing limited companies | From around £16 a month | Add-on | VAT and Income Tax ready |
| QuickBooks | VAT and mobile users | From around £10 a month | Add-on | VAT and Income Tax ready |
| FreeAgent | Contractors and sole traders | Around £19 a month, or free with an eligible bank account | Basic payroll included | VAT and Income Tax ready |
Prices are a guide only and correct at the time of writing. All three providers change their plans and run regular introductory discounts, often half price for the first few months, so always check the current pricing before you sign up.
So which should you choose?
Start with how you bank and what you actually do day to day. If you bank with NatWest, Royal Bank of Scotland, Ulster Bank or Mettle and you are a contractor or sole trader, FreeAgent is an easy win because it costs you nothing extra. If you want the lowest paid price and you live on your phone, look at QuickBooks. If you are building something you expect to grow, and you want the widest choice of add-ons and the smoothest experience, Xero is usually worth the slightly higher cost.
Whatever you pick, the biggest gains come from using it properly, keeping it up to date, and reviewing the numbers regularly. Good software with messy data still gives you messy answers. If you would like a steer on which package fits your situation, or you want it set up and running correctly from day one, that is exactly the sort of thing we help with. You can read more in our small business bookkeeping guide or our guide to starting a business.
Frequently asked questions
Which accounting software is best for a sole trader?
For most sole traders, FreeAgent or QuickBooks are the strongest choices because they are simple and affordable. FreeAgent is the standout if you bank with NatWest, Royal Bank of Scotland, Ulster Bank or Mettle, since it is free with those accounts. QuickBooks is a good alternative if you want the lowest paid price and a great mobile app. Xero works well too, but its extra features are more useful once you start to grow.
Do I have to use software for Making Tax Digital?
Yes, if you fall within the rules. Every VAT registered business already has to keep digital records and file returns through compatible software. For income tax, you must use compatible software once your qualifying income passes the threshold for your year, starting at £50,000 from 6 April 2026. Spreadsheets on their own are not enough unless you also use bridging software to file.
Can I switch accounting software later?
Yes. All three let you export your data, and moving between them is common. The cleanest time to switch is at the start of a new financial year, so your full year sits in one place. If you are mid year, it can still be done, it just takes a little more care to bring the balances across correctly. We can handle a migration for you if you would rather not risk it.
Is FreeAgent really free?
It is free for as long as you hold an eligible business bank account with NatWest, Royal Bank of Scotland, Ulster Bank or Mettle. If you close that account or bank elsewhere, you pay the standard monthly price, which is around £19 a month at the time of writing. For many contractors, opening one of those accounts is worth it for the free software alone.
Which one do you recommend as accountants?
We work with all three every day, so our advice depends on your setup rather than a single favourite. As a general rule we lean towards Xero for growing limited companies, QuickBooks for VAT heavy businesses on a budget, and FreeAgent for contractors, particularly where it comes free with the bank. If you would like a recommendation tailored to your business, get in touch and we will point you the right way.
At YF Accounting we set up and manage Xero, QuickBooks and FreeAgent for sole traders, contractors and limited companies across the UK, all on a fixed monthly fee with one point of contact. If you want your software chosen, connected and kept tidy so it actually saves you time, get in touch and we will take it from there.
Founder of YF Accounting — a fixed-fee, fully digital accountancy practice in Manchester serving SMEs, sole traders and landlords across the UK. One point of contact, unlimited support, no surprise bills.
Related reading
How to Register for VAT: A Step-by-Step Guide for 2026
How to Form a Limited Company in the UK: A Step-by-Step Guide for 2026
How to Register for Self Assessment: A Step-by-Step Guide for 2026This article is part of our Starting a Business guide. See the full topic for related reads.