Top 12 Accounting Software for Small Business

Managing business finances can be overwhelming for small business owners. From tracking expenses and issuing invoices to calculating taxes and filing VAT returns, handling accounts manually is time-consuming and prone to errors.

This is where accounting software for small businesses comes in offering automated solutions that simplify bookkeeping, ensure tax compliance, and provide financial insights.

But with so many options available, how do you choose the right one? In this guide, we’ll explore the top 12 accounting software options in the UK, comparing features, pricing, and benefits to help you make an informed decision.

What is the Use of Accounting Software for Small Businesses?

Accounting software helps businesses manage their financial transactions efficiently.

It automates processes such as:

• Bookkeeping: Recording daily transactions, sales, and expenses.
• Invoicing: Creating and sending professional invoices.
• Expense Tracking: Categorising and monitoring business expenses.
• Payroll Management: Calculating wages, deductions, and tax contributions.
• Tax Compliance: Ensuring accurate VAT and tax filings with HMRC-approved software.
• Financial Reporting: Generating profit and loss statements, balance sheets, and cash flow reports.

Using accounting software reduces errors, saves time, and improves financial decision-making, making it an essential tool for small business owners.

Top 12 Accounting Software for Small Business

1. Xero – Best for UK Startups

Overview:

Xero is a powerful, cloud-based accounting software designed specifically for small businesses, startups, and freelancers. It offers automated bookkeeping, invoicing, bank reconciliation, and tax compliance, making it one of the most popular choices in the UK.

Key Features:

• Spend Less Time on Bookkeeping: Xero automates everyday financial tasks, allowing businesses to focus on growth.
• Paperless Record-Keeping: Secure cloud storage for invoices, receipts, and transactions.
• Smart Financial Insights: Customisable reporting, trend analysis, and cash flow monitoring.
• Automated Invoicing & Payment Reminders: Helps businesses get paid faster.
• Seamless HMRC VAT Submissions: Ensure compliance with Making Tax Digital (MTD).
• Bank Reconciliation: Automatically syncs with UK banks for real-time tracking.
• Integration with Third-Party Apps: Connects with over 1,000 business applications.

Pricing Plans:

• Early Plan: £2/month (for startups and sole traders).
• Growing Plan: £4.70/month (for small businesses).
• Established Plan: £8/month (includes multi-currency support and project tracking).
• 30-Day Free Trial Available.

2. QuickBooks – Best for Small Businesses & VAT Management

Overview:

QuickBooks is one of the most widely used accounting software worldwide, offering VAT management, payroll, invoicing, and real-time financial tracking. It’s an ideal choice for UK businesses looking for HMRC-compliant accounting solutions.

Key Features:

• Submit VAT Returns Directly to HMRC: Fully compliant with Making Tax Digital (MTD).
• One-Click Invoicing: Send professional invoices and get paid faster.
• Expense & Mileage Tracking: Automatically categorises business expenses and mileage.
• Cash Flow Insights:  Real-time profit and loss reporting.
• Stock & Inventory Management: Track and manage product stock levels.
• Multi-Currency Transactions: Great for businesses dealing with international payments.
• Mobile App Access: Manage your accounts from anywhere.

Pricing Plans:

• Sole Trader Plan: £1/month for 6 months, then £10/month.
• Simple Start: £8/month for 6 months, then £16/month.
• Essentials: £16.50/month (for businesses working with suppliers).
• Plus: £23.50/month (for businesses managing projects & stock).
• 30-Day Free Trial Available.

3. FreeAgent – Best for Freelancers & Small Business Owners

Overview:

FreeAgent is an HMRC-approved accounting software, ideal for freelancers, contractors, and small businesses. It simplifies tax filing, invoicing, and expense tracking, making it a favourite among self-employed professionals.

Key Features:

•  HMRC-Approved Tax Filing: Supports VAT, Self-Assessment, and Corporation Tax submissions.
• Automated Invoicing: Customisable templates and payment reminders.
•  Bank Integration: Connects with UK banks for real-time transactions.
• Multi-Currency Support: Ideal for businesses with international clients.
• Time Tracking & Project Management: Perfect for freelancers managing multiple clients.
• Expense & Receipt Management: Upload receipts via mobile for easy tracking.

Pricing Plans:

• Monthly Plan: £11/month (for first 6 months, then £22/month).
• Annual Plan: £110/year (for first year, then £220/year).
• 30-Day Free Trial Available.

4. Sage Business Cloud – Best for Growing Small Businesses

Overview:

Sage Business Cloud is a powerful accounting solution with AI-driven automation, designed to help small businesses manage finances efficiently. It is trusted by UK businesses for VAT compliance, payroll management, and in-depth financial reporting.

Key Features:

• AI-Powered Accounting & Automation:  Reduces manual data entry and improves efficiency.
• Seamless HMRC VAT Filing:  Fully compliant with Making Tax Digital (MTD).
• Smart Invoicing & Cash Flow Forecasting: Get paid faster with automated payment reminders.
• Multi-User Access: Collaborate with your accountant and team members.
• Custom Reports & Insights:  Generate profit and loss reports, balance sheets, and cash flow statements.
• Payroll & Employee Management: Optional add-on for businesses managing salaries and staff payments.

Pricing Plans:

• Accounting Start: £15/month (for sole traders and small businesses).
• Accounting Standard: £30/month (for businesses managing VAT & CIS).
• Accounting Plus: £39/month (for businesses dealing with inventory & multi-currency transactions).
• 3 Months Free for New Users.

5. Zoho Books – Best for Automation & Budget-Friendly Solutions

Overview:

Zoho Books is a cost-effective, cloud-based accounting solution that offers powerful automation tools. It is ideal for startups and small businesses looking to streamline invoicing, tax filing, and expense tracking.

Key Features:

• Automated Bookkeeping & Financial Reports:  AI-driven categorisation of expenses and transactions.
• Multi-Currency & International Transactions:  Supports businesses dealing with overseas clients.
• Mobile-Friendly Dashboard: Manage your accounts on the go.
• Customisable Invoicing & Payment Reminders: Send branded invoices and track payments.
•  Integrated with Zoho Ecosystem: Works with Zoho CRM, Zoho Inventory, and other Zoho apps.

Pricing Plans:

• Free Plan: Available for businesses with a turnover below £35K.
• Paid Plans: Start from £6/month.

6. FreshBooks – Best for Freelancers & Service-Based Businesses

Overview:

FreshBooks is a simple yet powerful accounting software designed for freelancers, consultants, and service-based businesses. It offers easy invoicing, expense tracking, and tax filing, helping small business owners stay organised.

Key Features:

• Professional Invoicing & Recurring Billing:  Send invoices and accept payments online.
• Automated Expense Tracking: Categorises business expenses and imports transactions.
• Time Tracking & Project Management: Great for freelancers managing multiple clients.
• Mobile App Access: Track finances from anywhere.
• VAT-Compliant & HMRC-Approved: Submit MTD-compliant VAT returns directly.

Pricing Plans:

• Lite Plan: £7.50/month (50% off for 3 months).
• Plus Plan: £12.50/month.
• Premium Plan: £17.50/month.
• 30-Day Money-Back Guarantee.

7. Wave – Best Free Accounting Software for Small Businesses

Overview:

Wave is one of the few completely free accounting software options available, making it a great choice for freelancers, micro-businesses, and startups on a tight budget. While it lacks some advanced features, it provides excellent invoicing, expense tracking, and basic financial reporting.

Key Features:

• 100% Free Accounting & Invoicing Software:  No subscription fees.
• Unlimited Invoice Creation: Send professional invoices with custom branding.
• Expense & Cash Flow Tracking: Monitor transactions and generate reports.
• Automated Bank Reconciliation: Sync bank transactions in real time.
• Secure Cloud-Based Access: Manage finances from anywhere.
• Payroll & Payments Add-ons Available: Optional paid services for payroll processing and payment acceptance.

Pricing Plans:

• Free Plan: Unlimited invoicing, accounting, and expense tracking.
• Payroll Add-on: From £20/month.
• Wave Payments: Pay-as-you-go transaction fees apply.

8. KashFlow – Best for UK Tax Compliance & Payroll

• 

Overview:

KashFlow is a UK-focused accounting software designed to make VAT filing, invoicing, and payroll management easy. It is fully HMRC-compliant and offers customisable reporting tools for small businesses.

Key Features:

• UK VAT & CIS Compliant: Automatic tax calculations and submissions.
• Professional Invoicing & Estimates: Customisable templates for branding.
• Bank Reconciliation & Payments Integration: Get paid faster.
• Multi-Currency Support: Ideal for international transactions.
•  Mobile App Access: Manage finances on the go.
• Payroll & Employee Management: Add-on available for processing salaries.

Pricing Plans (90% off for 6 months):

• Starter: £1.15/month (then £11.50).
• Business: £2.35/month (then £23.50).
• Business + Payroll: £3.15/month (then £31.50).
• 14-Day Free Trial Available.

9. Pandle – Best Budget-Friendly Accounting Software

Overview:

Pandle is a low-cost, user-friendly accounting software built for small businesses, freelancers, and startups that need affordable yet powerful bookkeeping tools. It offers bank feeds, VAT calculations, and invoicing without expensive contracts.

Key Features:

•  Live Chat Support: Get real-time help from Pandle experts.
• Bank Reconciliation & Automation: Reduce manual work.
• Invoicing & Expense Tracking: Manage bills and client payments.
• VAT Returns & Tax Calculations: Stay compliant with HMRC.
• Collaboration Tools: Add accountants or team members.
• Unlimited Transactions:  No hidden charges for high-volume users.

Pricing Plans:

• Free Plan: Basic features, including invoicing and bank feeds.
• Pandle Pro: £5/month (includes unlimited bank feeds and receipt uploads).
• 14-Day Free Trial Available.

10. Clear Books – Best for Small Businesses Wanting AI Automation

Overview:

Clear Books is an AI-driven accounting software designed for UK sole traders, freelancers, and SMEs. It streamlines bookkeeping and financial management using automation, making it a great choice for business owners who want to reduce manual admin work.

Key Features:

• Automated Bookkeeping: AI-powered categorisation of expenses.
• HMRC-Recognised VAT & CIS Submissions: Stay compliant with Making Tax Digital (MTD).
• Customisable Invoicing: Create and send invoices with branding.
• Bank Feeds & Real-Time Data Sync: Connect to UK banks effortlessly.
• Project Accounting & Multi-Currency Support: Great for businesses handling international clients.
• Unlimited UK-Based Customer Support: Free expert assistance.

Pricing Plans (50% off for 3 months):

• Small: £6.75/month (then £13.50).
• Medium: £14.50/month (then £29.00).
• Large: £18.00/month (then £36.00).
• 30-Day Free Trial Available.

11. Reckon One – Best for Customisation & Scalability

Overview:

Reckon One is a modular accounting software, allowing businesses to customise features based on their needs. This makes it a great option for businesses that don’t want to overpay for features they don’t use.

Key Features:

• Flexible Modular Pricing: Pay only for the features you need.
• Real-Time Financial Tracking: Monitor cash flow and expenses.
• Bank Reconciliation & Invoice Management: Automate data entry.
• Unlimited Users: No additional fees for adding team members.
• Payroll & Project Management Add-ons: Scale as your business grows.
• Cloud-Based & Secure: Accessible from any device.

Pricing Plans:

• Accounting Essentials: £3/month.
• Premium Accounting & Payroll: Prices vary based on custom features.
• 30-Day Free Trial Available.

12. Crunch – Best Free Accounting Software for Sole Traders & Small Businesses

Overview:

Crunch is the only UK-based free accounting software specifically designed for sole traders, small businesses, and limited companies. Unlike other free tools, Crunch includes unlimited invoicing, expense tracking, and HMRC-ready financial reporting.

Key Features:

• Completely Free Accounting Software: No hidden fees or trials.
• Unlimited Invoicing & Expense Tracking: Generate invoices and manage business costs.
• Bank Feeds & Reconciliation:  Import transactions automatically.
• HMRC-Compliant VAT Returns: Making Tax Digital (MTD) ready.
• Online Support & Community Forum: Access free guidance from experts.
• Affordable Upgrade Options:  For businesses needing payroll and bookkeeping services.

Pricing Plans:

• Crunch Free: £0/month (forever free).
• Crunch Pro: £24.50/month (adds bookkeeping support & additional features).
• Crunch Premium: Custom pricing for advanced accounting needs.

How to Choose the Best Accounting Software for Your Business?

Choosing the right accounting software depends on your business size, needs, and budget. Here are some key factors to consider:

Business Type & Size

• Sole Traders & Freelancers: Need simple invoicing and expense tracking (e.g., FreeAgent, FreshBooks, Crunch).
• Small Businesses & Startups: Require VAT compliance, payroll, and financial reporting (e.g., Xero, QuickBooks, Sage).
• Growing Businesses: Need scalability, automation, and integration with other business tools (e.g., Zoho Books, Reckon One).

Essential Features

Look for software with:

• Invoicing & Payment Processing: Helps track income and get paid faster.
• Expense & Tax Management: Ensures compliance with HMRC VAT & CIS rules.
• Bank Integration & Reconciliation: Saves time by automating transaction imports.
• Financial Reporting: Helps monitor cash flow and business performance.

Cloud-Based vs. Desktop Software

• Cloud-Based Software: Accessible from anywhere, auto-updates, and secure storage (Xero, QuickBooks, Sage).
• Desktop Software: Offers offline access but requires manual updates (Clear Books, KashFlow).

Integration with Other Tools

Ensure the software integrates with:

• HMRC for VAT & Tax Filing
• Business Banking Accounts
• CRM, Payroll, and Inventory Management Systems

Customer Support & Ease of Use

• Live chat, email, or phone support is essential for troubleshooting.
• User-friendly dashboard with easy navigation saves time.

Pricing & Free Trials

• Compare free vs. paid options. Some offer free trials (e.g., Xero, QuickBooks, FreshBooks).
• Budget-conscious businesses can start with Wave or Crunch (free plans).

By evaluating these factors, you can find the best accounting software that meets your business needs.

Conclusion

Choosing the right accounting software simplifies financial management, saves time, and ensures compliance with UK tax regulations.

Whether you need basic invoicing or full-fledged financial automation, there’s a solution tailored to your business size and industry.

• Xero, QuickBooks, and Sage are excellent for small businesses needing VAT and payroll features.
• FreeAgent, FreshBooks, and Crunch cater to freelancers and contractors.
• Wave and Pandle provide budget-friendly or free accounting solutions.
• Zoho Books and Reckon One are ideal for automation and customisation.

With free trials available for most software, you can test and compare before making a final decision.

FAQs About Accounting Software

What is the best accounting software for UK small businesses?

The best software depends on your needs. Xero, QuickBooks, and Sage are great for VAT compliance and payroll, while FreeAgent and FreshBooks work well for freelancers.

Is there any free accounting software for small businesses?

Yes! Wave and Crunch offer completely free accounting software with invoicing, expense tracking, and financial reporting.

What accounting software is HMRC-approved?

HMRC-approved options include Xero, QuickBooks, FreeAgent, Sage, and Clear Books, all of which support Making Tax Digital (MTD) for VAT submissions.

Can I do payroll with accounting software?

Yes, many accounting tools like QuickBooks, Xero, Sage, and KashFlow offer built-in payroll features or paid add-ons.

What is the easiest accounting software for beginners?

For beginners, Pandle, FreshBooks, and Crunch are easy to use with simple interfaces and automation to reduce manual work.

Can I manage VAT with accounting software?

Yes! Xero, QuickBooks, FreeAgent, and Sage allow automatic VAT calculations and direct submissions to HMRC.

Is cloud-based accounting software better than desktop versions?

Yes! Cloud-based software (like Xero, QuickBooks, and Zoho Books) offers automatic updates, remote access, and better security, making it a preferred choice.