Xero vs QuickBooks vs FreeAgent: which should a UK small business choose?

Ask five UK accountants which accounting software to use and you will get three answers and a shrug. That is because Xero, QuickBooks Online and FreeAgent are all good, and the best choice depends on who you are. We work in all three every day at the same £15 an hour, so we have no stake in the outcome. This comparison is built from what we see in real client files.

If you want the wider picture, including Sage and what to look for in any package, read our guide to choosing accounting software. Here we focus on the three cloud products small businesses most often compare.

The short version

	Xero	QuickBooks Online	FreeAgent
Best for	Growing companies, e-commerce	Sole traders, small firms	Freelancers, contractors
Main strength	Integrations and multi-user	Ease of use and mobile	UK tax built in
Making Tax Digital	Yes	Yes	Yes
Learning curve	Moderate	Gentle	Gentle
Watch for	Plan limits on entry tiers	Plan features vary	Less suited to complex stock

Xero

Xero is a cloud accounting platform with strong bank feeds, a huge marketplace of connected apps and a clean, flexible interface. It handles multiple users well and scales from a sole trader to a mid-sized company.

Strengths. Excellent integrations with payment providers, marketplaces, payroll, inventory and receipt capture. Good multi-currency support. Widely used by accountants, so finding help is easy.

Weaknesses. Entry plans may limit the number of invoices or bills, and some features sit on higher tiers. The breadth of options can overwhelm very small users.

Best for. Limited companies planning to grow, e-commerce sellers with several channels, and businesses that rely on integrations. See our Xero bookkeeping service and bookkeeping for e-commerce sellers.

QuickBooks Online

QuickBooks Online focuses on making accounting approachable. It has strong invoicing, good mobile apps and sensible plans for sole traders and small companies.

Strengths. Easy to learn. Quick to raise an invoice or log an expense from a phone. Flexible plans, including options for the self-employed.

Weaknesses. Plan features vary and it is worth checking which version includes what you need, such as VAT, multiple users or bills. Reporting is good but some advanced features are on higher plans.

Best for. Sole traders, landlords and small companies that want simplicity. See QuickBooks bookkeeping.

FreeAgent

FreeAgent was built in the UK for freelancers, contractors and small limited companies, and it shows. It keeps tax estimates, deadlines and Self Assessment or Corporation Tax calculations visible from the dashboard.

Strengths. UK tax awareness built in. A clear tax timeline. Good fit for one-person companies with director's loan accounts and dividends. Some business bank accounts include it at no extra charge, so check whether yours does.

Weaknesses. Less suited to businesses with complex stock, heavy multi-currency or large teams. The marketplace of connected apps is smaller than Xero's.

Best for. Freelancers, contractors and one-director limited companies. See FreeAgent bookkeeping and bookkeeping for IT contractors and freelancers.

Making Tax Digital

All three support Making Tax Digital for VAT, and all three offer or support quarterly updates for Making Tax Digital for Income Tax. Check that the specific plan you choose includes MTD submission, because entry-level plans sometimes differ. See our Making Tax Digital guide and VAT guide.

Pricing

Prices and promotions change often, and each provider has several tiers with different invoice limits, user numbers and features. Compare the current plans on each website, not a stale blog post, including ours. A useful method is to list the features you need, such as VAT returns, payroll connection and multiple users, and then find the cheapest tier that includes all of them.

Business types and the best fit

Sole trader with 30 to 100 transactions a month. QuickBooks or FreeAgent usually fits best. Xero also works if you want an accountant who prefers it.

Freelancer or contractor with a limited company. FreeAgent is a natural fit, with Xero a close second. Pay particular attention to the director's loan account and dividend handling.

Landlord. QuickBooks and Xero handle property income well, and some specialist landlord tools exist. See bookkeeping for landlords.

E-commerce seller. Xero, with connectors to marketplaces and payment providers, is usually strongest.

Business with employees. Check payroll connections. See payroll bookkeeping.

Construction and trades. Check CIS support in your plan. See CIS bookkeeping.

How to test them properly

1. Pick two finalists using the table above.
2. Start free trials and connect your real bank account.
3. Import a month of transactions and categorise them.
4. Raise an invoice and send it.
5. Run a profit and loss and a VAT report if relevant.
6. Ask your accountant or bookkeeper which they prefer.
7. Choose the one you did not dread opening.

Switching later

You are not locked in. Moving between packages is routine for a good bookkeeper, though it takes planning. Choose a natural break such as a tax year start, export your data and run the old and new systems in parallel for a month. Our software migration service handles this.

Mistakes to avoid

• Choosing on price alone and discovering missing features later
• Ignoring what your accountant uses
• Skipping set-up, which leaves the chart of accounts messy
• Not enabling two-factor authentication
• Never reconciling the bank feed
• Assuming software does the bookkeeping for you

Three short case studies

A freelance copywriter with 30 transactions a month, no VAT and no staff wants the simplest thing that supports Making Tax Digital. She chooses an entry-level QuickBooks plan, because the app is quick and the price is low. A one-director IT contractor with a limited company wants dividends, director's loan and tax estimates in one place. He chooses FreeAgent, since it is built around exactly that. A growing Shopify retailer with a part-time team, three payment providers and a bookkeeper wants connectors and multi-user access. They choose Xero and add a settlement connector. All three made sensible choices, because each matched the software to their actual business instead of choosing the most popular name.

Questions to ask before you commit

Before paying, ask the sales team or the support team a few specific questions. Does the plan I need include VAT returns and Making Tax Digital submission? How many invoices and bills can I enter per month on this plan? Can my accountant or bookkeeper have free access? What is the cost to add payroll? How do I export all my data if I leave? Clear answers to these save surprises at renewal time, and the answers vary between plans more than the marketing suggests.

Frequently asked questions

Which is cheapest?

It varies by plan and promotion. Compare the specific tier you need on each website, and remember to include any add-ons for payroll, receipt capture or multiple users.

Which is best for Making Tax Digital?

All three support it. The best choice is the one that fits your business and that you will keep current.

Can I switch from one to another?

Yes. A planned migration keeps your history and VAT position intact.

Do you charge differently for each?

No. We charge £15 an hour whichever software you use.

Can you set it up for me?

Yes. Get an instant quote and choose your software in the form.