Xero vs QuickBooks vs Sage vs FreeAgent for Making Tax Digital

Xero is a cloud accounting platform popular with small businesses and accountants. It is HMRC-recognised for MTD for VAT and is preparing full MTD for Income Tax support. Strengths: bank feeds, app marketplace, accountant network, multi-currency. Tradeoff: mid-tier pricing — usually more than QuickBooks Self-Employed or Coconut for a single freelancer.

QuickBooks Online is a strong all-rounder, with a Sole Trader tier aimed at simpler filers and a full Online Plus tier for growing businesses. HMRC-recognised for MTD for VAT and in development for MTD for Income Tax. Strong mobile app and receipt capture.

Sage Business Cloud Accounting suits established small businesses and accountants comfortable with the Sage ecosystem. HMRC-recognised for MTD for VAT and offering MTD for Income Tax functionality. Tightly integrated with Sage Payroll and Sage for Accountants.

FreeAgent is the favourite of UK contractors and freelancers, especially limited company directors. HMRC-recognised for MTD for VAT and currently in HMRC's MTD for Income Tax beta programme. Free for NatWest, RBS and Mettle business banking customers.

• Limited company contractor or freelancer — FreeAgent is the usual favourite (and free with some business bank accounts).
• Growing small business with staff — Xero or QuickBooks, for the app ecosystems and payroll add-ons.
• Already in the Sage world — Sage, for the tight payroll and accountant integration.
• Simple sole trader — a lower-cost self-employed tier (QuickBooks Sole Trader, Coconut) is usually plenty.
• Committed spreadsheet user — keep the spreadsheet and add bridging software rather than migrating.

Honestly, the “best” is often whichever your accountant uses, because shared access saves time and money at year end. If you are not sure, tell us how you work and we will recommend one independently — we take no commission from any vendor.

1. Confirm the software is HMRC-recognised for the tax you need (VAT, Income Tax, or both).
2. Check whether your accountant uses one platform exclusively — alignment saves time.
3. Check pricing tiers carefully; sole-trader and self-employed plans are often much cheaper than full bookkeeping plans.
4. If you have rental income, look for property income features or use a landlord-specific tool alongside.
5. If you already use Excel, consider bridging software instead of moving everything across.

Or use bridging software →