Running a small business means juggling a lot, and your accounting software should make things easier, not harder. With so many tools out there, it’s easy to feel overwhelmed.
We hear this all the time from clients: “Which accounting software is actually best for a UK small business?”
So here’s our straightforward, up-to-date guide. We’ve reviewed the top three options for 2025, explained what each one does well (and not so well), and shared our top recommendation based on what actually works for real small businesses.
Why the right software matters
Great accounting software should make your life easier, not add to the stress. It keeps all your invoices, expenses, and reports in one place so you’re not chasing bits of paper or spreadsheets at year-end. It also helps you work faster, with handy features like automatic bank feeds and real-time VAT calculations.
Most importantly, it keeps you compliant. With Making Tax Digital, your software needs to be HMRC-recognised and able to file returns directly. If it’s not ticking those boxes, it’s probably time to make a change.
Top 3 Accounting Software Picks for Small Businesses (2025)
We’ve had a proper look at the most popular accounting tools out there, and a few names come up again and again. Some are solid, some are… not for everyone. We’ve narrowed it down to the three that come up most, and saved our top pick for last.
🥉 3. Sage Business Cloud
Sage has been around for decades and is still a strong option, especially if you’ve got a slightly more complex setup.
Why it might work for you:
Well suited to businesses that need payroll, stock control, or more traditional features
Trusted by accountants in larger or more established companies
Things to keep in mind:
The interface feels a bit outdated and may take some time to get used to if you’re new to bookkeeping. It’s not the most intuitive option on the list.
🥈 2. QuickBooks
QuickBooks is popular for its clean layout and good mix of features, especially for self-employed users and service-based businesses.
What it does well:
HMRC-recognised for Making Tax Digital
Easy to use, with tools like mileage tracking and mobile invoicing
Connects to your bank and handles most everyday tasks well
Watch out for:
The price can jump up once you need extras. Some users find the reporting tools limited and support a bit inconsistent.
🥇 1. Xero
We recommend Xero to all our clients, and we use it ourselves. It’s simple, powerful, and built for small business owners.
Why it stands out:
Fully HMRC-compliant for VAT and income tax under MTD
Clean, easy-to-use dashboard and mobile app
Connects to your bank and 1,000+ other apps
Works brilliantly with your accountant, so no chasing spreadsheets
Plans start at £15/month, and there’s a free trial if you want to try it first.
Why do accountants prefer Xero?
Because it makes collaboration easy. You can handle the day-to-day, and your accountant can log in to check things or file your tax return without hassle.
Common questions (and honest answers)
We get these questions all the time from small business owners figuring out their finances. Here’s what you need to know if you’re thinking about using Xero in your business.
Is there free accounting software that’s HMRC-approved?
Technically, yes. HMRC shares a list of MTD-compatible tools, and a few offer limited free plans — usually for submitting VAT returns only. But most of these don’t include invoicing, bank feeds, or expense tracking. For full bookkeeping and proper support, Xero remains the most complete and cost-effective option we’ve seen for small businesses.
Can I use Xero instead of an accountant?
You can, especially if you’re a sole trader or running a very simple setup. Xero is designed to be user-friendly and covers everything from invoicing to VAT returns. But in our experience, most small businesses still benefit from having an accountant alongside it — not just for tax filing, but for advice, planning, and making sure you’re not missing out on claims or reliefs.
Is Xero recognised by HMRC?
Yes, fully. Xero is officially recognised by HMRC and works seamlessly with their systems, especially for Making Tax Digital (MTD). You can submit VAT returns and, soon, income tax updates directly through Xero. This means no extra forms or uploads — just connect your account and file straight from your dashboard. It’s one less thing to worry about at deadline time, and it keeps your records tidy and compliant.
Can I learn Xero on my own?
Absolutely. Xero is built for small business owners, not accountants, so it’s designed to be simple and approachable. They offer free video tutorials, webinars, and a helpful support centre to guide you through things like setting up your chart of accounts or connecting your bank. And if you ever get stuck, many accountants (like us) offer hands-on training or setup support to help you get the most out of it.
👋 Want help getting started?
We’re award-winning Xero specialists here at Simplex, with years of experience helping UK small businesses make the most of their accounting software. Whether you’re switching from another tool, starting fresh, or just want to feel more confident using Xero day to day — we’re here to help.
We’ll get you set up properly, show you how to stay on top of things, and keep your business HMRC-compliant from day one.
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