Are you looking for the perfect accounting system to simplify managing your small business’s finances? With so many options on the market, it can be overwhelming to choose the best one, especially as a small business owner in the UK.
From invoicing and payroll to VAT submissions and expense tracking, the right accounting software can save you hours of manual work while ensuring compliance with HMRC’s requirements.
In this guide, we’ll introduce you to the 15 best accounting systems for small businesses in 2024, covering both free and paid options. Whether you’re self-employed, a freelancer, or running a growing business, you’ll find the best option tailored to your specific needs.
Why Small Businesses Need Accounting Systems?
Keeping your books accurate is vital for the survival and growth of any business. With the rise of digital tools, small businesses now have access to powerful software that simplifies financial management. Here are a few reasons why investing in accounting software is essential for small businesses:
- Automation: Automate tasks like invoicing, payroll, and expense tracking, saving time and reducing errors.
- Compliance: Most software ensures your VAT and tax filings comply with UK law, especially for HMRC’s Making Tax Digital (MTD) initiative.
- Better Decision-Making: With real-time financial data, you can make informed decisions about your business growth and cash flow.
Key Features to Look for in Accounting Software
Before jumping into our top picks, let’s outline the essential features that small businesses should look for in accounting software:
- Invoicing: Automated invoicing and the ability to customize for clients.
- Expense Tracking: Track your spending and categorize expenses for easier tax reporting.
- VAT Filing: Ensure your software is compliant with UK VAT laws, including MTD.
- Bank Reconciliation: Integrate with bank feeds to simplify reconciling transactions.
- Payroll: Manage employee payments and tax filings.
- Multi-Currency Support: Ideal for businesses dealing with international clients.
15 Best Accounting Systems for Small Business
Top Free Accounting Software for Small Businesses UK
1. Wave
Website – www.waveapps.com
Wave is an excellent choice for freelancers and small businesses needing a free accounting solution. It’s packed with core accounting features such as invoicing, expense tracking, and reporting tools. Although it lacks UK-specific features like VAT submissions, it works well for basic accounting needs.
The software is cloud-based, allowing you to access your financial data anywhere and automate much of your daily accounting tasks. Additionally, Wave’s payroll feature is available as a paid add-on, making it a flexible option for growing businesses.
Key Features:
- Free invoicing and receipt scanning
- Income and expense tracking
- Multi-user access
Pros:
- Completely free for core accounting functions
- Easy-to-use interface
Cons:
- No support for UK VAT filings
- Limited scalability for growing businesses
Pricing: Free for most features, paid payroll options available as add-ons
2. Pandle
Website – www.pandle.com
Designed specifically for UK small businesses, Pandle offers a free and easy-to-use platform that supports VAT tracking and is compliant with Making Tax Digital (MTD). It’s best suited for small businesses that need essential accounting features without breaking the bank.
Pandle offers bank feeds, VAT submissions, and detailed financial reporting to ensure compliance with HMRC regulations. While its free version is basic, the paid plans unlock useful features like recurring invoices, making it more scalable for larger businesses.
Key Features:
- VAT compliant with MTD
- Bank reconciliation
- Customizable invoicing
Pros:
- Tailored for UK small businesses
- Free plan includes VAT support
Cons:
- Free version lacks advanced features
- Paid version required for advanced functions like recurring invoicing
Pricing: Free; paid plans start at £5 per month
3. GnuCash
Website – www.gnucash.org
GnuCash is a free, open-source accounting software that caters to startups and small businesses. Its main strength lies in its basic accounting features, like double-entry bookkeeping, tracking income and expenses, and managing payroll.
GnuCash is perfect for small businesses that don’t need advanced features like VAT submissions or cloud-based functionality. It’s a desktop software that offers multiple currency support, making it suitable for startups that may be testing their business model.
Key Features:
- Double-entry accounting
- Multi-currency support
- Expense and income tracking
Pros:
- Free and open-source
- Suitable for basic bookkeeping tasks
Cons:
- No cloud integration
- Lacks UK VAT compliance
Pricing: Free for use, yet powerful and flexible.
Best Paid Accounting Software for Small Businesses UK
4. Xero
Website – www.xero.com
Xero is one of the most popular accounting platforms for small businesses, offering a broad range of features such as automated bank feeds, invoicing, and VAT submissions. It stands out with its scalability, meaning small businesses can grow without needing to change accounting platforms.
Xero’s interface is clean and user-friendly, allowing for quick setup and integration with over 800 apps. However, Xero can become costly as businesses expand and need more advanced tools.
Key Features:
- VAT submission directly to HMRC
- Invoicing and billing automation
- Advanced analytics and financial reporting
Pros:
- Scalable, suitable for growing businesses
- Wide range of integrations
Cons:
- Premium pricing may not suit micro-businesses
- Additional costs for advanced features
Pricing: Starts from £16 to £59 per annum.
5. QuickBooks Online
Website – www.quickbooks.intuit.com
QuickBooks Online is a top choice for UK small businesses due to its flexibility and comprehensive accounting tools. With features like automated invoicing, payroll, and VAT compliance, it’s ideal for businesses looking for all-in-one accounting software.
QuickBooks is cloud-based, allowing business owners to manage their finances from anywhere. Its wide range of integrations with e-commerce platforms and apps makes it suitable for growing businesses, although the costs can rise as you add more features.
Key Features:
- Automated VAT filing for MTD
- Bank reconciliation and transaction categorization
- Integration with e-commerce platforms
Pros:
- Easy to use for non-accountants
- Scalable for business growth
Cons:
- Additional fees for advanced features
- Some features locked behind higher pricing tiers
Pricing: Starts at £5 per month
6. Sage Business Cloud Accounting
Website – www.sage.com
Sage Business Cloud Accounting is a well-established solution for UK businesses. With a strong focus on compliance, Sage makes VAT submissions, payroll management, and tax reporting straightforward. It’s best known for its ease of use, making it suitable even for non-accountants.
Sage also offers various integrations with financial tools and apps. The software can be a bit complex for those new to accounting, but it’s ideal for businesses with more substantial reporting and compliance needs.
Key Features:
- Automatic bank reconciliation
- Cash flow forecasting
- VAT returns and submission to HMRC
Pros:
- Excellent compliance and reporting features
- Suitable for businesses of all sizes
Cons:
- Steeper learning curve for beginners
- Limited mobile functionality
Pricing: Starts at £15 per month
Best Accounting Software for Self-Employed UK
7. FreshBooks
Website – www.freshbooks.com
FreshBooks is a great option for self-employed individuals, freelancers, and service-based businesses. Its intuitive interface makes invoicing, time tracking, and expense management a breeze. FreshBooks also offers payment processing, allowing you to accept credit card payments directly.
It’s perfect for professionals who need simple accounting features without complicated tax or VAT compliance requirements. The software’s biggest limitation is its lack of advanced accounting features, making it less suitable for larger businesses.
Key Features:
- Invoicing and automated reminders
- Time and project tracking
- Payment processing
Pros:
- User-friendly and great for service-based businesses
- Strong invoicing capabilities
Cons:
- Lacks advanced accounting features
- Limited to smaller businesses or freelancers
Pricing: Starts at £7.50 per month
8. FreeAgent
Website – www.freeagent.com
FreeAgent is designed for UK freelancers, contractors, and small businesses. It simplifies accounting with features like automated bank feeds, invoicing, and a tax timeline that helps you stay on top of your obligations. FreeAgent integrates directly with UK banks and supports HMRC’s Making Tax Digital initiative, making VAT submissions easy.
While it’s free for NatWest and RBS business customers, others will need to subscribe to a paid plan. FreeAgent is excellent for sole traders but lacks some scalability for larger businesses.
Key Features:
- VAT submission compliant with MTD
- Time tracking and project management
- Bank account integration
Pros:
- Free for certain UK bank customers
- Designed for freelancers and small businesses
Cons:
- Not ideal for larger businesses
- Free version only available to specific bank customers
Pricing: Free for NatWest/RBS customers, £16.50 per month otherwise
Best Free Accounting Software for UK Startups
9. Zoho Books Free Plan
Zoho Books is an affordable accounting solution that offers a free plan with essential features like invoicing, expense tracking, and bank reconciliation. The free version is ideal for startups or small businesses with limited transactions, making it an attractive option for budget-conscious entrepreneurs.
While Zoho Books is affordable, its free plan caps the number of transactions, so it may not be the best choice for businesses with higher volumes of invoices or expenses.
Key Features:
- Invoicing and expense tracking
- Multi-currency support
- Bank reconciliation
Pros:
- Free for businesses with low transactions
- Comprehensive features in paid plans
Cons:
- Free plan has transaction limits
- Lacks payroll functionality
Pricing: Free for small businesses under £50,000 revenue; paid plans from £10/month
10. Brightbook
Website – www.mybrightbook.com
Brightbook is a completely free accounting software designed specifically for UK businesses. It offers all the essential features a small business needs, such as invoicing, expense tracking, and reporting. Brightbook is cloud-based and comes with a simple, intuitive interface.
However, it lacks some of the more advanced features found in paid software, such as payroll and VAT compliance, making it suitable for smaller businesses and freelancers.
Key Features:
- Cloud-based invoicing and expense tracking
- Simple reporting tools
Pros:
- 100% free with no hidden costs
- Easy-to-use interface
Cons:
- Lacks VAT filing and payroll features
- Limited to basic accounting needs
Pricing: Free
11. QuickFile
Website – www.quickfile.co.uk
QuickFile is a UK-based cloud accounting software designed for freelancers and small businesses. Its main strength lies in its ability to support VAT submissions to HMRC, making it fully compliant with Making Tax Digital. QuickFile offers a free tier for businesses with fewer than 1,000 ledger entries per year, making it a great cost-saving solution for startups.
However, as your business grows, you may need to upgrade to a paid plan for more advanced features.
Key Features:
- MTD compliant VAT submissions
- Invoicing and expense tracking
- Customizable templates
Pros:
- Free for businesses with lower volumes of transactions
- Compliant with UK VAT regulations
Cons:
- Paid plan required for higher transaction volumes
- Limited to small businesses or freelancers
Pricing: Free for small businesses; £4.50/month for businesses exceeding 1,000 transactions
Affordable Accounting Systems for Small Businesses UK
12. Kashoo
Website – www.kashoo.com
Kashoo is a cloud-based accounting software ideal for small business owners who want a simple, affordable tool to manage their finances. It offers features like invoicing, bank reconciliation, and expense tracking without the complexity of larger accounting systems.
Kashoo’s easy-to-use platform is perfect for entrepreneurs who don’t need advanced features like inventory tracking or payroll. It also includes basic reports, making it suitable for smaller businesses that need to track income and expenses efficiently.
Key Features:
- Simple invoicing and expense tracking
- Bank reconciliation
- Basic reporting tools
Pros:
- Affordable and user-friendly
- Great for businesses with basic accounting needs
Cons:
- Lacks advanced features like payroll
- Limited scalability for larger businesses
Pricing: Starts at £10/month
13. Zoho Books
Zoho Books is a powerful accounting software that scales well for small businesses. Its affordable pricing, combined with features like project tracking, VAT submissions, and multi-currency support, makes it a strong contender for companies that need a comprehensive solution.
Zoho Books integrates seamlessly with other Zoho apps, which is great if your business already uses Zoho CRM or Zoho Inventory. The software also supports automation for recurring transactions and has robust reporting features for financial insights.
Key Features:
- VAT filing for MTD
- Multi-currency support
- Project and time tracking
Pros:
- Comprehensive feature set for small businesses
- Affordable with excellent scalability options
Cons:
- Limited support in the free plan
- Steeper learning curve for advanced features
Pricing: Free for businesses under £50,000 revenue; paid plans start at £10/month
Best Accounting Systems for Accountants in the UK
14. Clear Books
Website – www.clearbooks.co.uk
Clear Books is a cloud-based accounting system tailored for UK-based small businesses and accountants. Its strength lies in its simplicity and compliance with UK VAT and tax regulations. Clear Books offers a wide range of features, including invoicing, bank reconciliation, and VAT submissions.
It’s perfect for accountants managing multiple clients, as it allows for clear, easy collaboration. The software has a straightforward interface but may lack some advanced features like extensive integrations, which could be a drawback for some businesses.
Key Features:
- VAT submission and MTD compliance
- Customizable invoicing
- Payroll integration
Pros:
- Simple and easy to use for accountants
- Compliant with UK tax laws
Cons:
- Limited integrations compared to competitors
- May not have enough advanced features for larger firms
Pricing: Starts at £13.50/month
15. Capium
Website – www.capium.com
Capium is a cloud-based accounting software that caters specifically to accountants and tax professionals. It provides tools for VAT submissions, payroll management, and tax returns, making it a comprehensive solution for businesses that need to handle multiple client accounts.
Capium also includes time-saving automation tools that streamline repetitive tasks like invoicing and bank reconciliation. While it’s designed for accountants, small businesses can also benefit from Capium’s features, especially if they work with multiple clients or have complex financial needs.
Key Features:
- VAT returns and tax filing
- Payroll management
- Automation for invoicing and reconciliation
Pros:
- Designed for accountants with multiple clients
- Comprehensive toolset for managing finances and compliance
Cons:
- Steeper learning curve for small business owners
- Limited non-accountant features
Pricing: Starts at £15/month
Free and Paid Accounting Systems Comparison
| Software | Free Plan | Starting Price | Key Features |
| Wave | Yes | Free | Invoicing, expense tracking |
| Pandle | Yes | Free | MTD compliant, VAT reporting |
| Xero | No | £16/month | Advanced analytics, multi-currency |
| FreshBooks | No | £7.50/month | Project tracking, invoicing |
| Zoho Books | Yes | £10/month | Multi-currency support, invoicing |
| QuickBooks | No | £5/month | VAT compliance, payroll integration |
| FreeAgent | Yes | £16.50/month | Time tracking, project management |
| Clear Books | No | £13.50/month | Payroll, VAT submissions |
| Capium | No | £15/month | Payroll, and tax management for accountants |
How to Choose the Right Accounting Software for Your Business?
Choosing the best accounting system for your small business comes down to understanding your specific needs. For example:
- Business Size: Freelancers may prefer options like Wave or FreeAgent, while growing businesses might benefit from more scalable solutions like Xero or Zoho Books.
- Budget: If budget is a concern, free options like Wave, Pandle, and Zoho Books offer robust features, while paid software like QuickBooks or Xero provides scalability.
- Compliance: For UK businesses, compliance with VAT and HMRC’s MTD regulations is essential. Software like Sage, QuickBooks, and Xero offer easy VAT submissions to HMRC.
- Automation Needs: If your business requires automating repetitive tasks like invoicing or payroll, tools like Capium and QuickBooks provide excellent automation features.
Conclusion
The best accounting software for your small business in 2024 will depend on your specific needs. From free options like Wave and Pandle to paid solutions like Xero and QuickBooks, there is a range of systems to choose from. Take advantage of free trials and demos to test which platform works best for your business, ensuring it meets both your current and future needs.
Frequently Asked Questions (FAQs)
What is the best free accounting software for small businesses in the UK?
Wave and Pandle are highly recommended free accounting tools, providing essential functions like invoicing, expense tracking, and VAT compliance.
Can small businesses in the UK use cloud-based accounting systems?
Yes, most popular accounting systems like Xero, QuickBooks, and FreeAgent are cloud-based, offering flexibility and accessibility from anywhere.
What’s the best accounting system for startups in the UK?
Zoho Books offers a free plan for businesses with less than £50,000 in revenue, making it ideal for startups.
How do accounting systems help with VAT returns in the UK?
Many UK-specific accounting systems, such as Xero, QuickBooks, and Sage, allow direct VAT submissions to HMRC, ensuring compliance with MTD.
What’s the best option for self-employed professionals?
FreshBooks and FreeAgent are tailored for self-employed professionals, providing invoicing, time tracking, and easy tax management.
Are there free accounting systems that support Making Tax Digital (MTD)?
Yes, Pandle and QuickFile offer free plans that are fully compliant with MTD for VAT submissions.
What’s the most affordable paid accounting software for UK businesses?
Zoho Books and QuickBooks offer affordable plans starting at £10/month, providing a range of features for small businesses.
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