What’s the Best Accounting Software for Your Small Business in 2025?

With thanks to Alan Bloome of Acumenica for the original inspiration

Choosing accounting software used to be simple – a spreadsheet and a strong cup of tea would get you through. But now, with Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) looming for landlords and sole traders in April 2026, and quarterly reporting becoming the new norm, your software isn’t just about convenience anymore – it’s about survival.

Alan Bloome over at Acumenica wrote a helpful breakdown of the main players a couple of years ago, and this post builds on that – updated for 2025, in plain English, with a few more tools thrown in for good measure.

Let’s Cut to It: What You Need from Software in 2025

Here’s what your accounting software needs to handle if you want to stay on HMRC’s good side (and avoid a digital headache):

• MTD for ITSA or MTD for VAT compliance (depending on your setup)
• Quarterly reporting (coming for landlords and sole traders in 2026)
• Bank feeds and automated categorisation
• Invoicing, receipts, and expense tracking
• Mobile app access
• Accountant collaboration (without extra fees)
• Scalability (as your business grows)

That’s your baseline. Now, let’s talk options.

1. FreeAgent – Best for freelancers and contractors (especially if you bank with NatWest or Mettle)

Still one of the friendliest options for non-accountants. It automates a lot, has a clean dashboard, and if you use Mettle, it’s completely free. MTD-compliant and great for side-hustlers, consultants, and one-person companies.

Good for: VAT-registered freelancers, contractors, and small Ltd Co directors

Watch out for: Limited functionality for growing businesses with stock or multiple income streams

2. Xero – Best all-rounder for growing businesses

Xero does it all – sales, expenses, VAT, payroll, and it’s MTD-ready across the board. The interface is slick, the app works well, and it integrates with just about everything. It does take a little setup work, but most accountants (including us) love it.

Good for: Limited companies, retailers, and those with a team

Watch out for: Monthly cost creeps up fast with add-ons (payroll, projects, etc.)

3. QuickBooks – Best for users who want automation without too much jargon

QuickBooks is solid and intuitive, with good bank feeds and helpful insights. It handles VAT and MTD, though some users find the layout less flexible than Xero.

Good for: Small service businesses and trades

Watch out for: It’s easy to mess up things if you dive into advanced areas without guidance

4. Sage Accounting – Best for traditional businesses that like structure

Sage has come a long way. The cloud version is far more user-friendly than the old desktop stuff, and it’s MTD-ready. Still a bit “corporate” feeling, but solid and reliable.

Good for: SMEs used to traditional accounting software

Watch out for: Clunky mobile experience compared to Xero or QuickBooks

5. Zoho Books – Best value for tech-savvy users

Zoho is part of a wider suite of business tools, and if you like customising things, it’s brilliant. MTD-ready, low cost, and full of features – but not the easiest for beginners.

Good for: Digital businesses, online sellers, and those already using Zoho CRM or projects

Watch out for: Learning curve is steeper than it looks

6. Coconut – Best for sole traders and landlords keeping things lean

Simple, app-first accounting for one-person businesses. Tracks expenses, sorts tax, and gives you a live tax estimate. MTD for ITSA is fully integrated. If you’re a sole trader or property investor with no employees or VAT, this might be all you need.

Good for: Sole traders, consultants, side hustlers, and landlords

Watch out for: Not suitable if you grow or need advanced features

7. Bokio – Best free option for those starting out

Yes, free. Bokio does the basics really well – invoicing, expenses, MTD VAT, and some payroll functions. Ideal if you’re just starting out and want something to “do the job.”

Good for: Startups and microbusinesses

Watch out for: No phone support and limited features once you scale

What About Spreadsheets?

HMRC still allows spreadsheets if they’re linked to MTD-compatible bridging software. It’s doable, but fiddly – and you’ll need to be meticulous. For anyone not spreadsheet-fluent, this is not the stress-free option.

So, Which Should You Pick?

It depends on your setup:

Final Thought: Don’t Overthink It

The best software isn’t the one with the most features. It’s the one you’ll actually use. Pick something that makes your life easier, works with your bank, and lets your accountant get what they need without chasing you for receipts.

And if in doubt, ask your accountant before committing – we’ve seen all of them in the wild and can usually steer you clear of the usual traps.