Xero
The accountants' favourite. Simple plan is good value.
by Xero Limited
Safe, popular choice. The Simple plan is where most small sole traders should start.
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Overview
Xero is the most widely used cloud accounting platform among UK accountants. The £7/mo Simple plan is the cheapest entry from a major provider and covers most sole trader or landlord needs for MTD.
Xero at a glance
How Xero stacks up on the dimensions that matter when picking MTD software.
Full MTD coverage. HMRC-recognised for both VAT and Income Tax, with quarterly updates, digital records, and the Self Assessment final declaration flow built in. Strong audit trail and easy accountant access make HMRC enquiries straightforward.
Comprehensive. Profit & loss, balance sheet, cash flow, debtor/creditor reports, and customisable management reports all included even on the £7/mo Simple plan. Reporting is one of the main reasons accountants recommend Xero.
Full double-entry bookkeeping with chart of accounts, bank rules, and automated reconciliation. Bank feeds connect directly to UK banks, and Hubdoc (included) handles receipt scanning. This is what Xero is built for.
Available on Standard plan and up (£36/mo). Tracks stock quantities, average cost, and cost of goods sold against sales. Solid for small product businesses; not designed for warehouses or multi-location stock.
Available on Standard plan and up. Tracks time, expenses and invoicing per project, with project profitability reports. Good for consultants and small agencies.
Strong. Hubdoc captures receipts via app or email forwarding, mileage tracking is available on Starter and up, and expenses flow into the bank feed. Most expense work happens on mobile.
Strong fit. Lenders and brokers commonly accept Xero exports for credit decisions, and Xero integrates directly with lenders like iwoca and Capify. Clean management accounts out of the box make loan and mortgage applications easier than a spreadsheet workflow.
A common choice for new UK businesses. The £7/mo Simple plan is cheap enough to start with, and the wide accountant ecosystem means you can hand off later without changing systems. Good for sole traders intending to grow.
Cleanest UI among the major platforms. Onboarding is fast for sole traders; the Simple plan deliberately hides advanced options. Bank feeds and reconciliation are the slickest in the market.
+Pros
- ✓Cheapest entry point from a major platform
- ✓Huge accountant ecosystem (easy to hand off later)
- ✓Clean, fast interface
−Cons
- ✕Simple plan is limited on features, Starter is where it gets useful
- ✕Not purpose-built for landlords
Xero, frequently asked questions
How much does Xero cost?+
Xero's cheapest UK plan is Simple at £7 per month, aimed at sole traders. Starter is £18 per month and Standard £36 per month. There's no free tier.
Is Xero free?+
No. Xero has no permanently free plan, the cheapest option is the £7/mo Simple plan. If you specifically want free MTD software, look at HMRC's free tool, QuickFile, Pandle or Clear Books instead.
Does Xero support MTD for Income Tax?+
Yes. Xero is HMRC-recognised and supports MTD for Income Tax as well as MTD for VAT, digital records and quarterly updates included.
Which Xero plan do I need for MTD?+
For most small sole traders the £7/mo Simple plan covers MTD Income Tax. The Simple plan is limited on wider features, so if you need more, multiple users, projects, fuller reporting, the £18/mo Starter plan is where Xero gets more useful.