Best UK Accounting Software for Limited Companies and Contractors 2026

Last updated: 14 October 2026. Competitor prices were read on each vendor's own pricing page that day: monthly, excluding VAT, at the standard rate after any introductory offer ends. AccountsOS has no VAT to add.

Choosing accounting software for a UK limited company is harder than it looks. Prices have moved, every product now says it uses AI, and since 1 April 2026 HMRC's free online Company Tax Return service has closed, so every company files its CT600 through commercial software or an accountant. This guide compares the seven realistic options for a UK limited company, including the one-person contractor company, with current prices and a plain view of who each one suits.

Which accounting software is best for which limited company?

Competitor prices exclude VAT. In October 2026 Xero, QuickBooks and Sage were all offering new customers 90% off for six months, and FreeAgent 50% off for six months, so the first months cost less than the table shows. The table shows what a limited company pays once those offers end, not the cheaper sole-trader plans, which usually do not support a limited company.

Which accounting software is best for a UK contractor with a limited company?

A contractor's company is usually one director, one or two clients, a salary around the personal allowance with the rest taken as dividends, VAT (often on the Flat Rate Scheme), and micro-entity accounts at year-end. AccountsOS, Xero and FreeAgent all handle that. The real choice is who does the work: you, your accountant, or an AI accountant.

How does IR35 affect which accounting software you choose?

IR35 decides whether a contract is taxed like employment. Since April 2021, a medium or large private-sector client, or any public-sector body, decides your status and the fee-payer deducts the tax before paying your company. With a small client, your own company decides, and if the contract is inside IR35 the company works out a deemed employment payment.

No accounting software decides your IR35 status for you, AccountsOS included. What the software does is keep the books straight on either side. Finn can talk you through the status tests, and there is a free IR35 checker to run a contract against them. If a small client leaves the decision to you and the contract is inside, or HMRC challenges a status, have an accountant or IR35 specialist do or check that work.

How do salary and dividends work in each option?

Outside IR35, most contractor directors take a salary around the personal allowance and the rest as dividends. In Xero or FreeAgent you, or your accountant, work out the split and record the dividends. In AccountsOS, Finn models the split against your real numbers and the 2026-27 tax rates, shows what is safe to take after the tax the company will owe, and records each dividend with a voucher. Our salary and dividends guide has the full 2026-27 working.

Finn runs the director's payroll and prepares the Full Payment Submission (FPS). Sending the FPS to HMRC from inside AccountsOS is going through HMRC's software recognition, so until then it goes through other RTI payroll software or your accountant.

Which options file VAT returns for a contractor?

All three. AccountsOS is HMRC-recognised software for Making Tax Digital VAT and files the return straight to HMRC once you approve the figures, on the Standard, Flat Rate or Cash Accounting scheme. Xero and FreeAgent also file MTD VAT returns.

Who files the year-end accounts and the Corporation Tax return?

Most contractor companies are micro-entities. In AccountsOS, Finn prepares the micro-entity accounts (FRS 105) and the Corporation Tax computation from the ledger, you or your accountant review and sign, and Finn files the accounts with Companies House from inside AccountsOS. Finn also files the confirmation statement when nothing has changed.

Filing the CT600 itself from inside AccountsOS is built and going through HMRC's software recognition. Until that lands, Finn prepares the CT600 figures and the iXBRL, and the return goes in through other Corporation Tax filing software or your accountant. If you want the CT600 filed from the same software you keep the books in today, FreeAgent does this for most simple companies.

Do contractors still need an accountant?

Not for the day-to-day. Finn does the recurring production work: bookkeeping, VAT, payroll figures, dividends, the year-end accounts and the Corporation Tax computation. Keep a qualified accountant or IR35 specialist for a disputed IR35 status, an HMRC enquiry, closing the company, or unusual tax. If you keep one, give them accountant access to AccountsOS: they work from live books and review and sign the year-end instead of rebuilding it from a spreadsheet. More on fees in our contractor accountant cost guide, and the full contractor workflow on accounting for contractors.

When is Xero or FreeAgent the better choice for a contractor?

• You enjoy doing your own bookkeeping and want familiar software plus an accountant at year-end: FreeAgent or Xero.
• You bank with NatWest, RBS, Ulster Bank or Mettle: FreeAgent costs nothing, which is hard to beat.
• You want the CT600 filed from your bookkeeping software today: FreeAgent does it for most simple companies.
• Your accountant works only in Xero: match them.
• You need a big app marketplace for niche tools: Xero has the largest.

What does "best" actually mean in 2026?

Three things changed the market in 2026.

1. Prices. Xero, QuickBooks, Sage and FreeAgent all charge a limited company more than a sole trader, and the limited-company plans now sit between £33 and £59 a month at FreeAgent, Xero Grow, QuickBooks Essentials and Sage Standard. See our QuickBooks alternatives UK 2026 guide for the detail.

2. Making Tax Digital and the CT600 switch. From April 2026, Making Tax Digital for Income Tax started for sole traders and landlords with qualifying income over £50,000. Limited companies are not in it, but HMRC's free Company Tax Return service closed on 31 March 2026, so every company now files its CT600 through commercial software or an accountant.

3. AI. Every product now says it uses AI. The established players (Xero, QuickBooks, FreeAgent, Sage) have added AI features such as receipt reading, categorisation suggestions and chat on top of software you still operate. An AI accountant works the other way round: Finn does the work and you review it. See our AI-native vs bolt-on accounting software guide for the difference.

For a UK limited company in 2026, "best" means: files MTD VAT, works with your bank, fits your accountant, and saves you time rather than giving you more screens to operate.

AccountsOS: best for directors who want an AI accountant to do the work

What it is. AccountsOS is an AI accountant. Finn does the production work on a real double-entry ledger: bookkeeping, VAT returns, payroll, salary and dividends, invoicing, expenses, deadlines, the year-end accounts and the Corporation Tax computation. You talk to Finn in plain English in the app, by voice, or over WhatsApp, Slack, Telegram and email. You review and sign every filing.

Pricing. 14-day free trial, no card. Then £20/month for a limited company (£10/month for a sole trader), everything included, no VAT to add. The rate you join at is the rate you keep.

Strengths.

• HMRC-recognised software for Making Tax Digital VAT: the return goes straight to HMRC once you approve it
• Files annual accounts and the no-changes confirmation statement with Companies House from inside the app
• Live bank feeds from Starling, Revolut, Wise, Mercury and others; any other bank by statement upload (CSV or PDF)
• Salary and dividend split modelled on your real numbers, with dividend vouchers
• Receipts and invoices forwarded by email or WhatsApp are read, filed and matched to payments
• Your accountant can have accountant access to the live books
• Moving from Xero, QuickBooks or Sage brings your history with you
• Also runs companies outside the UK if you have more than one

Weaknesses.

• Filing the CT600 and sending payroll RTI from inside AccountsOS are both going through HMRC's software recognition; until then they go through other software or your accountant
• Prepares micro-entity (FRS 105) accounts only; small-company FRS 102 Section 1A accounts are not produced yet
• Newer than Xero, FreeAgent and Sage, with a smaller accountant network
• Direct bank feeds cover the fintech banks; high-street banks such as Barclays, HSBC, Lloyds and NatWest come in by statement upload

Who it is for. Directors and contractors running a small limited company (up to five people) who want the books done rather than another piece of software to operate, and who are happy to review and sign. Also founders paying a monthly bookkeeping retainer they would rather hand off.

Xero: best when your accountant works in Xero

Xero is the most widely supported cloud accounting platform in the UK. Almost every accountant in Britain works with it, and it has the largest ecosystem of integrations.

Pricing. £18 Ignite (capped at 20 invoices and 10 bills a month), £39 Grow, £55 Comprehensive, £70 Ultimate. A limited company with regular suppliers usually needs Grow.

Strengths.

• Huge UK accountant network: almost any UK firm works with Xero
• Mature bank feeds for every major UK bank
• Large app marketplace
• Excellent multi-currency support
• Reliable, polished and well documented

Weaknesses.

• The Ignite plan's invoice and bill caps push most limited companies to Grow at £39
• AI features help with suggestions, but you or your bookkeeper still do the work
• Built for accountants and bookkeepers as much as founders, so there is more to learn if you do your own books

Who it is for. Established UK limited companies with a bookkeeper or external accountant, and anyone who needs deep multi-currency, inventory or industry-specific integrations.

QuickBooks Online: best for product businesses

QuickBooks Online is Intuit's UK product, adapted for the UK from the US original.

Pricing. £16 Simple Start, £38 Essentials, £56 Plus, £123 Advanced. Essentials is the first plan that handles supplier bills, which most limited companies need.

Strengths.

• Strong inventory tracking, better than Xero for product businesses
• Intuit's AI features cover receipt capture, categorisation and invoicing
• Good mobile app
• Project profitability tracking
• Solid payroll add-on

Weaknesses.

• Among the more expensive options once a company needs Essentials or Plus
• Some terminology and default reports still reflect its US origin
• UK tax categories need some setup to be right

Who it is for. Limited companies with real stock to track, or teams already on QuickBooks who do not want to migrate. See our full QuickBooks UK review 2026.

FreeAgent: best for contractors who bank with NatWest group or Mettle

FreeAgent is UK-built (Edinburgh) and owned by NatWest. It is free if you have a business current account with NatWest, RBS or Ulster Bank, or a Mettle account with at least one transaction a month.

Pricing. Free with the banks above. Otherwise £33/month for a limited company, £27 for a partnership and £19 for a sole trader.

Strengths.

• Free with the right bank: unbeatable value if you fit
• Designed for UK micro-businesses and contractors from day one
• Genuinely good IR35 contractor support
• Files the CT600 to HMRC from inside the software for most simple companies
• Simple, clean interface
• Solid MTD VAT submission
• Time tracking and project tools built in

Weaknesses.

• AI features are light
• Less flexible than Xero or QuickBooks for complex businesses
• The free plan depends on staying with the NatWest group or Mettle
• Smaller integration ecosystem

Who it is for. Solo directors and contractors banking with NatWest, RBS, Ulster Bank or Mettle who want a no-fuss UK platform they run themselves. Hard to beat on price if you fit.

Sage Accounting: best if you already use Sage

Sage is the oldest name in UK accounting software. The cloud product, Sage Accounting, comes in Start, Standard and Plus.

Pricing. £20 Start, £43 Standard, £59 Plus.

Strengths.

• Trusted brand with UK accountants, especially longer-established firms
• Strong payroll integration via Sage Payroll
• A natural step for businesses moving from Sage desktop

Weaknesses.

• Standard, the plan most limited companies need, is the most expensive of the mainstream options at £43
• AI features are limited
• Fewer integrations than Xero or QuickBooks

Who it is for. Businesses already on Sage payroll or moving from Sage desktop.

Pandle: the cheapest paid option

Pandle is a UK-built cloud accounting platform for small businesses and bookkeepers.

Pricing. A free plan, and Pandle Pro at £5/month plus VAT.

Strengths.

• The cheapest paid plan on this list
• MTD VAT returns on Pro
• Made in the UK for UK businesses

Weaknesses.

• Functional rather than polished
• Small integration ecosystem
• No real AI features
• Smaller accountant network

Who it is for. Cost-sensitive micro-businesses who want the basics at the lowest price.

QuickFile: free for low volumes

QuickFile is free for businesses with up to 1,000 ledger entries, which covers many small limited companies.

Pricing. Free up to 1,000 ledger entries. £60 a year plus VAT for up to 4,000. A Power User subscription adds features for smaller accounts.

Strengths.

• Genuinely free for low-volume businesses
• MTD VAT included
• UK-built and UK-focused
• Bank feeds available for a small yearly fee

Weaknesses.

• Dated interface
• No AI features
• Basic reporting
• Small accountant network

Who it is for. Side-hustle companies, dormant companies and very small businesses on a tight budget.

How do you choose accounting software for a limited company?

Six questions decide it.

1. Do you want to operate accounting software, or have an AI accountant do the work?
If you want Finn to do the bookkeeping and you review and sign, AccountsOS is built around that. If you want to run the software yourself (reconcile, run reports, file returns), Xero, QuickBooks and FreeAgent are mature options.

2. Will you use an external accountant?
If yes, ask which software they prefer. Xero has the broadest UK accountant coverage, then QuickBooks, then FreeAgent. In AccountsOS your accountant gets their own accountant access to the live books.

3. Which bank do you use?
With NatWest, RBS, Ulster Bank or Mettle, FreeAgent is free. That is hard to ignore unless you need something it does not do.

4. How many transactions do you have?
Up to 1,000 ledger entries a year, QuickFile is free. Above that, the realistic choice is AccountsOS at £20, or £33 to £59 at FreeAgent, Xero Grow, QuickBooks Essentials or Sage Standard.

5. Do you need inventory, multi-currency or industry-specific features?
Inventory: QuickBooks or Xero. Deep multi-currency and niche integrations: Xero.

6. How much do you want AI to do?
AI-native tools assume Finn does most of the work and you supervise. Traditional platforms assume you or a bookkeeper do the work and AI helps. Both are reasonable; pick the one that matches how you want to spend your time.

What about spreadsheets?

Spreadsheets are allowed for a company that is not VAT-registered. Once you cross the £90,000 VAT threshold, MTD VAT returns must come from compatible software, and since April 2026 the CT600 must be filed through commercial software too.

For a dormant company or a very early company with a handful of transactions, a spreadsheet plus an annual accountant review can work. Move to software once you have any of:

• VAT registration
• More than about 50 transactions a year
• Any payroll, including a director's salary
• Several income streams or contracts
• An accountant who charges by the hour for clean-up

See our spreadsheets vs accounting software guide for the full comparison.

How do you switch accounting software?

Switching is a real cost. Plan for:

• A few hours setting up the new software (chart of accounts, bank feeds, opening balances)
• Reconciling opening balances against the old software
• One full VAT quarter to check the returns match
• Telling your accountant before, not after

Most moves between Xero, QuickBooks and FreeAgent involve an export and a manual import. AccountsOS imports your history from Xero, QuickBooks, Sage and others, and Finn maps the old accounts and categorises the transactions, which removes most of the manual work.

Switch at your financial year-end where you can: you then only move opening balances, not a part-year of transactions.

Frequently Asked Questions

What is the best accounting software for a UK contractor with a limited company?

It depends on who you want doing the work. AccountsOS (£20/month after a 14-day free trial) is best if you want an AI accountant to do the bookkeeping, VAT, payroll, salary and dividends and year-end accounts while you review and sign. FreeAgent is best if you bank with NatWest, RBS, Ulster Bank or Mettle (it is then free) and want simple software you run yourself. Xero is best if your accountant works in Xero. Whichever you choose, keep an accountant or IR35 specialist for a disputed IR35 status or an HMRC enquiry.

Does AccountsOS handle IR35?

AccountsOS keeps the books straight whichever side of IR35 a contract falls, and Finn can talk you through the status tests. There is also a free IR35 checker. No accounting software decides your status for you: for a medium or large client the client decides, and if a small client leaves it to you and the contract is inside IR35, have an accountant or IR35 specialist do or check the deemed employment payment.

What is the cheapest UK accounting software for a limited company in 2026?

QuickFile is free up to 1,000 ledger entries. Pandle Pro is £5/month plus VAT. FreeAgent is free with a NatWest, RBS, Ulster Bank or Mettle business account. AccountsOS is £20/month after a 14-day free trial (no card), with the bookkeeping done for you. All four handle MTD VAT.

What does QuickBooks cost in the UK in 2026?

QuickBooks Online costs £16/month for Simple Start, £38 for Essentials, £56 for Plus and £123 for Advanced, excluding VAT, at the standard rate. Essentials is the first plan that handles supplier bills, which most limited companies need. In October 2026 QuickBooks was offering new customers 90% off for six months or a 30-day free trial. See our QuickBooks UK 2026 review.

Does AccountsOS work as a Xero or QuickBooks replacement?

Yes for most small UK limited companies. AccountsOS covers bookkeeping, VAT under MTD, Companies House accounts and confirmation statements, the Corporation Tax computation, payroll, dividends and invoicing. The differences: direct bank feeds cover Starling, Revolut, Wise, Mercury and other fintech banks, with any other bank by statement upload; filing the CT600 and sending payroll RTI from inside AccountsOS are going through HMRC's software recognition, so for now they go through other software or your accountant; and it prepares micro-entity accounts only.

What is the best UK accounting software for directors who pay themselves salary and dividends?

AccountsOS models the salary and dividend split against your real numbers and the 2026-27 rates, shows what is safe to take after the company's tax, and records each dividend with a voucher. Ask Finn "can I pay myself £2,000 this month?" and get an answer from your live books. Xero and QuickBooks hold the data but expect you or your accountant to do the analysis. See our salary and dividends strategy guide.

Which UK accounting software is MTD-compliant?

All seven options on this list file MTD VAT returns: AccountsOS, Xero, QuickBooks Online, FreeAgent, Sage Accounting, Pandle (Pro) and QuickFile. AccountsOS is HMRC-recognised software for Making Tax Digital VAT, and you can check it on HMRC's list of MTD VAT software (search "AccountsOS"). MTD for Income Tax applies to sole traders and landlords, not to the limited company itself.

Can I get a free trial of UK accounting software?

Yes. AccountsOS offers a 14-day free trial with no card, then £20/month. In October 2026 Xero, QuickBooks and Sage were offering new customers 90% off for six months, FreeAgent 50% off for six months, and QuickBooks also a 30-day free trial. Pandle has a permanent free plan.

Do I need an accountant if I use AI accounting software?

Not for the day-to-day. In AccountsOS, Finn does the recurring production work (bookkeeping, VAT, payroll, dividends, the year-end accounts and the Corporation Tax computation) and you review and sign. Keep a qualified accountant for audits, an HMRC enquiry, a disputed IR35 status, a company sale or closure, and unusual tax. If you already have one, they can work from live books instead of a year-end dump.

What about Sage 50 or Sage desktop?

Sage 50 is Sage's desktop product, separate from the cloud Sage Accounting plans compared here. If you are on Sage desktop, the options are to stay, move to Sage Accounting in the cloud, or use the move to compare Xero, QuickBooks, FreeAgent or AccountsOS. Switching at your year-end is easiest.

How does an AI accountant like AccountsOS differ from Xero or QuickBooks with AI features?

With an AI accountant, Finn reads your books, does the work and brings you only the decisions. With traditional software plus AI features, you still operate the software and the AI makes suggestions. If you do not enjoy operating accounting software, an AI accountant saves real time. If you want to control every step yourself, software with AI on top is more comfortable. Read our AI-native vs bolt-on accounting software guide.

What if my accountant only supports Xero or QuickBooks?

Three options: ask them to log in to AccountsOS with accountant access and work from the live books (or take an export), move to the software they use, or change accountant. Plenty of firms now work across several products.

Bottom line

For a new UK limited company or contractor in 2026, the realistic shortlist is three:

1. AccountsOS if you want Finn to do the books, VAT, payroll, dividends and year-end while you review and sign: £20/month after a 14-day free trial, no card
2. FreeAgent if you bank with NatWest, RBS, Ulster Bank or Mettle and want simple software you run yourself
3. Xero if your accountant works in Xero or you need its app marketplace

QuickBooks suits product businesses with stock. Sage suits businesses already on Sage. Pandle and QuickFile are the cheapest but do the least.

The biggest 2026 question is no longer "Xero or QuickBooks?" It is "do I want software I operate, or an AI accountant who does the work?"

Try AccountsOS free for 14 days. No card required.