Making Tax Digital software: stay on Xero or switch to something cheaper?
Six MTD-ready options, the yearly cost by profile, the 2026 thresholds, and an eight-step move that keeps your HMRC history straight.
The short answer: Xero is fully ready for Making Tax Digital, for VAT and for Income Tax, so compliance alone is not a reason to leave. Price is. Ignite went from £16 to £18 a month in 2026 and still caps you at 20 invoices. If you are a sole trader who banks with NatWest, RBS, Ulster Bank or Mettle, FreeAgent is free. If you have no budget at all, Zoho Books has a free plan that files MTD returns. A sole trader or landlord who is not VAT registered can use Sage's free plan, or keep a spreadsheet and link it to HMRC with Coconut. A micro business that mostly files VAT pays least with QuickFile, and a small company whose accountant lives in QuickBooks may as well join them. We compared all six against Xero's 2026 UK pricing.
Our ranking is editorial: any sponsored placement is flagged on its card, and affiliate links never move a score.
Why sole traders and landlords look past Xero
MTD for Income Tax changes who needs software. From 2026, sole traders and landlords with qualifying income over £50,000 must keep digital records and send HMRC quarterly updates. The threshold drops to £30,000 in 2027 and £20,000 has been announced for 2028. Plenty of people who never needed bookkeeping software now do, and many start by asking whether Xero is worth it. Here is what pushes them elsewhere.
The entry price keeps climbing
Xero's UK plans in 2026, before VAT: Ignite £18, Grow £39, Comprehensive £55 and Ultimate £70 a month. Ignite went up from £16 this year. For a landlord with two flats sending four quarterly updates, £216 a year is a lot when free options exist. Xero also keeps the right to change prices at any time.
Ignite is tight for an active trader
Ignite allows 20 sales invoices and 10 bills a month. A tradesperson or consultant with steady work hits that fast, and the next step, Grow, more than doubles the bill to £39.
The 90% discount ends after six months
Xero often runs heavy launch offers on its UK plans for the first six months. Budget on the full price from month seven, not the promotional one. FreeAgent's half-price offer works the same way.
Bank feeds that drop out
Xero still scores 4.1 out of 5 on Trustpilot over 11,000 reviews, but 17% are one star. Recent complaints describe card feeds that stopped syncing for weeks with no goodwill gesture. If your MTD records depend on bank feeds, an outage means manual catch-up before the quarterly deadline.
A chatbot before a human
Reviewers keep calling the support chatbot painfully useless, while praising the people behind it once they get through. If you want a person on the end of the phone during your first MTD year, check that before you sign anywhere.
Accountants are spreading their bets
After repeated price rises in Australia and New Zealand, some accounting firms say they cannot rely on a single mainstream platform. In the UK the same logic applies: if your accountant also supports FreeAgent or QuickBooks, you have room to choose.
You are… go with…
The right Making Tax Digital software depends on how you earn and who files for you. One line usually fits. Each card jumps to the full write-up.
Free with an eligible business account, MTD for Income Tax on the sole trader and landlord plans.
A sole trader or small company with zero budgetZoho BooksFree plan that files VAT, quarterly updates and the final return.
A sole trader or landlord who is not VAT registeredSage AccountingSole Trader and Landlord Free, MTD for Income Tax at £0.
Someone who wants to keep their spreadsheetCoconutMTD Bridging at £49.99 a year, no VAT.
A micro business whose main job is VATQuickFileFree up to 1,000 ledger entries, £60 a year + VAT above.
A small company whose accountant uses QuickBooksQuickBooksEvery plan handles MTD for Income Tax, VAT from Simple Start.
Making Tax Digital software, option by option
Every option here is recognised by HMRC for at least one MTD obligation. HMRC does not supply software itself; it keeps an official finder listing compatible products, and the Income Tax list alone runs to well over a hundred names. The trick is to read what each product actually files: VAT returns, quarterly updates, the final return, or only some of them. For each one below: why you would pick it over Xero, who it suits, its catch, how to move your records from Xero, and the 2026 price before VAT.
FreeAgent: free if you bank with the right people
Free with your bankWhy pick it over Xero. FreeAgent is free for NatWest, RBS, Ulster Bank and Mettle business customers. For a sole trader who already banks there, it is the cheapest full accounting package on this page, with no feature cut compared with the paid version. It is listed by HMRC as compatible, and it is the tool accountants often recommend to clients who want plain-English reminders about what is due and when.
Who it suits. Freelancers, sole traders and landlords who want one place for invoices, expenses, bank feeds and their MTD filings.
Who it doesn't. A growing company with stock, several entities or heavy multi-currency work. And watch the plan you pick: MTD for Income Tax sits on the sole trader and landlord plans. The limited company plan files VAT, but a company pays Corporation Tax, which is outside MTD. Partnerships cannot get FreeAgent free through Mettle.
The catch. Without a bank deal you pay £19 a month as a sole trader, £10 as a landlord, £27 as a partnership and £33 as a limited company, with 50% off for the first six months. Over a year at full price, the sole trader plan is £228, a touch more than Xero Ignite.
Moving from Xero. Export your contacts, open invoices and trial balance, enter the trial balance as FreeAgent's opening balances, then connect your bank. Start at the beginning of a quarter, so each update comes from one system.
- Free
- with NatWest, RBS, Ulster Bank, Mettle
- Paid
- sole trader £19, landlord £10/month
- MTD
- Income Tax on sole trader and landlord plans; VAT
- Catch
- company plan files VAT only
Zoho Books: the full MTD job on a free plan
Zero budgetWhy pick it over Xero. Zoho Books' free plan does not stop at a token submission. It files MTD VAT returns and handles Income Tax end to end: quarterly updates, year-end adjustments and the final declaration. Its logic will feel familiar if you come from Xero: invoices, bank rules, a separate seat for your accountant.
Who it suits. Sole traders and small service businesses who want to stop paying for software, and teams already on other Zoho apps.
Who it doesn't. Anyone who needs fast support: reviews across the Zoho suite mention slow replies and a busy interface.
The catch. The free plan's limits are published: one user plus your accountant, 1,000 invoices and 1,000 expenses a year. Some comparison sites mention a turnover cap; Zoho's own pricing page does not, so go by those two limits. Above them, Standard is £12 a month or £10 billed yearly, Professional £24 (£20 yearly). Annual plans are not refunded pro rata if you leave early.
Moving from Xero. Zoho Books imports contacts, items and invoices from CSV. Export each list from Xero, map the columns, then key in opening balances from your trial balance.
- Free
- 1 user + accountant, 1,000 invoices/year
- Paid
- Standard £12/month (£10 yearly)
- MTD
- VAT, quarterly, final return
- Catch
- slow support
Sage Accounting: free for sole traders and landlords without VAT
Non-VAT, freeWhy pick it over Xero. Sage answered MTD for Income Tax with a free plan called Sole Trader and Landlord Free, for sole traders and landlords who are not VAT registered. If your turnover sits below the VAT threshold, you may never need to pay, which beats £216 a year on Xero Ignite.
Who it suits. Sole traders and landlords who have just crossed the £50,000 line, or will cross £30,000 in 2027, with simple books.
Who it doesn't. VAT-registered businesses wanting to pay nothing: VAT filing sits on the paid plans.
The catch. The free plan is deliberately tight on volume, and paid prices only appear inside Sage's sign-up flow, not on a public grid. Compare them with Zoho Books' published prices before committing. Check on HMRC's finder that the free plan covers the final declaration for your situation.
Moving from Xero. Bring your contacts by CSV and start at a quarter boundary. Our guide to leaving Sage covers the reverse trip if it does not suit.
- Free
- Sole Trader and Landlord Free
- Paid
- prices shown in the sign-up flow
- MTD
- Income Tax; VAT on paid plans
- Catch
- free plan has no VAT
Coconut: keep your spreadsheet and still comply
Spreadsheet usersWhy pick it over Xero. Many sole traders who look at Xero for MTD really just want to keep the spreadsheet they have used for years. Coconut's MTD Bridging links that spreadsheet to HMRC for £49.99 a year: you log income and expenses as before, and Coconut sends the quarterly updates.
Who it suits. Sole traders and landlords who are not VAT registered and do not want to learn accounting software.
Who it doesn't. Companies and VAT-registered sole traders: Coconut does not file VAT returns.
The catch. The year-end return costs another £49.99 on top of Bridging. If you want everything in one place, MTD filing covers quarterly updates and the final declaration for £129.99 a year or £12.99 a month. There is a 14-day trial with no card, and Coconut is free for two years with a Zempler business account. Reviewers flag no phone support and patchy bank feeds.
Moving from Xero. Export your Xero transactions for the current tax year to a spreadsheet, tidy the categories, and use that file as your bridging source from the next quarter.
- Bridging
- £49.99/year
- Full MTD filing
- £129.99/year or £12.99/month
- MTD
- Income Tax only
- Catch
- no VAT returns
QuickFile: the budget choice for VAT filers
Low-volume VATWhy pick it over Xero. QuickFile is a UK accounting package that stays free under 1,000 ledger entries. Above that, it costs £60 a year + VAT up to 4,000 entries. For a small company whose main MTD job is the VAT return, that is the lowest paid price on this page, against £216 a year for Xero Ignite.
Who it suits. Micro businesses and small companies with light VAT filing, and spreadsheet users who need VAT bridging.
Who it doesn't. Sole traders who mainly need MTD for Income Tax: it sits in QuickFile's advanced paid features, so FreeAgent or Zoho Books are more direct.
The catch. Automatic bank feeds cost £15 a year + VAT. The interface is plain and expects some discipline to set up.
Moving from Xero. Import your chart of accounts and contacts by CSV, then post opening balances from your Xero trial balance at the start of a VAT period.
- Free
- up to 1,000 ledger entries
- Paid
- £60/year + VAT to 4,000 entries
- MTD
- VAT; Income Tax as advanced add-on
- Catch
- bank feeds £15/year + VAT
QuickBooks: when your accountant already lives there
Accountant-ledWhy pick it over Xero. Plenty of UK practices run on QuickBooks. If yours does, moving there makes their work faster, and that shows on your fee. Every plan handles MTD for Income Tax, quarterly updates and final return included.
Who it suits. Small limited companies, VAT-registered sole traders and accountancy clients who need several users: Essentials includes 3, Plus 5, Advanced 25.
Who it doesn't. Anyone price sensitive who just wants a free MTD bridge.
The catch. The Sole Trader plan cannot file a VAT return: once VAT registered, you need Simple Start at least, and multi-currency only arrives with Essentials. QuickBooks shows its prices during sign-up rather than on a public grid, so we do not quote a figure we could not read. You get either 90% off for six months or a 30-day trial, not both: note the price from month seven before you choose.
Moving from Xero. Ask your accountant to run the conversion: they usually have the tools. Our page on QuickBooks alternatives helps if you want to compare the other way.
- Offer
- 90% off 6 months or 30-day trial
- MTD
- Income Tax on every plan; VAT from Simple Start
- Users
- 3, 5 or 25 by plan
- Catch
- no public price grid
Xero and six MTD options side by side
What will a year cost you? It depends on your profile. A sole trader without VAT can pay £0 with Sage's free plan or Zoho Books Free, £99.98 with Coconut Bridging plus its year-end return, or £216 on Xero Ignite. A landlord pays £0 on Sage, £120 on FreeAgent's landlord plan, or £216 on Xero. A small VAT-registered company pays £0 to £60 + VAT on QuickFile, £120 on Zoho Books Standard billed yearly, £396 on FreeAgent's company plan, or £216 on Xero Ignite if 20 invoices a month is enough (£468 on Grow if not). All prices before VAT.
| Entry price (ex VAT) | What it files for MTD | |
|---|---|---|
| XeroStarting point | Ignite £18, Grow £39, Comprehensive £55/month | VAT and Income Tax; 20 invoices on Ignite |
| FreeAgentBank deal | Free with partner banks; sole trader £19, landlord £10 | Income Tax on sole trader and landlord plans; VAT |
| Zoho BooksZero budget | £0; Standard £12 (£10 yearly) | VAT, quarterly updates and final return |
| Sage AccountingNon-VAT | Sole Trader and Landlord Free; paid in sign-up flow | Income Tax free; VAT on paid plans |
| CoconutSpreadsheet | Bridging £49.99/year; MTD filing £129.99/year | Income Tax only, no VAT |
| QuickFileVAT on a budget | Free to 1,000 entries; £60/year + VAT | VAT; Income Tax as advanced add-on |
| QuickBooksAccountant-led | Shown in sign-up; 90% off or 30-day trial | Income Tax on every plan; VAT from Simple Start |
Prices before VAT shown by each vendor in 2026, subject to change.
Leaving Xero in eight steps
Your past VAT returns already sit with HMRC and do not move. What you carry over is your records, so the job is mostly about timing and clean exports.
Pick a quarter boundary
FirstSwitch at the start of a VAT period or MTD quarter, so each quarterly update comes from one system. MTD for Income Tax has four updates a year, due by 7 August, 7 November, 7 February and 7 May, then the final return by 31 January. Moving in the weeks after one of those deadlines gives you a full quarter to settle in.
Mid-quarter switches mean stitching two sets of figures together, and your accountant will charge for the stitching.
- Best moment
- start of a quarter
Check your Xero notice period
ContractSome Xero pages mention a month's notice. Read the terms in your own account and work back from your switch date.
- Check
- terms in your account
Export everything while you still pay
DataUse Accounting, Advanced, Export accounting data for the general ledger, then export the trial balance, contacts, open invoices and bills, bank statements and attachments. Repeating invoice templates do not export: screenshot them.
- Exports
- ledger, trial balance, contacts, open items
- Gap
- repeating templates
Disconnect Xero from HMRC
ComplianceAuthorise the new software with HMRC for VAT and Income Tax, and remove Xero's connection, so only one product sends your updates.
- Rule
- one product per obligation
Set up accounts and VAT codes in the new tool
StructureMap your Xero chart of accounts line by line before importing, then recreate VAT rates and bank accounts.
- Output
- account mapping sheet
Enter opening balances and open invoices
ImportKey in your trial balance as opening balances and recreate unpaid invoices so payments match. The new trial balance should equal Xero's to the penny.
- Check
- balances match to the penny
Move bank feeds, then cut Xero's
FeedsConnect your bank in the new tool and disconnect it in Xero the same day, or you will import transactions twice.
- Risk
- duplicate transactions
Run one month in parallel, then cancel
FinishKeep Xero read only for a month. Store your exports outside Xero, with their attachments, so your records stay readable after the subscription ends.
- Overlap
- one month
Is your tool missing from this page? Email us: hello@hackceleration.com
What goes wrong when people leave Xero
None of these are technical. They are timing and housekeeping mistakes, and each one costs more than avoiding it.
Switching mid-quarter
Your quarterly update then draws on two systems. Wait for the boundary, or ask your accountant to bridge it.
Leaving two products connected to HMRC
Remove Xero's authorisation once the new tool is set up, or you risk sending figures from the wrong place.
Budgeting on the discount
Six-month offers end. Compare full prices across a year, including VAT if you cannot reclaim it.
Forgetting the first-year grace
New MTD for Income Tax users do not pick up penalty points for late quarterly updates in their first year. That gives you room to get the new tool right, not a reason to skip updates.
Choosing without your accountant
A free tool that your accountant has to re-key costs more than a paid one they use daily. See our rankings for MTD software, landlords and the self-employed.
Leaving attachments behind
Receipts attached in Xero are your evidence. Export them before cancelling and check the files open.
- Switch date at a quarter boundary
- Notice period read in your account
- Ledger, trial balance, contacts, open items and attachments exported
- Repeating invoices screenshotted
- New software authorised with HMRC, Xero removed
- Opening balances match to the penny
- Bank feeds moved and Xero feeds cut
- Records stored outside Xero
Making Tax Digital software: your questions
Is Xero Making Tax Digital compliant?
Yes. Every Xero UK plan is HMRC recognised for VAT and for MTD for Income Tax, including quarterly updates and the final return.
Does HMRC provide free MTD software?
No. HMRC does not supply software, but its online finder lists compatible products, including free ones such as Zoho Books' free plan and Sage's free tier for non-VAT sole traders.
Who has to use MTD for Income Tax in 2026?
Sole traders and landlords with qualifying income over £50,000. The line drops to £30,000 in 2027, and £20,000 has been announced for 2028.
What is the cheapest MTD software for a landlord?
A free option if you qualify: FreeAgent through a partner bank, or a free tier. Otherwise FreeAgent's landlord plan is £10 a month. Our MTD software for landlords page goes further.
Do I lose my VAT history if I leave Xero?
No. Submitted returns are held by HMRC. What you must keep is your own records, so export the ledger and attachments before cancelling.
Can I use spreadsheets for MTD?
Yes, with bridging software that sends your figures to HMRC. Coconut does it for Income Tax from £49.99 a year, QuickFile for VAT. The records must stay digital, with no retyping between the spreadsheet and the submission.
What happens if I miss a quarterly update?
In the 2026-27 tax year, nothing: new users get no penalty points for late quarterly updates. After that, each late update earns a point, and the fourth point triggers a £200 penalty. Our MTD software ranking lists who files what.
How long does a move off Xero take?
Exports take an afternoon, setup a few days. The real wait is for a clean quarter boundary.
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