Xero vs QuickBooks for Making Tax Digital

At a glance: Xero versus QuickBooks

Xero and Intuit QuickBooks are two of the most widely used cloud accounting systems in the United Kingdom. Both platforms have passed recognition testing with HM Revenue and Customs (HMRC) for Making Tax Digital (MTD) for Income Tax and Making Tax Digital for VAT. Both allow sole traders and landlords to maintain digital records and send quarterly updates directly to HMRC.

Neither provider provides a permanent free tier, and neither is bundled free of charge with retail business bank accounts. Every user must pay an ongoing monthly subscription. The best choice depends on whether your business is registered for VAT, how many sales invoices you issue each month, and whether you require automated mileage tracking.

Standard monthly prices compared

Both providers promote substantial introductory discounts on their public websites. For example, Xero frequently advertises 90 per cent off for the first six months, while QuickBooks promotes discounts or thirty-day free trial periods. When evaluating long-term business costs, you must look at the regular ongoing subscription prices that take effect once promotions expire.

Xero pricing structure

• Xero Simple: 7 pounds a month excluding VAT (8.40 pounds a month including VAT, which is 100.80 pounds a year including VAT). Built specifically for non-VAT registered sole traders and landlords. Includes MTD for Income Tax quarterly updates and final declarations, bank reconciliation, Hubdoc receipt capture, and CIS subcontractor calculations. It limits users to creating 10 invoices and quotes each month.
• Xero Ignite: 18 pounds a month excluding VAT (21.60 pounds a month including VAT, which is 259.20 pounds a year including VAT). Adds direct Making Tax Digital for VAT return filing to HMRC, up to 20 invoices, and up to 10 bills each month.
• Xero Grow: 39 pounds a month excluding VAT (46.80 pounds a month including VAT). Removes limits on invoices and bills, adds automated bill entry, and includes payroll for one person.

QuickBooks pricing structure

• QuickBooks Sole Trader Plus: 10 pounds a month excluding VAT (12 pounds a month including VAT, which is 144 pounds a year including VAT). Designed for non-VAT registered self-employed workers and landlords. Includes MTD for Income Tax filing, automated bank feeds, receipt capture, Self Assessment estimates, and GPS mileage tracking. It does not file VAT returns to HMRC.
• QuickBooks Simple Start: 16 pounds a month excluding VAT (19.20 pounds a month including VAT, which is 230.40 pounds a year including VAT). Designed for sole traders registered for VAT, providing direct MTD for VAT return submission to HMRC.
• QuickBooks Essentials: 33 pounds a month excluding VAT (39.60 pounds a month including VAT). Supports up to three users, supplier bill management, multi-currency accounting, and CIS deductions.

Making Tax Digital for Income Tax compliance

Under rules set out by HM Revenue and Customs, Making Tax Digital for Income Tax requires sole traders and landlords with gross qualifying income above specific thresholds to maintain digital accounting records and send quarterly updates using compatible software.

Qualifying income is gross income before deducting expenses, also known as turnover. It is not taxable profit. The statutory thresholds and rollout timetable confirmed by HMRC are:

• From 6th April 2026: Qualifying income over 50,000 pounds (evaluated against your 2024 to 2025 Self Assessment tax return).
• From 6th April 2027: Qualifying income over 30,000 pounds (evaluated against your 2025 to 2026 Self Assessment tax return). HMRC estimates that approximately 1,077,000 additional sole traders and landlords will join at this stage.
• From 6th April 2028: Qualifying income over 20,000 pounds (evaluated against your 2026 to 2027 Self Assessment tax return).

Both Xero and QuickBooks have passed HMRC software recognition testing and connect directly to HMRC systems. During each tax year, both packages allow you to compile digital records of business turnover and allowable expenses, review the cumulative quarterly figures, and submit the quarterly update. At the end of the tax year, both platforms assist with the final declaration due by 31st January.

Key bookkeeping features compared

Bank feeds and transaction reconciliation

Both systems connect securely with major UK banks through Open Banking data links. Once connected, incoming and outgoing transactions import automatically each day. You can review and categorise transactions into appropriate tax categories with a single tap or click.

Invoicing limits

The most restrictive distinction between entry plans lies in sales invoicing. Xero Simple enforces a strict ceiling of 10 invoices and quotes per month. If you are a tradesperson, consultant or freelance professional issuing twelve invoices a month, you must upgrade to Xero Ignite at 18 pounds a month excluding VAT. In contrast, QuickBooks Sole Trader Plus includes invoicing without that ten-invoice monthly barrier.

Receipt capture

Managing paper receipts is a legal requirement under digital record-keeping rules. Xero includes Hubdoc smart document capture across all plans at no additional fee. Hubdoc extracts vendor names, dates and amounts from photos and sends the data straight into Xero. QuickBooks includes built-in photo receipt capture in its standard mobile app, automatically extracting figures and matching them against bank transactions.

Mileage tracking

QuickBooks Sole Trader Plus includes automatic GPS mileage tracking within its mobile app. You can let the app run while driving, then swipe to categorise each trip as business or personal. Xero does not include automated GPS mileage tracking in its entry-level plans; tracking journeys requires manual log entry or a separate mileage application.

Accountant support

Both providers let you invite an accountant or bookkeeper to collaborate on your books at no additional charge. Xero is especially dominant among high-street UK accounting practices, meaning your existing accountant may already use it. QuickBooks is also broadly supported across the UK accounting profession.

Landlord and property income support

Sole traders who also earn rental income from property must report both income streams under MTD rules. In QuickBooks Online, each subscription account is configured around a single business or property trade. Reporting multiple diverse businesses may require distinct company profiles or manual aggregation. In Xero, subscribers can use tracking categories to separate property income from sole trader sales, or maintain separate accounts depending on complexity.

Plain verdicts by situation

• Non-VAT sole trader with light invoicing (under 10 invoices a month): Xero Simple is the better choice on price. At 7 pounds a month excluding VAT (100.80 pounds a year including VAT), it is 43.20 pounds a year cheaper than QuickBooks Sole Trader Plus and includes Hubdoc document extraction.
• Non-VAT sole trader issuing more than 10 invoices a month: QuickBooks Sole Trader Plus is the better choice. It costs 10 pounds a month excluding VAT (144 pounds a year including VAT), avoiding the need to upgrade to Xero Ignite at 18 pounds a month excluding VAT (259.20 pounds a year including VAT).
• Sole trader with high business mileage: QuickBooks Sole Trader Plus is the clear winner due to built-in GPS mileage tracking in the mobile application.
• VAT-registered sole trader: QuickBooks Simple Start is 16 pounds a month excluding VAT (230.40 pounds a year including VAT), which is 28.80 pounds a year cheaper than Xero Ignite at 18 pounds a month excluding VAT (259.20 pounds a year including VAT).
• Residential landlord with basic properties: Xero Simple at 7 pounds a month excluding VAT is an affordable paid route if invoice caps do not constrain your operations.
• Anyone seeking a free solution: Do not choose either. Neither Xero nor QuickBooks offers a free plan. Look instead at Sage Sole Trader Free (0 pounds a year), FreeAgent through a NatWest, Royal Bank of Scotland or Mettle bank account (0 pounds a year), or spreadsheet bridging tools.

Questions people ask

Which is cheaper, Xero or QuickBooks?

For a non-VAT registered sole trader with light invoicing, Xero Simple is cheaper at 7 pounds a month excluding VAT (100.80 pounds a year including VAT), compared to QuickBooks Sole Trader Plus at 10 pounds a month excluding VAT (144 pounds a year including VAT). However, if you send more than 10 invoices a month, QuickBooks Sole Trader Plus is cheaper than upgrading to Xero Ignite, which costs 18 pounds a month excluding VAT.

Are Xero and QuickBooks recognised by HMRC for Making Tax Digital for Income Tax?

Yes. Both Xero and QuickBooks are recognised by HM Revenue and Customs for Making Tax Digital for Income Tax. Both systems support keeping digital records, submitting quarterly updates, and submitting the final declaration.

Does Xero or QuickBooks offer a free plan for sole traders?

No. Neither Xero nor QuickBooks provides a permanent free plan or a free bank account bundle in the United Kingdom. Both services require an ongoing paid subscription once any promotional trial period expires.

Can I submit VAT returns on the entry-level plans?

No. Neither Xero Simple nor QuickBooks Sole Trader Plus includes direct VAT return filing to HMRC. If your business is registered for VAT, you must choose at least Xero Ignite (18 pounds a month excluding VAT) or QuickBooks Simple Start (16 pounds a month excluding VAT).

Do Xero and QuickBooks include receipt capture?

Yes. Xero includes Hubdoc smart document capture across all plans at no extra cost, allowing you to extract data from receipt images. QuickBooks includes photo receipt capture directly within its mobile application across all plans.

Which software do UK accountants prefer?

Both software packages are widely supported across the United Kingdom. Many independent accounting practices and bookkeepers prefer Xero for practice collaboration, while QuickBooks also enjoys extensive support among small business advisors.

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Sources

• HM Revenue and Customs, Choose the right software for Making Tax Digital for Income Tax, checked 15th October 2026.
• HM Revenue and Customs, Find software that is compatible with Making Tax Digital for Income Tax, checked 15th October 2026.
• HM Revenue and Customs, Find out if and when you need to use Making Tax Digital for Income Tax, checked 15th October 2026.
• HM Revenue and Customs, Sole traders and landlords earning more than 30,000 pounds urged to act now, checked 15th October 2026.
• Xero UK, Xero UK pricing plans, checked 15th October 2026.
• Xero UK, Xero Simple plan details, checked 15th October 2026.
• Intuit QuickBooks UK, QuickBooks UK pricing and costs, checked 15th October 2026.
• Intuit QuickBooks UK, QuickBooks Sole Trader pricing, checked 15th October 2026.