Xero review: should your small business make the switch in 2026?

Xero is one of the best accounting software options for small businesses, and is the top choice for expanding businesses that need sophisticated software that can grow alongside them. Xero’s strength is the well-balanced range of feature-packed plans that can take you from a solopreneur up to managing a multi-million pound enterprise.

Many sole traders and landlords will also be looking for a software that can make them compliant with the new Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) rules. Xero is HMRC-approved for MTD ITSA and it has a designated plan aimed at non-VAT registered businesses.

If you’re wondering if Xero is going to be worth your money in 2026, we’ll take you through everything you’ll need to know. Startups.co.uk has been advising small business owners for 26 years, and we’ll break down Xero’s costs, features, AI tools, and MTD-capabilities in our comprehensive guide.

Xero: a summary

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		Price from	Best for	Key benefits
Simple	Ignite	Grow	Comprehensive	Ultimate
Paid monthly: £7/month (+ VAT) Buy by 31 March 2026 to get 95% off for the first six months	Paid monthly: £16/month (+ VAT) Buy by 31 March 2026 to get 95% off for the first six months	Paid monthly: £37/month (+ VAT) Buy by 31 March 2026 to get 95% off for the first six months	Paid monthly: £50/month (+ VAT) Buy by 31 March 2026 to get 95% off for the first six months	Paid monthly: £65/month (+ VAT) Buy by 31 March 2026 to get 95% off for the first six months
Best for landlords and sole traders who need to be MTD-ready	Best for micro-businesses that just need the basics	Best for the majority of SMEs, who need automations for enhanced efficiency	Best if you deal in multiple currencies, or you need other team members to track mileage	Best for medium-sized, complex organisations
Send quotes and up to 10 invoices MTD for Income Tax ready Accept online invoice payments	Making Tax Digital VAT returns 30-day cash flow forecast Real-time reports	Enter unlimited bills Auto-reconcile bank transactions (in beta) Graphs for financial performance	Multi-currency support Mileage tracking for multiple team members Custom metrics to track your performance	180-day cash flow forecast Payroll for up to 10 people Claim expenses for up to 5 people

Pros and cons of Xero

These are some of the top strengths and weaknesses of Xero to consider:

The pros

Xero is feature-packed, with a lot to offer, but these are some standout points:

1. Easy bank reconciliation

This is a crucial element for business owners, and especially time-poor sole traders, to get right. You’ll need to know your bank feeds are adding up, and Xero has one of the easiest ways of doing this in the industry.

2. Scalability

Xero’s wide variety of uses means it can suit a range of businesses from micro-freelancers to medium-sized businesses. The clear upgrade path will support your business as it grows, so you don’t need to stress about switching.

3. Third-party integrations

One of the biggest strengths of Xero is the massive selection of other software providers that have built integrations with Xero – over a thousand in fact. Xero’s a market leader, so other companies will build with Xero in mind.

This is great not only for future planning, business growth, and generally making it easier to do your accounts, but you can also plug-in third party apps that can automate your workflows for a much smoother bookkeeping experience.

The cons

Like any software, Xero is not without its flaws. The key ones to be aware of are:

1. It can take some time to master

It takes longer to fully get to grips with Xero than some of its competitors. It’s unlikely you’ll be able to hit the ground running, and it’ll take some time and effort to master its complexities. Once you do though, it becomes very easy to use.

2. Multi-currency support is paywalled

A frustration with Xero is that it only includes multi-currency functionality on the costly Comprehensive plan (£50 per month, plus VAT).

If you hold bank accounts in different currencies, or you want to invoice in a currency other than GBP, you’ll need to pay for a mid-tier plan, even though you might not need the other premium features.

If you only need basic software, but need multicurrency support, I’d suggest looking at another competitor like Zoho Books or QuickBooks: you can find more information on these in our guide to the best accounting software for the self-employed.

3. Expenses and mileage are on the premium tiers

You’re able to capture receipts on any plan level, but if you need to capture mileage you’ll need to be on at least the Grow plan (£37 per month plus VAT), and even then this is limited to one user. You can add an additional user for £2.50, or upgrade to the higher end plans.

What are Xero’s key features?

Each of Xero’s plans is well stocked with helpful tools, but the standout feature is the easy bank categorisation. With any modern accounting software, you’ll need to connect your business bank account to the platform, and Xero makes this particularly easy.

With Xero, the bank feeds screen works like this:

1. Your transactions come in from the left
2. You categorise them on the right
3. AI will then assist in helping you guess the right ‘category’, and you can also set up rules to make this more efficient in the future

Invoicing

Xero offers customisable, professional invoice templates that support your business branding, directly out of the box.

Reporting

What we like about Xero’s reporting features is that they are highly customisable. There are a solid number of ‘widgets’ you can add to your Xero dashboard which can give you key data at just a glance.

Xero’s business snapshot is highly useful for getting a quick look at your profitability. Source: Startups.co.uk.

You’ll also be given access to short-term cash flow predictions, and Xero will also give you a snapshot of your businesses’ finances, which can be very helpful in assessing your overall financial health (we’d just advise that these are only as helpful as the data you enter, and predictions are prone to being off).

Just note that you’ll have to upgrade to at least the Comprehensive plan for more detailed reporting functions, and tailored insights.

What AI tools does Xero offer?

Xero has launched JAX (Just Ask Xero), an AI business companion. JAX is currently in beta, and being rolled out for UK users, with AI-powered features like:

• Automating workflows: like bank reconciliation
• Sending out payment reminders to your clients: to cut down on wasted admin time
• Analysing your business data: providing actionable insights

Can I use Xero with my POS system?

Hospitality owners will want to know if Xero can connect to their EPOS system, and the good news is that Xero integrates with a range of the best POS systems for small businesses, including:

• Square
• SumUp
• Lightspeed
• Epos Now

To stay on the right side of HMRC and remain compliant with Making Tax Digital, it’s going to be crucial for F&B owners to have an accounting platform that can talk to their existing POS system.

The relevant POS apps seamlessly connect to Xero, meaning you can link up your sales channels in your EPOS system with your record keeping in your cloud accounting software. For example, some POS apps will automatically sync up your daily sales, so no more tedious manual entry.

With our top rated POS system for restaurants, Square, you can connect to Xero and:

• Accept online payments instantly via Square for Xero invoices
• Automatically separate out fees
• Receive a daily Square sales summary

Can I use Xero for Making Tax Digital?

Yes, Xero is HMRC-approved and fully MTD-ready. The latest addition to the range of plans is Simple, which is specifically designed for non-VAT registered businesses.

So if you’re a sole trader or landlord who needs to submit quarterly returns to HMRC, you can do this directly through Xero. You can find out more information in our guide to MTD-ready software.

What’s it like using Xero?

In our testing, we particularly appreciated Xero’s well organised navigation bar, and certain actions like linking expenses to clients were very simple and straightforward.

As we mentioned in the key features segment, the bank feeds tool is especially easy to use, and makes the day-to-day process of your bookkeeping feel satisfying. The bills function also stood out as being especially easy to use: creating clients, adding descriptions, and adjusting currencies was nice and easy.

You might find Xero’s dashboard to be overwhelming initially, but it can be a helpful snapshot of your business. Source: Startups.co.uk.

There are a few small areas that we felt could have had an improved user-experience, such as how you customise invoices, which could have been smoother.

Is Xero easy to use?

The main thing you need to know about using Xero: it has a steep learning curve. It can take a while to fully understand all of its complexities, but once you’ve put some time into it, it can be a rewarding experience.

It may not seem like it at first glance, but it can be pretty user-friendly. We found that Xero is one of the easiest software platforms to track your upcoming monthly bills and expenses, as well as creating cash flow forecasts.

Since the end of 2025, Xero has been gradually rolling out a new interface and navigational experience to its users.

How does Xero handle receipt capture?

Xero also owns Hubdoc, the document capture app, so this comes bundled with every plan for free. The only slight downside to this is that Hubdoc is a separate app, not baked into the platform already, which can create a disjointed experience for users.

There’s also been some confusion amongst users about the difference between Hubdoc, and Xero’s built-in tool Xero Expenses. The difference is this:

• Hubdoc is used to capture physical documents
• Xero Expenses is specifically designed to help you capture and reimburse employee expense claims

Though we do note that Xero plans to address this, as a fully fledged receipt capture app experience is on the company’s update roadmap in the near future. An update we would welcome, as a smooth receipt capture experience can really help when it’s time to submit your tax return.

Expert opinion: Dan Heelan on Xero

Having worked with thousands of clients, time and time again the feedback is that Xero is the easier accounting software to use, once the owner has got used to it. It’s packed with features and scales so well as your business grows.

Dan Heelan Accountant and Business Services Director at Heelan Associates Ltd

How much does Xero cost in 2026?

Xero’s UK pricing is between £7 and £65 per month (plus VAT), offering a scalable path from sole traders to medium enterprises.

Here’s how each plan breaks down in terms of cost, and what you’re getting for your cash:

Is Xero worth the money?

In short, yes. Xero’s feature-filled, well designed plans are worth the money for business owners.

Despite some incremental price increases, Xero remains a high-value proposition for SMEs due to its extensive list of integrations and scalability. In particular, when compared to enterprise-level software, it’s incredibly good value for money.

Does Xero have a free plan?

Unfortunately, Xero doesn’t have a free plan. It does have a free trial though, so you can try it out credit-card free for 30 days, which is a decent enough amount of time for you to get a feel for the platform.

If you do need a no-cost option, we ranked Zoho Books as the best free accounting software platform.

It’s understandable that many non-VAT registered businesses with highly basic needs will be wanting a way to stay MTD-compliant without spending a penny: in which case you should head over to our guide to the best free MTD-ready software for small businesses.

Are there any hidden fees?

There aren’t strictly hidden fees, but some Xero features will only be available through higher tier plans. For instance, if you want to create a cash flow forecast, then how far into the future you can plan will be determined by your tier (you can find this information in the above pricing table).

It’s good to know that currently, there’s no extra charge for Xero users to access Jax, the AI financial agent. Although Xero has noted that they reserve the right to change this in the future.

However, users might find it frustrating that being able to claim mileage and expenses is locked behind the Grow tier (£37 per month plus VAT), and even then, it’s limited to one user. With a charge of £2.50 per additional user per month (plus VAT), this could add up quickly.

Xero vs QuickBooks: which is right for my business?

Both are very strong contenders in the accounting software space, but Xero is ultimately the best choice for ambitious businesses with plans for long-term growth.

However, QuickBooks will have some specific features that will make it a better choice under certain circumstances: for example, it has an excellent mobile app for on the move business owners.

Crucially, QuickBooks also has multicurrency support on the slightly more affordable Essentials plan (£38 per month plus VAT). You can find out more in our guide to QuickBooks cost.

If you’re wondering which one will be best for being MTD-ready, you can check out our guide to Xero vs QuickBooks for MTD.

How we test accounting software for UK small businesses

In January 2025, our dedicated research team conducted analysis and hands-on user testing into seven of the top accounting software platforms for small businesses.

This data-driven research, combined with hands-on testing, amounted to 1512 areas of investigation spread across six core categories and 25 sub categories.

Our six testing categories, which were deemed to be the most relevant to small business owners, were:

• Core accounting: the key functions of accounting software, including invoicing, tax preparation and financial transactions.
• Financial planning and visibility: the tools you need to gain a clear understanding of your company’s financial health.
• Operational efficiency: the customisability of the workflow, and the range of third-party integrations.
• Help and support: the avenues of support that are available, including contact hours, and security measures.
• Pricing: the monthly subscription costs as they compare to competitors, as well as any hidden fees.
• Usability: determining how easy to use the software is.

In order to ensure our reviews are as up-to-date and relevant as possible, we also engaged the opinion of an external accountant. In March 2026, Dan Heelan, Accountant and Business Services Director at Heelan Associates Ltd, provided us with his own expert thoughts and opinions on Xero.

In summary: should I choose Xero for my small business?

If you want a feature-packed, solidly designed accounting software that scales alongside your business as it grows, look no further than Xero.

For the vast majority of small businesses, the Grow plan represents the best cost vs feature balance: you’ll get customisable performance dashboards, unlimited quotes and invoices, and the auto-reconciliation feature which is currently in beta.

For sole traders and landlords who aren’t VAT registered and need to be MTD-ready (the April 6 deadline is now just days away!), you should choose the Simple plan. If you’re feeling unsure about what you need to actually do to be MTD-ready you can jump over to our full guide to Making Tax Digital.

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