Best free accounting software for small businesses in 2020
Accountancy software can make running your business quicker, simpler, and easier, and there are some great free solutions out there. Check out the options here, and find the right fit for your business.
Anyone who’s ever run a business knows what a headache accounting can be.
Knowing how much money is coming in and out is crucial, but keeping track of it all can be stressful and time consuming, especially for the UK’s army of small businesses. It’s no surprise, then, that a raft of accountancy software products is available – all of which promise to make balancing the books a doddle.
Get it right, and you can make big savings. Indeed, a 2018 study by Sage suggested that SMEs save 2.3 days per month by using dedicated accounting software – equivalent to £17,000 a year.
While major players like Sage, QuickBooks and FreshBooks dominate the market, you might not know that there is some great free accounting software out there, perfect for early stage businesses that need to carefully account for every penny.
Using our detailed knowledge of the needs of UK SMEs, we’ve taken a comprehensive look at what’s out there, and picked out five products that we love.
We’ve based our choices on ease of use, features, design, scalability, suitability for the UK taxation system, and suitability for various kinds of businesses.
Read on for detailed insight, and to discover which products could make a real difference to your small business.
This guide will cover:
Best free accounting software for UK small businesses
Our top picks for free accounting software are:
- QuickFile – best for very small businesses that want a slick cloud-based accounting solution for free
- FreeAgent – best for RBS/Natwest customers that don’t mind their bank seeing their accounts
- Wave Accounting – best for small businesses that want a powerful, fully featured accounting solution
- GnuCash – best for small businesses that want desktop open source accounting software
- VT Cashbook – best for small businesses looking for a basic and simple solution that’s great for VAT returns
- Great range of features
- Responsive support community
- Fee applies for larger accounts
- Cloud-based – works on web browser, mobile, and tablet
What is QuickFile?
Founded in 2010, QuickFile is accounting software that’s specifically aimed at freelancers, small businesses, and entrepreneurs. It’s a simple and intuitive cloud-based solution that helps any small business owner with little accounting knowledge to easily keep track of their finances.
It’s also got great reviews on Trustpilot, amassing an average score of 4.7 out of 5 from over 1,100 reviews, with reviewers praising its ease of use and range of features.
What can QuickFile do?
QuickFile boasts an enviable range of features, including:
- Integration with over 50 automated bank feeds
- Easily manage invoices through a branded portal, which your clients can use to view and pay invoices through a range of online payment providers like PayPal and Stripe
- Track and file VAT returns – QuickFile is fully compatible with Making Tax Digital
- Generate a range of reports that give insight into your business
- Full multi-currency support
- Tools to create estimates, purchase orders, and delivery notes
- A mobile app that allows you to create invoices/estimates and snap expenses receipts on the go
- A seamless ‘click to print’ service if you need to post hard copies of your invoices, estimates, or statements
Why is QuickFile free?
QuickFile is only free for accounts of a certain size. This is slightly technical, but you’re limited to 1,000 ledger entries (this includes all invoices, purchases and bank transactions). Once you go over this limit, you pay a set fee of £45+VAT per year (approximately £54 in total at current rates). This fee also grants you access to some advanced features, such as enhanced bulk invoice entry and VAT bridging tools.
The free version is also supported by ads.
This pricing structure makes it perfect for startups – who can upgrade as their business grows – and means that you can easily try QuickFile for free to see if it’s the right fit for your business.
What support does QuickFile offer?
While there is no phone support available, QuickFile has a very active online community forum, and promises to answer most questions posted there within a few hours. You can also email their support team directly, but you’re likely to get a quicker response by posting a question in the forum.
- Powerful cloud-based accounting software with a huge range of features
- Free for Natwest/Royal Bank of Scotland (RBS) business banking customers
- Dedicated phone and email assistance from UK-based support accountants
- Cloud-based – works on web browser, mobile and tablet
What is FreeAgent?
Set up in 2007, FreeAgent is now used by over 90,000 small businesses across the UK, who use it to keep track of their finances, expenses, invoices, estimates, and more. It boasts some great advanced features, like automatically generated VAT returns, corporation tax forecasts, and self-assessment tools that automatically fill in up to 90% of the self employment tax return form. It has also won awards (it was named the Small Business Accounting Software of the Year at the 2018 Accounting Excellence Awards, for example), and has an average rating of 4.7 out of 5 (from nearly 1,000 reviews) on Trustpilot.
For most users, though, all this comes at a cost (see the “why is FreeAgent free” section for full details). The reason FreeAgent is being discussed here is that it was bought by RBS in March 2018 for £53m, and it is now being offered for free to RBS/Natwest business banking customers.
This equates to a saving of at least £150 a year, and so is very tempting for small business owners. However, the small print makes it clear that taking up this option means your bank will be able to see exactly what’s going on with your accounts, so carefully consider whether you want to give them access to your detailed financial data in return.
What can FreeAgent do?
FreeAgent’s huge range of features includes:
- Tools to create and send professional estimates and invoices
- Time tracking tools so you can easily create smart timesheets
- Powerful HMRC integration that makes doing your tax return a doddle
- Automatic creation of VAT returns
- Corporation tax forecasting
- A dashboard that lets you easily monitor your cash flow
- Automatic importation of bank transactions
- A projects view that clearly shows the income, time, and expenses associated with each project, and whether it’s making a profit or loss
- A fully featured mobile app that allows you to snap receipts, create invoices, track time, manage payments, and see your accounts on the go
Why is FreeAgent free?
As stated above, FreeAgent is only free for RBS/Natwest business banking customers.
For everyone else, the standard pricing is as follows:
- Sole trader – £19+VAT per month – includes self-assessment filing tool
- Partnership/LLP – £24+VAT per month – includes profit share calculation tool
- Limited company – £29+VAT per month – includes self-assessment filing, dividend vouchers, and corporation tax forecasting tools
All plans have a 30-day free trial.
If you are an RBS/Natwest business banking customer, then you can get FreeAgent for free. However, remember that you are giving up something valuable in exchange – your financial data. Quite what your bank intends to do with this is not yet clear, but make sure you consider how this might affect you before signing up, and discuss this decision with your accountant if you have one.
What support does FreeAgent offer?
FreeAgent offers excellent customer service, with help available from UK-based support accountants via phone and email during business hours (9am-5pm Monday to Friday). The website also has lots of resources that explain things like expenses, invoices, and VAT filing.
- Powerful accounting software that’s completely free
- Handy receipt scanning mobile app
- US/Canada focus limits UK functionality
- Cloud-based – works on web browser, mobile, and tablet
What is Wave Accounting?
Founded in 2010 in Toronto, Canada, Wave Accounting is powerful, free, cloud-based accounting software that has a great UI and a slick marine design scheme. It makes its money by selling payroll and payments services (alongside display ads), which means its free accounting software is pretty much unlimited in terms of account size etc. All this means Wave Accounting is beloved by US startups, but its US/Canada focus means it’s not an ideal fit for UK small businesses – and some may find it a non-starter for this reason.
What can Wave Accounting do?
Wave Accounting’s great range of features includes:
- Tools to create and send professional invoices, even on the go
- Unlimited income and expense tracking
- Receipt scanning via an iPhone/Android mobile app
- Create and export a range of accounting reports
- Multi-currency support with automatic exchange rate calculations
- Integration with Shopify
- Connections to PayPal, Shoeboxed, and Etsy
- A smart dashboard that organises income, expenses, payments, and invoices
- As well as receipt scanning and invoice creation, the mobile app allows you to easily keep track of your accounts on the move
Why is Wave Accounting free?
As mentioned above, Wave Accounting makes its money by displaying ads, and most importantly, by selling payments and payroll services. These services are targeted at US/Canadian customers, with the payroll service being exclusive to those customers. This focus means that, for UK small businesses, Wave Accounting has some significant deficiencies.
Most notably, Wave Accounting does not support the new Making Tax Digital (MTD) protocol for VAT, and so it will be of only limited use to businesses that need to register for VAT and file VAT tax returns digitally. Unlike some of the other providers discussed here, it also does not support the automatic importation of bank transactions via open banking, making keeping track of your financial activity a more time consuming process.
What support does Wave Accounting offer?
Wave offers expert help via its community forum, and you can also ask for technical support via a help function built into the platform. There is no phone support available, however.
Wave Accounting Verdict
- Open-source desktop accounting software
- Completely free
- Basic features
- Desktop – works on Windows, Mac, and Linux PCs
What is GnuCash?
GnuCash began life in 2001, and is a desktop open-source accounting software. If you’re confused by any of that; desktop means you need to actually download and install it, while open-source means that anyone can download and edit the actual code that makes up the program, in order to add extra functionality and fix errors.
This means it’s completely free forever, but it won’t win any awards for its UI, and it’s not particularly tailored to the needs of small businesses (there’s no open banking integration or mobile app, for example). There’s also a bit of a learning curve, and doing your accounts is a more manual and fiddly process than with some of the other software discussed in this piece.
What can GnuCash do?
GnuCash offers a basic range of accounting features. This includes:
- A checkbook-style interface that allows you to record transactions via double entry accounting
- Support for recurring transactions
- Generated reports that show balance sheets, profit and loss etc.
- Customer and vendor tracking tools
- Multiple currency support
- Compatible with QIF files used by some other accounting software
Why is GnuCash free?
Essentially, GnuCash is made on an entirely voluntary basis, so no one who makes it gets paid at all. The product is then provided free of charge to anyone who wants to use it, and keeps being updated by a dedicated army of volunteer developers. In other words, GnuCash is free because it’s not trying to make money at all – it just wants to help people who can’t afford professional accounting software. If you want to help them out, then you can donate via the GnuCash website, or even volunteer to test new updates.
What support does GnuCash offer?
GnuCash supports its users through its forums (called Mailing Lists), and an extensive manual and FAQ. There’s also a part of the GnuCash wiki called Using GnuCash, which gives solutions to common issues encountered by real-world GnuCash users. This probably goes without saying, but there’s no phone or email support for GnuCash.
- Basic desktop accounting software
- Easy to use
- Paid upgrade required for Making Tax Digital VAT returns
- Desktop – works on Windows PCs
What is VT Cashbook?
VT Cashbook was released in 2019, but it’s from a company with a strong track record in accounting software. VT Software was founded in 1997, and its professional products (VT Accounts and VT Transaction+) are beloved by accountants, especially small firms that work with small businesses. Cashbook is the starter product – a straightforward, easy to use desktop accounting software that’s perfect for anyone looking for a simple way to keep track of their accounts.
What can VT Cashbook do?
VT Cashbook offers the following:
- Fast data entry with autocomplete
- Keep track of multiple bank/cash accounts
- Bank reconciliations (check your accounts against your bank statements)
- Produce VAT returns (with paid upgrade)
- Easily correct mistakes
- Produce profit and loss accounts, balance sheets, and ledger reports
Why is VT Cashbook free?
As with some of the other software on this list, VT Cashbook is free software with basic functionality that is designed to encourage business owners to upgrade to a more advanced paid version.
In this case, VT Software offers two paid options.
The cheaper option is VT Transaction+, which costs £75+VAT a year for a single user. This allows users to create and file Making Tax Digital VAT returns, as well as maintain customer and supplier ledgers.
The full VT Accounts suite costs £150+VAT per year, and allows users to easily create professional reports for their companies, as well as quickly calculate corporation tax. It also works as a Microsoft Excel plugin, making it attractive for any Excel users that don’t want to learn the nuances of a new program.
All VT products come with a 60-day free trial.
What support does VT Cashbook offer?
VT Software doesn’t offer any dedicated support for its free Cashbook program, with the only assistance given being a detailed user guide available on its website. For the Transaction+ and Accounts programs, support is available by both phone and email (currently email only due to COVID-19 restrictions), with the requirement that the user is either a current subscriber or purchased the software in the last 12 months.
VT Cashbook Verdict
How to choose the best free accounting software for your small business
Choosing the right free accounting software for your business is an important decision, and one you should approach carefully. Below are some key things you should consider when comparing providers.
Cloud-based vs desktop
Cloud-based accounting software is all the rage right now, and it’s easy to see why – these services let you work on your accounts from anywhere with an internet connection, on any device you have to hand. This means you can snap a pic of an expenses receipt as soon as it’s handed to you, or digest your profit and loss report during breakfast. However, it’s not the ideal solution for everyone, and anyone who runs a business in an area with limited internet connectivity may find a desktop solution is better suited to their needs.
Check with your accountant (if you have one)
This should not be the crucial factor in your decision (you’re paying them, after all), but if you do already work with an accountant, then it may be useful to get their input on what software is likely to work best for your business, and which works best with their systems.
Choose your compromise
Every piece of free accounting software discussed in this article has benefits and drawbacks. To work out which one is right for you, you need to decide which of the bad points you can live with. Do you want a basic solution that has no usage limits? A slick cloud-based service that you’ll have to pay for once your business reaches a certain size? Or are you prepared to give your bank access to your accounts in return for a powerful free accounting solution? Regardless of which you choose, chances are you will have to compromise on something – there's a reason this software is free, after all.
Take them for a spin
There’s no better way of working out which free accounting software is right for your business than trying them out for yourself. Remember, they’re free, so you can simply sign up/download, put your data in, and see how each feels when you use them day to day. Give each software you're considering a little trial period, and see which one works best in practice. Many of the top paid accounting software providers (see below) also offer free trials, so you can see exactly what the extra outlay will give you in return.
The best alternatives to free accounting software
As you’ve probably realised by now, the line between free and paid accounting software is blurry to say the least. To help you work out if free accounting software is the best fit for your business, we’re going to take a quick look at four of the most popular paid accountancy software programs on the market: Sage, QuickBooks, FreshBooks, and Xero.
All the software discussed below is cloud-based, meaning it works in your web browser, and on your mobile or tablet.
For a more comprehensive overview of the different paid accounting packages available, check out our page on the best small business accounting software.
Sage Business Cloud Accounting
Sage is a UK company that has been producing accounting software for the best part of four decades. Founded in 1981, its latest offering – Sage Business Cloud Accounting – is a cloud-based accounting solution that’s perfect for businesses large, small, and anywhere in between.
Alongside everything you’d expect from cloud-based accounting software in 2020 – including open banking integration, invoice creation, and Making Tax Digital VAT returns – Sage Business Cloud Accounting includes award-winning customer service. This is available 24/7 via phone and live chat, and vital for all those small business owners whose working hours frequently stretch beyond the standard 9 to 5 (and that’s most of you, in our experience).
The price depends on which Sage Business Cloud Accounting package you select.
- Entry-level accounting software
- Connect your bank account
- Submit VAT returns
- Advanced reporting capabilities
- Unlimited users
- Cash flow statements
- Multi-currency support
- Inventory management
The cheapest package, Accounting Start, costs £12+VAT per month and is designed for sole traders. It offers entry-level accounting software that lets you (amongst other things) create sales invoices, track what you’re owed, connect your bank account, and submit VAT returns. You’ll also get the mobile app for working on the go, plus 24/7 support.
Accounting Standard is aimed at small businesses, and costs £24+VAT per month. For this extra outlay, you get advanced reporting capabilities, support for unlimited users, cash flow statements, and the ability to record purchase invoices.
Billed as advanced accounting software for small businesses, Accounting Plus is the top package. For £30+VAT a month, you get everything in the two packages discussed above, plus support for multiple currencies and inventory management (which can make a real difference to anyone running a retail business).
Payroll services can be added to any of these packages for an extra fee (from £7+VAT per month, depending on the number of employees).
At the time of writing, Sage is offering 3 months free on all its Business Cloud Accounting packages, as well as a 30-day free trial so you can see if it’s right for your business.
QuickBooks Online comes from another company with a long history in accounting software – Intuit software was founded in 1983, and has grown from its US origins to satisfy users all over the world. The UK is a key market for the company, and QuickBooks Online is cloud-based accounting software that has been specifically designed for UK small businesses.
It ticks all the standard boxes – track income and expenses, produce and submit Making Tax Digital VAT returns, create and send invoices, and connect multiple bank accounts – but also has great features like a cash flow planner, and built in integration for Construction Industry Scheme (CIS) deductions. All plans also come with reporting capabilities and 24/7 customer support.
Quickbooks Online has three small business plans:
- SmartScan VAT checker
- Mileage tracking
- Estimate creation
- Up to three users
- Manage bills and payments
- Multi-currency support
- Up to five users
- Track employee time/project profitability
- Specialised budgeting/stock management tools
Simple Start costs £12+VAT per month and offers all the features discussed above, as well as mileage tracking, a SmartScan VAT checker that looks for errors on your VAT return, a tool for creating and sending estimates, and a mobile app that allows you to snap receipts on the go and have the important info automatically uploaded into your accounts.
Upgrade to an Essentials plan for £20+VAT per month, and you’ll be able to have up to three users, get access to a useful tool for managing bills and payments, and be able to handle multiple currencies.
Plus, the top plan, costs £30+VAT a month and adds support for up to five users, tools for tracking employee time and project profitability, as well as specialised budgeting and stock management tools. The last of these comes with low stock alerts, leaving you with one less thing to worry about.
Payroll can be added to any of these plans, with the cost depending on whether you need standard or advanced payroll, and how many employees are being paid. This service starts at £4+VAT per month, plus £1 per paid employee per month.
At the time of writing, QuickBooks Online is offering 60% off these plans for the first six months. All plans have a 30-day free trial, so you can try it for yourself with no obligation.
FreshBooks started way back in 2004, and has been cloud-based since the beginning. From its Toronto home, it has gradually spread worldwide, and has a tailored offering for the UK. All FreshBooks plans include unlimited customised invoices, unlimited expense entries, a tool that helps you create and send Making Tax Digital VAT returns, the ability to accept credit card payments online, open banking integration, unlimited time tracking, unlimited estimates, and specialised tax time reports.
There are two FreshBooks plans designed for small businesses:
(There is also a self-employed offering that’s limited to 5 billable clients and costs £11+VAT a month, but this is unlikely to be suitable for many small businesses.)
The Plus plan costs £19+VAT per month and offers all the features discussed above, plus automated recurring invoices, scheduled late fees, automated late payment reminders, and the ability to create client retainers.
There’s also a handy feature called ‘Proposals', which helps creative professionals to produce company documents that explain their services or clearly explain their creative plans and associated fees.
This plan is limited to 50 billable clients, but FreshBooks makes clear that this limit applies to active and archived clients, and that old clients can be deleted to make space. You will also still see the info for deleted clients, and deleted clients can also be undeleted later.
If you have more than 50 clients, then you’ll need the Premium plan. This costs £38+VAT per month, and supports up to 500 billable clients.
If you have more than 500 billable clients, then you’ll need to contact FreshBooks directly for a custom solution, with a personal account manager and customised training.
On both the plans discussed in detail above, extra users can be added for £7+VAT per person per month, while advanced payments (so you can process cards in person or over the phone) can be added for £15+VAT per month.
At the time of writing, FreshBooks is offering 60% off these plans for the first six months, and all plans have a 30-day free trial so you can try FreshBooks for yourself.
Xero began in 2006 in Wellington, New Zealand, and has now expanded all over the world, including three UK offices (in London, Manchester, and Milton Keynes). As this presence indicates, the UK is a key market for Xero, and its cloud-based accounting services are used by over half a million UK businesses.
The features offered by Xero are comprehensive, including open banking integration, tools to create and send invoices, inventory management, a customisable dashboard that shows you at a glance how your business is doing, Making Tax Digital VAT returns submission, automatic Construction Industry Scheme (CIS) calculations/reports, and a mobile app that lets you tackle your accounts on the go.
24/7 online support is also included, with Xero noting that whenever you’re working, their global presence means someone will always be available to help.
While it costs extra (see below), Xero also has a sophisticated payroll service that, for example, has already added functionality that makes it easy to correctly process furloughed and self-isolating employees.
Xero offers three plans for UK small businesses.
- Making Tax Digital VAT returns
- Open banking integration
- Strict usage limits
- Same features as Starter
- No usage limits
- Multi-currency support
The Starter plan costs £10+VAT per month, and comes with all the features discussed above. There are, however, some pretty strict usage limits – businesses on the Starter plan are only able to send 5 invoices/quotes per month, enter 5 bills per month, and reconcile 20 bank transactions per month.
The Standard plan costs £24+VAT per month, and removes all of these limits. This makes it a great fit for growing businesses.
Finally, the Premium plan costs £30+VAT per month, and adds support for multiple currencies.
As well as payroll, a number of optional extra services can be added to any of the plans above. These are discussed below:
- Xero payroll – £5+VAT per month (up to 5 employees), £1+VAT per month for each additional employee
- Xero expenses – £2.50+VAT per month, plus £2.50+VAT per month for each additional active user
- Xero projects – £5+VAT per month, plus £5+VAT per month for each additional active user
- Xero Construction Industry Scheme (CIS) contractor – £5+VAT per month (allows users to submit CIS returns from Xero)
All Xero plans come with a 30-day free trial.
Choosing the right accounting software for your business is an important decision, and one you should consider carefully. Finding a solution that fits you and your business could save you countless hours of stressful and time-consuming admin, freeing you up to do what you do best – run your business.
Free accounting software is hugely attractive to UK small businesses, especially those that are just starting out. However, as this piece has explained, all free accounting software comes with compromises, so you have to think about which of these you can live with.
Moreover, you don’t want your small business to stay small forever, and chances are you’ll have to move to paid accounting software at some point. If you can afford it, finding a paid solution that will grow with your business could make this whole process much easier.
Finally, all the options discussed on this page are either free or offer a 30-day free trial, so be sure to make use of these options. It’s only by actually using the software that you’ll be able to work out which is right for you, which compromises are tolerable, and which extra features are really worth paying for.