If you're a UK freelancer looking for accounting software in 2026, you've probably narrowed it down to two names: Xero and FreeAgent. Both are MTD-compatible, both are popular, and both will happily charge you £20-£40 a month for the privilege.
But which one is actually worth your money? And is there a chance you don't need either?
I've compared them across every category that matters to UK freelancers and sole traders. No affiliate links, no sponsored rankings — just an honest breakdown.
Quick Verdict
The Short Answer
FreeAgent wins for most solo freelancers. It's simpler, has built-in self-assessment filing, and is free with NatWest/RBS business accounts. Xero is better if you have employees, your accountant insists on it, or you need advanced features like multi-currency invoicing. If you earn under £50k, you might not need either — a well-structured spreadsheet could save you £200-£400/year.
Pricing Comparison (March 2026)
| Feature | Xero | FreeAgent |
|---|---|---|
| Cheapest plan | £15/month (Starter) | £19/month (or FREE with NatWest/RBS) |
| Full-feature plan | £47/month (Premium) | £34/month (sole trader plan) |
| Annual cost (mid-tier) | £396/year (Standard) | £228-£408/year |
| Free option | No | Yes (NatWest/RBS customers) |
| Free trial | 30 days | 30 days |
Winner: FreeAgent on pricing. The NatWest/RBS deal is a game-changer. If you bank with either, you get full FreeAgent for free — that's a £400/year saving over Xero's mid-tier plan.
Ease of Use
FreeAgent
FreeAgent was designed specifically for freelancers and sole traders. The interface assumes you're not an accountant. Bank feeds connect easily, expenses are straightforward, and the dashboard shows you your tax position at a glance. Most freelancers can be up and running within an hour.
Xero
Xero is more powerful but has a steeper learning curve. It was originally built for small businesses with accountants, and it shows. The reconciliation workflow is excellent once you learn it, but the sheer number of options can be overwhelming for someone who just wants to track income and expenses.
Winner: FreeAgent. If you're a solo freelancer without an accountant, FreeAgent is significantly easier to get started with.
Features Head-to-Head
| Feature | Xero | FreeAgent |
|---|---|---|
| MTD for Income Tax | ✅ Compatible | ✅ Compatible |
| Self-assessment filing | ❌ Need accountant or separate filing | ✅ Built-in, file directly to HMRC |
| Bank feeds | ✅ 200+ banks | ✅ Most UK banks |
| Invoicing | ✅ Advanced (recurring, multi-currency, quotes) | ✅ Good (recurring, estimates) |
| Multi-currency | ✅ Full support | ⚠️ Limited |
| Expense tracking | ✅ Receipt capture + auto-categorise | ✅ Receipt capture + mileage |
| Mileage tracking | ❌ Need add-on | ✅ Built-in |
| Payroll | ✅ Built-in (up to 100 employees) | ✅ Built-in (smaller scale) |
| Project tracking | ✅ Time tracking + project costing | ✅ Time tracking |
| App integrations | ✅ 1,000+ apps | ⚠️ ~100 apps |
| Mobile app | ✅ Good | ✅ Good |
| Tax forecasting | ❌ | ✅ Real-time tax position |
FreeAgent: Pros and Cons
✅ Pros
- Free with NatWest/RBS accounts
- Built-in self-assessment filing
- Real-time tax position forecast
- Built-in mileage tracking
- Designed specifically for freelancers
- Simpler interface, less overwhelming
- UK-focused (not a global tool adapted for UK)
❌ Cons
- Limited multi-currency support
- Fewer integrations than Xero
- Less flexible reporting
- Not ideal if you have an accountant who prefers Xero
- Can feel basic as your business grows
Xero: Pros and Cons
✅ Pros
- 1,000+ app integrations
- Excellent multi-currency support
- Strong invoicing and quoting
- Most accountants know and prefer it
- Scales well as your business grows
- Better project costing and reporting
❌ Cons
- No free tier (even with any bank)
- Steeper learning curve
- No built-in self-assessment filing
- Starter plan is very limited (20 invoices/month)
- Not specifically designed for UK freelancers
- More expensive overall
When to Choose FreeAgent
- You're a solo freelancer or sole trader
- You bank with NatWest, RBS, Ulster Bank, or Mettle (free access)
- You file your own self-assessment
- You want the simplest possible setup
- You drive for work and need mileage tracking
- You don't need complex multi-currency features
When to Choose Xero
- You have employees
- Your accountant prefers or requires Xero
- You invoice in multiple currencies regularly
- You need extensive app integrations
- You're planning to grow beyond sole trader
- You need detailed project costing and reporting
The Budget Alternative Nobody Mentions
💡 Do You Actually Need Accounting Software?
Here's what nobody selling software wants you to hear: if you earn under £50,000/year, you might not need either Xero or FreeAgent.
The MTD threshold for 2026/27 is £50,000. Below that, you're not required to use MTD-compatible software. A well-structured spreadsheet can handle your bookkeeping perfectly well.
Even above the threshold, you have options. Bridging software (£50-£100/year) can submit your spreadsheet data to HMRC for MTD compliance — a fraction of what Xero or FreeAgent costs.
Annual cost comparison:
- Xero Standard: £396/year
- FreeAgent (paid): £228-£408/year
- FreeAgent (NatWest/RBS): £0/year
- Spreadsheet + bridging software: £50-£100/year
- Spreadsheet only (under threshold): £0-£7
Not Sure You Need Software?
Check if you're ready for MTD with our free readiness tool, or grab a pre-built tax tracking spreadsheet that does 90% of what accounting software does — for a one-off payment.
Free MTD Readiness Check → Tax Tracker Spreadsheet — £7 →Making Tax Digital: Are Both Ready?
Yes. Both Xero and FreeAgent are on HMRC's list of MTD-compatible software for Income Tax Self Assessment. Both will handle the new quarterly reporting requirements from April 2026.
The difference is how much you'll pay for that compliance. If you're a straightforward sole trader earning over £50k, both work. But if you're under the threshold, you're paying for MTD compliance you don't yet need.
Our free MTD readiness checker will tell you exactly where you stand and what (if anything) you need to do before April.
What About QuickBooks?
QuickBooks is the third popular option. In short: it sits between FreeAgent and Xero in complexity. It's cheaper than Xero (from £12/month), has decent features, but lacks FreeAgent's self-assessment filing and Xero's integration ecosystem.
For a full comparison of all three (plus free alternatives), see our guide to the best accounting software for UK freelancers.
Final Verdict
| Scenario | Best Choice |
|---|---|
| Solo freelancer, NatWest/RBS customer | FreeAgent (it's free) |
| Solo freelancer, other bank | FreeAgent (simpler, cheaper) |
| Freelancer with employees | Xero (better payroll + scaling) |
| International clients, multi-currency | Xero (proper multi-currency) |
| Working with an accountant | Ask your accountant (most prefer Xero) |
| Under £50k, budget-conscious | Spreadsheet (save £200-400/year) |
Save Money on Bookkeeping
Our MTD Readiness Toolkit includes everything you need for Making Tax Digital compliance — setup guides, checklists, and decision frameworks. One-off payment, no monthly fees.
MTD Readiness Toolkit — £14 → Tax Tracker Spreadsheet — £7 →Frequently Asked Questions
Is Xero or FreeAgent better for UK freelancers?
FreeAgent is generally better for solo freelancers and sole traders. It's simpler, has built-in self-assessment filing, and is free with NatWest/RBS business accounts. Xero is better if you have employees, work with an accountant who prefers it, or need advanced multi-currency features.
How much do Xero and FreeAgent cost in 2026?
FreeAgent costs £19-£34/month (or free with NatWest/RBS business accounts). Xero costs £15-£47/month depending on the plan. Both are MTD-compatible.
Do I need accounting software for Making Tax Digital?
If you earn over £50,000 from self-employment or property, you'll need MTD-compatible software from April 2026. If you earn under the threshold, you can still use spreadsheets with bridging software, or budget tracking tools like our Tax Tracker spreadsheet.
Can I use a spreadsheet instead of Xero or FreeAgent?
Yes, if your income is under the MTD threshold (£50k in 2026/27). A well-structured spreadsheet with bridging software costs far less than monthly accounting subscriptions. Many freelancers earning under £50k find a spreadsheet template more cost-effective.
Is FreeAgent really free with NatWest?
Yes. NatWest, RBS, Ulster Bank, and Mettle business account holders get full FreeAgent access at no extra cost. It's a genuine freebie — the full product, not a stripped-down version.
Last updated: 12 March 2026. Prices and features may change — check provider websites for the latest.