Xero

Cloud accounting software from £7/month (Simple plan), with strong bank feeds and a clear upgrade path as your business grows.

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At a glance

Xero is well-established cloud accounting software with strong bank feed integration, popular with sole traders who plan to grow.

£7/m

£39/m

Simple Plan

Ignite Plan

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What is Xero?

Xero is one of the most widely used cloud accounting platforms, known for strong bank feed integration, a large ecosystem of third-party app integrations, and a clean, well-regarded interface. It’s popular with sole traders who expect to grow, take on staff, or eventually incorporate as a limited company, since Xero scales smoothly from a single-person setup to something considerably larger.

Xero restructured its UK plans in September 2024, retiring the old Starter, Standard and Premium names in favour of Ignite, Grow, Comprehensive and Ultimate.

Key features

Automatic bank feeds from most UK banks
Bank reconciliation
Making Tax Digital submission for VAT and Income Tax
Large marketplace of third-party integrations
Multi-currency accounting (Grow and above)
Payroll add-on available from Grow upwards

Pricing

Xero is currently offering 90% off for the first 6 months on new sign-ups, so the plans above cost a fraction of the listed price to start. Check Xero's UK pricing page for the current offer before signing up.

Xero has five UK tiers. Most non-VAT-registered sole traders will start on Simple, moving to Ignite once they register for VAT or need more than 10 invoices a month.

Simple - £7/month

For non-VAT-registered sole traders - the natural starting point:

Send up to 10 invoices and quotes a month
Accept online invoice payments
MTD for Income Tax ready
Bank reconciliation and smart document capture (Hubdoc)

Ignite - £18/month

Once you register for VAT or need more invoices:

Everything in Simple, plus
Up to 20 invoices and quotes a month
Enter 10 bills
Submit VAT returns to HMRC

Grow, Comprehensive and Ultimate - £39 to £70/month

Aimed at growing or established businesses needing multi-currency support, payroll, or more detailed reporting - likely more than a typical sole trader needs day one, but useful to know about as an upgrade path.

Check Xero’s UK pricing page for the latest terms before signing up.

Is Xero MTD compatible?

Yes. Xero is HMRC-recognised for both MTD for VAT and MTD for Income Tax across its UK plans, with submissions made directly from the platform.

Pros and cons

Pros:

Strong bank feed integration with most UK banks
Large ecosystem of third-party integrations if you use other business tools
Clean, well-regarded interface
Clear upgrade path if your business grows - useful if you might incorporate later
Well-established with strong long-term product investment

Cons:

Pricier than dedicated sole trader tools like Sage Sole Trader once you’re past any introductory offer
CIS subcontractor returns and auto-reconciliation cost extra on Ignite, rather than being included in the base price
No genuine free plan - only a free trial, unlike some dedicated sole trader tools

Who is Xero best for?

Xero suits a sole trader who wants strong bank reconciliation and room to grow - particularly if you expect to take on staff, deal with multiple currencies, or eventually incorporate as a limited company. If you just need straightforward sole trader accounting without those extras, a cheaper dedicated tool like Sage Sole Trader or Zoho Books’ free plan may suit you better.

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Frequently asked questions

Which Xero plan do most sole traders need?

If you're not VAT registered, Simple (£7/month) is usually the right starting point - it covers invoicing, bank feeds, Hubdoc receipt capture and bank reconciliation. Move up to Ignite (£18/month) once you register for VAT or need more than 10 invoices a month.

Does Xero support Making Tax Digital?

Yes, for both MTD for VAT and MTD for Income Tax, across its UK plans.

Can I add payroll to my Xero plan?

Yes, payroll is available as an add-on from the Grow plan upwards, priced per employee per month.

What happened to Xero’s old Starter, Standard and Premium plans?

They were retired for new customers in September 2024, replaced by the current Ignite, Grow, Comprehensive and Ultimate structure. Existing users on old plans may have since migrated.

Compare accounting software for sole traders

Xero is one option among several worth comparing. Browse the full Accounting and Bookkeeping directory to compare it against Sage, Zoho Books, FreeAgent and other options.

Prices and offers correct at time of publication. Always check the Xero website for current pricing and promotional terms before signing up.