Choosing accounting software is one of the more important decisions a small business owner makes. The wrong choice can mean months of frustration, difficult data migration, and software that does not meet HMRC compliance requirements. This guide walks you through what to look for so you can make a well-informed decision.
Start With Your Business Size and Complexity
The first question is how complex your accounts actually are. A sole trader invoicing a handful of clients each month has very different needs from a limited company with employees, stock, and multiple VAT rates.
For very simple operations, basic bookkeeping software may be all you need. If you have employees, you will need payroll functionality or a package that integrates with dedicated payroll software. If you manage stock, look for inventory tracking. If you invoice clients in multiple currencies, currency handling matters.
Be honest about where your business is now, but also consider where it is likely to be in a couple of years. Migrating accounting software is a disruption, so choosing something you will quickly outgrow is a false economy.
Making Tax Digital Compatibility
If your business is VAT-registered, your accounting software must be MTD-compatible. Making Tax Digital for VAT requires digital records and VAT returns submitted directly from compliant software. MTD for Income Tax is also being rolled out to self-employed individuals and landlords above certain income thresholds.
Not all accounting software is MTD-compatible, and not all that claims compatibility is equally capable. Check the HMRC-approved software list to confirm any package you are considering is fully recognised. This is a non-negotiable requirement for UK businesses. See our guide to What Is Making Tax Digital for a full explanation of the requirements.
Cloud-Based vs Desktop
Most modern accounting software is cloud-based, meaning your data lives on a server and you access it through a browser or app. This allows access from anywhere, automatic backups, and software updates handled without your involvement.
Desktop accounting software is installed locally and stores data on your machine or server. Some businesses prefer this for data control reasons, but it requires manual backups and you are responsible for keeping it updated.
For most small businesses, cloud-based software is the practical choice. The main exception is businesses with poor or unreliable internet connectivity, where offline access matters. Our guide on cloud accounting vs desktop covers this in more detail.
Ease of Use
If you are not an accountant, ease of use matters enormously. Some accounting packages are built for finance professionals and present a steep learning curve for business owners managing their own books. Others are designed specifically for non-accountants and prioritise simplicity.
Most major packages offer free trials. Use them. Log in, try to raise a sales invoice, reconcile a bank statement, and run a basic profit and loss report. If those tasks feel unintuitive, the software is not the right fit, regardless of how many features it has.
Bank Feeds and Reconciliation
One of the most time-saving features in modern accounting software is an automatic bank feed. This connects to your business bank account and pulls transactions in automatically, making reconciliation much faster.
The quality of bank feed connectivity varies between software and between banks. Before committing, confirm the software integrates directly with your specific bank account. Some integrations work via Open Banking; others use older methods that are less reliable.
Invoicing and Billing
If your business sends invoices, look at how the invoicing feature works. Can you customise invoices with your logo and branding? Can you set up recurring invoices? Does it track who has paid and send automated reminders?
These details might seem small but they affect how professionally your business presents itself and how efficiently you manage cash flow.
Payroll Integration
If you have employees, you need payroll software that handles PAYE, National Insurance, pension auto-enrolment, and Real Time Information (RTI) reporting to HMRC. Some accounting packages include payroll; others require a separate subscription or a third-party integration.
Check whether payroll is included in the base price or costs extra. Also check whether it handles auto-enrolment pension submissions if you have a workplace pension scheme. Our guide on what to look for in payroll software covers this in detail.
Support and Accountant Access
If you use an accountant or bookkeeper, check whether the software allows you to give them access to your account directly. Most cloud accounting packages allow multi-user access, which removes the need to export and email files.
Also consider what support is available. Phone support, live chat, and a knowledge base are all useful. Check reviews specifically around customer service responsiveness — this tends to be where businesses report the most frustration.
Cost
Accounting software is almost always sold on a monthly subscription basis. Prices vary considerably, and introductory offers are common. Look at the full price after any introductory period ends, and check what is included at each tier.
Common add-ons that push up the cost include extra users, payroll, and advanced reporting. Build a realistic picture of what you will actually pay monthly before committing.
Making the Decision
The accounting software market in the UK is dominated by a few well-established names, but there are also specialist options for specific industries and business sizes. Take advantage of free trials, read reviews from UK users specifically, and confirm MTD compliance before committing.
If you have an accountant, ask them which software they prefer. Many accountants have preferred packages they know well, and using the same software can simplify collaboration and reduce your accounting fees.
If you are currently using spreadsheets and wondering whether it is time to switch, see our guide on when to move from spreadsheets to accounting software.
