With so many different products available, how do you know which accounting software is best for your contracting business? Our quick guide offers a few key pointers to help you make the right choice.
Work out what features you need
Most contractors will be comfortable with a system that makes it easy to raise invoices, provides a clear overview of the company’s profits and losses, and identifies debtors and creditors at a glance.
Some additional features you may need include:
Calculating VAT
If you are registered for VAT, look for a package that supports both cash and invoice accounting, the flat rate scheme, and generates VAT returns.
Since Making Tax Digital (MTD) is now mandatory for most VAT-registered businesses, ensure the software is MTD-compliant and allows you to file returns directly with HMRC.
Some tools now include a built-in MTD dashboard to alert you to submission deadlines and failed filings, especially useful for busy contractor-directors.
Running your payroll
Do you want a system that calculates staff wages, produces payslips, and handles tax and National Insurance deductions? Most packages offer this, but check if it includes real-time information (RTI) submissions to HMRC if you’re running payroll.
A few providers now offer payroll automation that runs and files automatically each month, reducing the chance of human error.
Budgets and forecasting
Some systems can analyse historical data and generate budget forecasts — handy for setting financial goals and spotting trends or inefficiencies in your business.
More advanced tools now use AI-assisted forecasting based on client trends and seasonality, helping predict cash shortfalls in advance.
Fixed asset management
Software with fixed asset tracking can provide audit trails, cost records, and automatic depreciation calculations – features that are particularly useful if your business owns equipment or other assets.
Bank feeds and project tracking
Most software now integrates directly with business bank accounts, automatically pulling in transactions. Some also support project-level accounting – ideal if you work on multiple jobs with varying costs or timescales.
Check that your bank can integrate with your chosen software provider before you sign up.
Many systems now also support receipt scanning via smartphone, with automatic line-item matching and tagging.
Multi-platform access
If you work across different devices, make sure your software is cloud-based, mobile-friendly, and has a reliable app. Offline access is becoming increasingly common, enabling you to raise invoices or log expenses without an internet connection and sync them later.
Comparing accounting software providers
When comparing software packages, features are only part of the story. Price—and what you get for your money—also matters.
Many providers offer a free trial (typically 14 to 30 days), so you can try before you commit.
Subscription fees vary depending on the number of features, users, or support options included. Expect to pay between £10 and £40+ per month (ex. VAT) for a typical contractor-ready package.
There are a few free options, but they come with limitations, particularly for limited companies:
Zoho Books Free is available to UK businesses with an annual turnover under £35,000. If your company earns more than that, you’ll need a paid plan.
GnuCash is open-source and completely free but lacks key UK features like MTD VAT filing and payroll — so it’s rarely suitable for limited companies.
Pandle offers a free plan with invoicing, bank feeds, and expense tracking. To access MTD VAT filing, you’ll need the paid version (£5/month), but it’s still one of the most affordable UK options.
QuickFile has a free tier for businesses with under 1,000 transactions per year. It supports MTD VAT and can be a viable low-cost option for some contractors.
Look out for tools that offer accountant collaboration portals — these allow your accountant to access your figures live without sending over backups or spreadsheets.
Contractors using multiple income streams (e.g. dividends, rental, or side businesses) may also benefit from packages that let you manage more than one business profile in a single dashboard.
And remember – if you use a specialist contractor accountant, they may provide software as part of their package. This can be a great cost-saver, but make sure you’re happy with the tool they offer before signing up.
Leading accountancy software providers (2025)
FreeAgent The most popular choice for contractors due to its simplicity and full feature set. Costs £33/month – 50% off for your first 6 months, depending on business type. MTD-ready with payroll and time tracking included. We’ve used it at Contract Eye for over 10 years. Almost universally used by contractor accountants. Get a 30 day free trial here.
QuickBooks Online
Well-established provider offering robust tools for VAT, payroll, expenses, and real-time bank feeds. Regular deals available, with typical pricing around £33/month depending on features.
Xero
Popular with freelancers and limited companies. Offers excellent reporting, payroll, project tracking, and expense management. Costs around £33/month for a typical limited company.
Sage Accounting
Formerly known as Sage One. Sage now offers several cloud accounting plans, primarily tailored to small businesses. Starting at £14/month for basic invoicing and VAT support, rising to £28+/month with payroll and inventory.
FreshBooks
Popular with freelancers, now supports UK VAT and MTD filing in its Plus plan (£25/month). Known for its clean interface and strong invoicing tools. FreshBooks now includes client portal functionality, allowing clients to view past invoices, accept estimates, and make secure online payments.
Shop around
All prices listed above are exclusive of VAT and accurate as of mid-2025, but are subject to change.
It’s a highly competitive market, so be sure to look out for special deals, bundled offers (e.g. with business bank accounts), or free trials before committing.
