FreeAgent vs Xero for Making Tax Digital
Last updated: · Prices checked on vendor sites on 31 October 2026
Both FreeAgent and Xero are recognised by HMRC for Making Tax Digital for Income Tax (MTD for ITSA). Xero Simple lists at £7 a month excl. VAT, or £0.70 for the first 6 months. FreeAgent lists at £19 a month for sole traders and includes VAT returns and payroll. It is free with NatWest, RBS, Ulster Bank or Mettle.
FreeAgent vs Xero: side by side
| Feature | FreeAgent | Xero |
|---|---|---|
| List price (vendor site) | Sole trader: £19/month · £190/yearexcl. 20% VAT · 50% off first 6 months (£9.50/month) or first year (£95)Landlord: £10/month · £100/yearexcl. 20% VAT · 50% off first 6 months (£5/month) or first year (£50)Price source: www.freeagent.com, checked 31 Oct 2026 | Simple (non-VAT registered): £7/month · £84/yearexcl. VAT · First 6 months £0.70/month (90% off), then £7/monthIgnite (includes VAT returns): £18/month · £216/yearexcl. VAT · First 6 months £1.80/month (90% off), then £18/monthPrice source: www.xero.com, checked 31 Oct 2026 |
| Free route | Free with a NatWest, RBS, Ulster Bank business current account or Mettle account (separate HMRC listing 3575) | None |
| HMRC finder listing | FreeAgent | Xero |
| Sends quarterly updates and tax return | Yes | Yes |
| Sole trader income | Yes | Yes |
| UK property income | Yes | Yes |
| Foreign property income | No (Not included). Source: HMRC finder | Yes (Ready now). Source: HMRC finder. Xero's pricing page does not list property types. |
| MTD for VAT | Yes, on Sole trader plan | Yes, Ignite plan and above (not Simple) |
| Employment (PAYE) income in tax return | Ready now | In development |
| Capital gains in tax return | Ready now | In development |
| HMRC Assist (submission feedback) | No | No |
| Payroll | Included on sole trader plan (accruals basis only) | Not on Simple; Ignite: £1.50 per person |
| Bank feeds | Yes — bank feed import | Yes — reconcile bank transactions |
| Invoices | Invoices and estimates included | Simple: quotes and 10 invoices; Ignite: 20 |
| Try it | Visit FreeAgent | Visit Xero |
HMRC finder statuses checked 31 October 2026 (FreeAgent product 3192, Xero product 3186). Foreign property is Ready now for Xero and Not included for FreeAgent on those product pages. The Xero pricing page is the source for the £7 and £18 list prices only; it does not mention foreign or overseas property. "In development" means the provider has committed to build it in time for the 2026 to 2027 tax return.
Which should you choose?
- Cheapest: Xero. Simple lists at £7 a month excl. VAT, or £0.70 for the first 6 months, if you are not VAT registered.Visit Xero
- Best for landlords: Xero. HMRC’s finder lists UK and foreign property as Ready now. UK-only landlords can pay £10 a month on FreeAgent’s Landlord plan.Visit Xero
- Best for sole traders: FreeAgent. VAT returns, payroll and PAYE income in the tax return are ready now on the £19 plan.Visit FreeAgent
What you actually pay in a year
Our calculation from list prices on 31 October 2026, before introductory discounts. If you are not VAT registered you cannot reclaim VAT, so the incl. VAT column is what leaves your account.
- FreeAgent Sole trader, billed monthly: £228 excl. VAT, £273.60 incl. 20% VAT
- FreeAgent Sole trader, billed annually: £190 excl. VAT, £228 incl. 20% VAT
- FreeAgent Landlord, billed monthly: £120 excl. VAT, £144 incl. 20% VAT
- FreeAgent Landlord, billed annually: £100 excl. VAT, £120 incl. 20% VAT
- Xero Simple (non-VAT registered), monthly: £84 excl. VAT, £100.80 incl. 20% VAT
- Xero Ignite (VAT returns), monthly: £216 excl. VAT, £259.20 incl. 20% VAT
Introductory offers published on the vendor pages the same day, which the list above does not include: FreeAgent takes 50% off the first 6 months on monthly billing (sole trader £9.50, landlord £5) or the first year on annual billing (sole trader £95, landlord £50). Xero takes 90% off the first 6 months: Simple is £0.70 a month, then £7; Ignite is £1.80 a month, then £18. Xero’s page marks both plans ready for MTD for ITSA. Offers change, so check the vendor page before you buy.
Choose FreeAgent if…
You bank with NatWest, RBS, Ulster Bank or Mettle (it is free while you keep the account), you are a VAT-registered sole trader who wants VAT and MTD for ITSA in one plan, you run payroll, or you also have PAYE income or capital gains to report. FreeAgent does not currently support foreign property income for MTD for ITSA.
Choose Xero if…
You are not VAT registered and want the lower list price (£7 a month on Simple, or £0.70 for the first 6 months), HMRC’s finder shows foreign property as Ready now, or you expect to grow into a larger plan later. Check that PAYE income and capital gains support, marked "In development" on HMRC's finder, is ready before your tax return is due.
Want to see more options? Compare every product on the HMRC-recognised software list, or keep your spreadsheet with bridging software. New to the rules? Start with the MTD for ITSA guide.
Sources (GOV.UK)
- Find software that works with Making Tax Digital for Income TaxSource: GOV.UK, published , updated
- Choose the right software for Making Tax Digital for Income TaxSource: GOV.UK, published , updated
- Find software that's compatible with Making Tax Digital for VATSource: GOV.UK, published , updated
- Find out if and when you need to use Making Tax Digital for Income TaxSource: GOV.UK, published , updated
- HMRC software finder: Find software that works with Making Tax Digital for Income TaxSource: HMRC service on GOV.UK, checked
Frequently asked questions
Is FreeAgent or Xero cheaper?
On list price Xero Simple was £7 a month excl. VAT, or £0.70 for the first 6 months (90% off), against £19 a month for FreeAgent's sole trader plan (£9.50 for the first 6 months) and £10 for its landlord plan. FreeAgent is free with a NatWest, RBS or Ulster Bank business account or an active Mettle account. Those yearly totals on this page are list prices and leave out the introductory discounts.
Do FreeAgent and Xero support foreign property income?
HMRC's software finder listed foreign property as Ready now for Xero (product 3186) and Not included for FreeAgent (product 3192) on 31 October 2026. Xero's pricing page does not mention foreign or overseas property, so it is not the source for that status. If you let property abroad, the HMRC listing shows Xero covers it and FreeAgent does not.
Can both file my full tax return?
Both send quarterly updates and the tax return. HMRC's finder showed employment (PAYE) income and capital gains as Ready now in FreeAgent but In development in Xero, which matters if you also have a job or sold assets.
Which is better for VAT-registered sole traders?
Both are recognised for Making Tax Digital for VAT. Xero's Simple plan is only for non-VAT registered businesses, so a VAT-registered user needs Xero Ignite at £18 a month; FreeAgent's sole trader plan at £19 a month includes VAT returns.