Xero vs FreeAgent vs Ledgers: the 2026 price and value matrix

Quick answer: These three are not competing for the same customer, and the headline prices hide it. Xero Simple at £7/month is the cheapest route to MTD for Income Tax that isn't tied to a bank — but it can't file a VAT return or even approve a bill. FreeAgent is free if you bank with NatWest, RBS, Ulster or Mettle, and files more to HMRC than either rival — VAT, Self Assessment, RTI payroll, CT600 and Companies House accounts. Ledgers costs more than both at the entry level and files less, but reads 150 documents a month on a £19 plan against FreeAgent's 10 and Xero Ignite's 10 approvable bills. Pick on which of those you're actually short of.

We publish Ledgers, so treat the closing recommendation with the scepticism it deserves. What we can do is show our working: every price below is ex VAT and taken from each provider's own published pricing in July 2026, and where a rival beats us we say so and name the plan.

All prices exclude VAT. This matters more than it looks. All three vendors quote ex VAT, and a VAT-registered business reclaims it — but a sole trader or landlord under the £90,000 threshold cannot. If that's you, add 20% to every number on this page.

Why the headline price is the wrong number

The sticker price tells you almost nothing, because each of these products meters a different thing:

• Xero meters documents you can approve. Receipt capture via Hubdoc is free and uncapped on every plan — but on the Ignite plan you can only approve 10 bills a month, and on Simple you cannot approve a bill at all. Xero's own help centre puts it plainly: you can create draft bills, "however, you can't approve these documents on this plan."
• FreeAgent meters AI extractions. Every licence gets 10 Smart Capture files a month — bills and expenses — then it's £5/month for unlimited.
• Ledgers meters transactions and documents directly: a bank transaction categorised, and a document read. Solo is 50 transactions and 150 documents a month.

So "£16 vs £19" is a comparison of three different products. The question that actually decides it is: what runs out first, and what does it cost to un-run-out?

What each one costs

Ex VAT, July 2026. Both Xero and FreeAgent run heavy introductory discounts — the full rate is what matters, because you'll pay it for years and the discount for months.

Xero is raising prices on 1 September 2026: Ignite £16→£18, Grow £37→£39, Comprehensive £50→£55, Ultimate £65→£70. Simple stays at £7. The multi-organisation discount is also being withdrawn on that date. If you're comparing today, compare against the September numbers.

At the bottom of the market, we are the most expensive of the three, and by a meaningful margin: a landlord pays £7 to Xero, £10 to FreeAgent — or £0 if they bank with NatWest — against £14.99 to us. There is no version of this table where that reads well for Ledgers, and if price is your binding constraint you should stop reading here and buy one of the other two.

The caps that actually bind

This is where the money goes. Every row is the point at which a plan stops being enough.

Three things fall out of this that most comparisons miss.

FreeAgent's unlimited users and unlimited employees are a genuinely strong offer. A five-person company on Xero Grow pays £37 + four extra employees at £1.50 = £43/month before anything else. On FreeAgent Limited Company it's £33 flat, or £0 with the right bank account. That is a real, structural advantage and it gets better the more staff you have.

Xero's entry plans are narrower than the price suggests. Simple at £7 cannot file a VAT return, cannot approve a bill, and has no payroll — it is an MTD-for-Income-Tax plan, not an accounting plan. Ignite at £16 has no Expenses module and 10 approvable bills. The plan most people actually need is Grow at £37, rising to £39 in September. There's also a trap in the small print worth knowing: Xero warns that "transactions initiated by app partners may automatically contribute to your plan invoice limit," so a connected app can quietly eat your allowance.

Our document allowance is the one place we're clearly cheapest per unit. £19 for 150 documents is 12.7p a document. FreeAgent's route to unlimited is £19 + £5 = £24, which beats us the moment you exceed roughly 190 documents a month. Xero Grow at £37 is unlimited too. So we win the middle of that range — a business doing between about 15 and 190 documents a month — and lose both ends.

What each one files

If a filing deadline is the reason you're buying software, this table outranks everything above it.

Ledgers files VAT and nothing else. Everything else it prepares, and someone else submits. That is a real limitation and the honest reason a lot of readers should choose a different product from this page.

On MTD for Income Tax, both rivals are on HMRC's recognised list and live now. There's a wrinkle worth knowing on each. Xero covers sole trader, UK property and foreign property income for both quarterly updates and the tax return — the widest coverage of the three — yet Xero's own support documentation still describes the feature as "currently in beta testing" while its marketing pages call it recognised and ready. Both statements are current; make of that what you will. FreeAgent covers sole trader and UK property, but not foreign property, and partnership partner income is still listed as in development for 2026/27.

Where each one is genuinely weak

No product here is bad. Each has a specific shape, and the gaps are specific too.

Xero's entry tiers are thin for the money and the real plan is £37+. Multi-currency at £50 and Projects at £65 are expensive gates compared to both rivals. Per-employee payroll charges scale against you. The app marketplace and accountant ubiquity are the reasons to accept all this, and for many businesses they're sufficient reasons.

FreeAgent cannot post a journal to a bank account at all, has no tracking, department or cost-centre dimension, no purchase orders, and no multi-entity consolidation. Payroll is monthly-only, and choosing the cash basis switches payroll and stock off entirely. Its forecasting is a fixed 90-day cashflow view. These matter to a growing or slightly complex business and are invisible to a simple one. Its strengths are underrated, though: a real fixed-asset register with automatic depreciation, FIFO stock valuation, and daily FX revaluation through an unrealised gain/loss account are more than most people assume it has.

Ledgers doesn't file most of what a UK company has to file, has no Projects or time tracking, has no mobile app, and has a far smaller integration ecosystem. It's also the youngest product here by a wide margin, which is a real risk when the software holds your books. What it does is take the bookkeeping itself off your desk — categorising, matching, reconciling and reading documents — rather than giving you a better place to do it by hand.

Three worked examples

A landlord with four properties, £48,000 gross rent, not VAT registered. Xero Simple £7, FreeAgent Landlord £10, Ledgers Landlord £14.99 — remember to add 20% VAT, as none of it is reclaimable. Both rivals file the quarterly MTD updates and the final declaration; we don't. Buy Xero Simple or FreeAgent. If you bank with NatWest or Mettle, FreeAgent is free and the decision is already made.

A VAT-registered consultancy, one director, ~120 transactions and ~200 documents a month, currently paying a bookkeeper £250/month. Xero Grow £37 + bookkeeper £250 = £287. FreeAgent Limited Company £33 + £5 unlimited capture + bookkeeper = £288, or £255 with the right bank. Ledgers Starter £29 does the categorising and reconciling itself, and files the VAT. The software comparison is £29 vs £33 vs £37 — near enough identical. The decision isn't the software price, it's whether the £250 line survives, and that's the only comparison on this page where the numbers aren't close.

A five-person limited company needing payroll, CT600 and accounts filed. Xero Grow £37 + 4 extra employees £6 = £43, with CT and accounts still going through an accountant. FreeAgent £33 flat, filing RTI, CT600 and FRS 105 accounts itself — or £0 with a NatWest business account. Ledgers Starter £29 runs the payroll numbers but files none of it. Buy FreeAgent. For this business it is both cheaper and more complete, and it isn't close.

So who is each one actually for?

Xero is for the business whose books someone else touches. Its ubiquity among UK accountants and its 1,000-plus integrations are worth real money if you have a bookkeeper, an accountant or a stack of connected apps. Xero Simple at £7 is separately excellent as a cheap, non-bank-gated MTD-for-Income-Tax plan for a sole trader or landlord with the simplest possible affairs — just know you outgrow it the day you register for VAT.

FreeAgent is for the sole trader, landlord or micro limited company that wants one product to file everything and then wants to stop thinking about it. If you bank with NatWest, RBS, Ulster or Mettle it is free, it is the full product, and it is very hard to argue against — the only cost most such users will ever see is £5/month if they exceed 10 documents. It is the best value in UK small-business accounting today and we'd rather say so than pretend otherwise.

Ledgers is for the VAT-registered owner-managed business whose problem is volume, not deadlines: enough transactions and paperwork that bookkeeping has become a weekly job, done either on your own evenings or on a bookkeeper's invoice. It suits an owner who wants the ledger genuinely correct and inspectable rather than a tax form generated, and who is content that Corporation Tax, payroll RTI and Self Assessment filing happen elsewhere for now. If you're below that volume, or a filing deadline is your real problem, the other two are better buys and cost less.

How quickly this page goes stale

Software pricing moves constantly — Xero restructured its entire UK range in September 2024 and is raising prices again on 1 September 2026. Every figure here was checked against primary sources on 21 July 2026. Confirm current prices on each provider's own site before you buy, and check HMRC's own Find software that works with Making Tax Digital for Income Tax list for recognition status, which is the only authoritative source for it. HMRC does not endorse any product, including ours.

Frequently asked questions

Is FreeAgent really free? Yes, if you hold a business current account with NatWest, Royal Bank of Scotland, Ulster Bank or Mettle — and it's the full product, not a cut-down tier, free for as long as you keep the account. Mettle adds one condition: at least one transaction a month. Add-ons stay chargeable, so Smart Capture beyond 10 documents a month is still £5/month for free users.

Which is cheapest for a sole trader facing MTD for Income Tax? FreeAgent at £0 if you bank with one of the four qualifying banks. Otherwise Xero Simple at £7/month ex VAT is the cheapest recognised option that isn't tied to a bank — provided you're not VAT registered, because Simple can't file VAT returns.

Does Ledgers file my Self Assessment or Corporation Tax? No. Ledgers files VAT returns to HMRC under MTD. Self Assessment, MTD for Income Tax quarterly updates, payroll RTI, the CT600 and Companies House accounts are prepared but filed elsewhere — by your accountant, or by software that supports them. If direct filing of those is what you need, FreeAgent is the stronger choice today.

Why is Xero Ignite's 10-bill limit a problem? Because it caps how much bookkeeping you can actually complete, not how much you can collect. Hubdoc will happily capture unlimited receipts on any Xero plan, but on Ignite only 10 bills a month can be approved into your ledger, and on Simple none can. If you receive more supplier bills than that, the real Xero price is Grow at £37, rising to £39 in September 2026.

Are these prices with or without VAT? All three vendors quote ex VAT, and every figure on this page is ex VAT. If you're not VAT registered you cannot reclaim it, so add 20% — a £19 plan leaves your account as £22.80.