If you’re self-employed, accounting software can make it much simpler to manage your finances and, when Making Tax Digital is introduced, everyone who has to file a Self Assessment tax return will need to use bookkeeping software that’s compatible with HMRC.

Since there are so many options out there, we’ve written a quick guide to help you pick the one that’s right for your business.

Accounting and bookkeeping software for business

In the past, accounting software was complex and cumbersome, and it was generally more suitable for large enterprises than small businesses. Now, there’s a huge range of accounting software that’s been designed especially for small businesses and self-employed workers, and many of the products are pretty cheap or even completely free.

This type of software is designed to make it easy for you to manage your business finances, helping you with things like bookkeeping, invoicing, inventory and payroll. The product you pick will usually include handy reporting tools as well, so that you can track your cash flow and monitor your profit and loss, for example.

While this software can make your life much easier, it’s currently up to you whether you use it to manage your business accounts. But that’s all set to change under the government’s Making Tax Digital plans, which will begin rolling out next year. Under the plans, you will have to file your tax returns online, using accounting software that can integrate with your new digital tax account.

Best Accounting software for small businesses

The many available accounting software for small business can make it hard to compare accounting software, let alone choose a package that best fits your needs,In this article we're providing some of the best options for your business.

Current accounting software tends to be cloud-based, so it will work perfect whether you use a Mac or PC, and most are mobile-friendly.

Many options are available, some are free while others are paid, the paid ones usually have trial period where you ca use the software to grow our small business without paying. If the accounting software suits your needs, you can decide to pay.

1. QuickBooks

QuickBooks ifrom Intuit, is one of the very earliest providers of accounting software for small business.

It's basic package helps you track your self-employed income for freelancers, while small businesses can use it for VAT and payroll. It has lots of reporting and monitoring tools too. Subscription starts at £6/month, discounted to £2.99/month for the first six months.

2. Xero

Xero is another big option. It can help with things like invoicing, inventory, payroll, and expense claims.

As well as that, it can import your banking, credit card, and PayPal data. There’s an app that works on both iPhone and Android. Prices start at £10/month, discount upto £7.50 for the first three months.

3. Zoho Books

Zoho Books is very customisable. It can help you issue invoices, sort expenses, and track inventory, There is currently no payroll feature.

It can also connect to your bank account for real-time updates on cashflow, and integrate with a whole host of other apps. Prices start at £6/month.

4. Fresh Books

It is user-friendly interface and lacks jargons. It’s built for freelancers and small businesses with basic accounting needs, Tt's focuses is on things like invoicing and expense tracking. It integrates with apps like PayPal and Zendesk. It5. starts at $15/month.

5. Free Agent

Free Agent is for freelancers and very small businesses, It focuses on tasks like invoicing, time tracking, and expense management.

6. Sage One

Sage is for big enterprise software. Sage One has its accountancy offering for small businesses. It can help you with invoicing, cashflow, and payroll.

Pricing starts at £20/month, currently reduced to £10/month for the first three months.

Top Free accounting software for businesses

Several providers offer free accounting software, including GnuCash and Wave Accounting.

GnuCash is an open source accounting software, meaning the code behind it is publicly available and can be shared and modified. It can be used to track stock, income, and expenses.

With Wave Accounting, the free software includes invoicing, accounting, and receipt scanning, and then additional services like payroll are pay-as-you-go.

Accounting software for small business compatible with Making Tax Digital

For a Self Assessment tax return you also need software that’s compatible with HMRC’s systems.

A number of these software providers are quite indifferent about whether or not their software will be compatible. Quickbooks, for example, says you can use it to ‘complete HMRC Self Assessment’, but on closer inspection it simply provides the information and expects you to copy and paste it into the online form HMRC.

FreeAgent, has a button that automatically files your tax return for you, but there’s no guarantee it will work if HMRC completely overhaul their own system.

Making Tax Digital is still growing, having been put on hold and then brought back onto the agenda recently. It’s likely that many, if not all software providers are making changes to ensure their software works with the new HMRC system.

If you already use subscription-based accounting software, or want to try it out before Making Tax Digital comes into effect, make sure you check how much notice you need to give to cancel your subscription. That way, if your provider isn’t ready when Making tax Digital starts, you can cancel your subscription in good time to switch to a different provider without having to pay for both simultaneously.

Thanks for taking out time to read our guide on small bussiness accounting software.