Accounting software for a contractor running a UK limited company

For a UK contractor operating through a limited company, I’d shortlist Xero and FreeAgent. The key question is whether you hire subcontractors under CIS.

• Xero — best if you hire subcontractors or expect to grow. It includes CIS calculations and reports across its business plans, and supports filing CIS returns to HMRC. The entry plan is £18/month plus VAT after its introductory offer, but it limits you to 20 invoices and 10 bills per month; compare the higher plans if you have more transactions. (xero.com)
• FreeAgent — best for a straightforward one-person company. It covers everyday bookkeeping, invoicing, expenses and payroll. The listed limited-company price is £33/month plus VAT after the current introductory discount; it’s free while you hold an eligible NatWest, RBS or Ulster Bank business account, or a Mettle account meeting its terms. (freeagent.com)
• QuickBooks — worth considering if your accountant prefers it or you need its particular integrations; check the current plan and any payroll add-ons against your needs. (quickbooks.intuit.com)

My quick pick: choose FreeAgent if it’s just you, your finances are uncomplicated, and you don’t need detailed CIS/subcontractor workflows. Choose Xero if you hire subcontractors, need CIS handling, or want more room to expand.

If you’re in construction, confirm that your chosen package supports the CIS tasks you actually need. HMRC requires CIS contractors to keep records of subcontractor payments and deductions; Xero is listed by HMRC as a recognised CIS software supplier. (gov.uk)

If you tell me whether you hire subcontractors, are VAT-registered, run payroll, and use an accountant, I can narrow it down further.

Short answer: For a contractor's limited company, FreeAgent is the most commonly recommended option, with Xero as the main alternative. Choose based on whether you're VAT-registered, whether you work in construction under CIS, and which platform your accountant uses.

What the sources say about the main options

• FreeAgent: Reviewers call it the contractor favourite. One says only FreeAgent includes built-in IR35 status indicators as standard, and another notes it is notable for its excellent self-assessment and corporation tax features. Its weak spot is larger firms: it is less suited to companies with complex needs, multiple employees, or significant s[tock]. Pricing quotes differ; one source gives £33 (limited company) per month, another £29 per month for limited companies. It is also free with NatWest, RBS, Ulster Bank or Mettle business accounts.
• Xero: Usually chosen for its ecosystem. One source says Xero is favoured for its extensive app marketplace and multi-currency support. Another lists tiers from Ignite: £16/month up to Ultimate: £65/month. It is a good fit if your accountant works in Xero, since it is popular with limited company contractors for working alongside accountants.
• QuickBooks: Strongest if you deal with CIS. One guide says it has excellent, built-in support for the Construction Industry Scheme (CIS), though another notes CIS functionality is in relevant plans, so check which tier includes it.
• Sage: Suited to established firms or businesses already using Sage. One source describes it as particularly well-suited for businesses that need to manage CIS, MTD for VAT, and domestic reverse charge rules correctly.

Tax deadlines to keep in mind

• MTD for Income Tax does not apply to your company. Limited companies aren't affected at all, because they pay Corporation Tax rather than Income Tax. It can still reach you personally if you have self-employment income or UK property rental income outside your limited company.
• VAT is different. If your company is VAT registered it must already use MTD for VAT. Whatever you choose must be compatible with MTD for VAT.
• Sources disagree on Corporation Tax. Some say Making Tax Digital (MTD) for Corporation Tax has been officially cancelled, while Armstrong Watson says the government has temporarily ruled out extending MTD to Corporation tax. Check the current position on GOV.UK before you commit.
• Filing software: one source reports that HMRC's free CT600 filing service closed on 31 March 2026 — all limited companies now need commercial software to file their Corporation Tax return. Another says the free CATO service closed on that date. Confirm this on GOV.UK, because it affects whether you need paid software for filing.

How to choose

1. Ask your accountant which platform they use. Many contractor accountants work in one system, and switching later costs time.
2. Check CIS. If you work as a subcontractor in construction, confirm the plan supports CIS before buying.
3. Check your bank. A free FreeAgent subscription may be available through your bank.
4. Verify prices on the vendor's site. Sources differ and prices change often.

If you tell me whether you're VAT-registered, whether CIS applies, and roughly how many invoices and expenses you handle each month, I can narrow this to one or two options.

For a contractor running a UK limited company, the choice of accounting software often comes down to your specific business needs, such as whether you need basic bookkeeping or more advanced project tracking.

Top Recommendations

Most UK contractors find that FreeAgent and Xero are the most effective solutions, though they cater to slightly different requirements.

1. FreeAgent (Best for Contractors & Freelancers)

FreeAgent is widely considered the top pick for independent contractors and small limited companies.

• Why it works: It is designed specifically for the UK market and handles contractor-specific needs—such as dividends, salary, and corporation tax estimates—directly within the dashboard.
• Key Advantage: It is often free if you have a business bank account with NatWest, Royal Bank of Scotland, Ulster Bank, or Mettle.
• Best for: Contractors who want a jargon-free, "all-in-one" experience without needing deep accounting knowledge.

2. Xero (Best for Scalability & Integrations)

Xero is a global leader and a powerful, versatile choice if you expect your business to grow or if you need to connect with many third-party apps.

• Why it works: It offers a massive ecosystem of integrations (over 1,000+ apps), making it highly adaptable for specialized business needs.
• Key Advantage: It provides deeper reporting, analytics, and more advanced multi-currency support compared to FreeAgent.
• Best for: Businesses that plan to scale, need complex reporting, or rely on specific third-party tools to run their operations.

Key Features to Look For

Regardless of which platform you choose, ensure the software covers these essentials for a UK limited company:

• Making Tax Digital (MTD) Compliance: Both FreeAgent and Xero are fully MTD-compatible, which is mandatory for VAT-registered businesses.
• Bank Feeds: Look for software that offers live Open Banking feeds to automatically import transactions, saving you significant manual data entry time.
• Expense Management: A good mobile app is crucial for snapping photos of receipts and tracking out-of-pocket expenses on the go.
• HMRC Filing: The software should allow you to file VAT returns and, ideally, handle payroll and payroll submissions (PAYE) directly to HMRC.
• Construction Specifics (if applicable): If you are in the construction industry, ensure the software handles CIS (Construction Industry Scheme) deductions, subcontractor statements, and verification, which some general-purpose software may handle less intuitively than others.

Summary Comparison

Final Advice

• Try before you buy: Both platforms typically offer a 30-day free trial. Use this time to test how easy it is to raise an invoice, record an expense, and view your "tax timeline."
• Consult your accountant: If you already have an accountant, ask them which software they prefer. Many accountants are "partners" with specific providers and may even provide you with a license at a lower cost or help you with the initial setup.
• Avoid "Over-buying": If you are a single-person limited company with simple transactions, you likely do not need the most expensive, complex tier of any software. Start with a plan that covers your essential compliance and upgrade only as your business requirements evolve.

For a UK contractor running a limited company, I’d shortlist FreeAgent, Xero and QuickBooks. The best fit depends mainly on whether you want a simple owner-managed setup, need construction-specific features such as CIS, or want more flexibility for an accountant and a growing business.

My practical recommendation: If you’re a one-person consultancy with simple finances, start by comparing FreeAgent against your bank’s offers. If you’re a contractor in construction who deals with subcontractors, look closely at Xero’s CIS functionality. If your accountant already uses one of these, choosing their preferred system may make year-end work smoother.

Before signing up, check that the package covers your actual needs: bank feeds, receipt capture, VAT returns if registered, director payroll, dividend and expense records, and the year-end accounts and Corporation Tax process. Software features and promotional prices change, so verify the current plan details with the provider.

Sources
¹ FreeAgent pricing
² Xero UK pricing
³ Xero payroll plans
⁴ QuickBooks UK pricing
⁵ QuickBooks limited-company software