Comparison

FreeAgent vs Xero: which accounting software should a startup use?

By Buzz Accounting · Updated 2026-07-13 · Startups guide

Both are excellent UK cloud accounting tools. The right pick depends on how complex your startup is — and whether the software is included in your accountant's fee.

The short answer

For most early-stage startups, FreeAgent wins on simplicity and cost — it's built for small businesses and comes free with a Mettle account or in our packages. Xero is more powerful for multi-currency, inventory and larger teams, but costs more and can be overkill until you scale.

Side by side

FreeAgent vs Xero at a glance

	FreeAgent	Xero
Built for	Freelancers & small businesses	Small to mid-sized businesses
Ease of use	Very easy	Powerful, steeper learning curve
Cost to you with us	£0 — included	Paid subscription
Multi-currency	Limited	Yes
Inventory / stock	Basic	Yes
MTD ready	Yes	Yes
Best for	Most early-stage startups	Scaling / complex startups

Where FreeAgent wins

FreeAgent was built for exactly the businesses this site serves — small, ambitious, and short on time for admin. It's genuinely easy to use, the tax timeline shows your corporation tax and VAT building live, and it's free with a Mettle account and included in every one of our packages. For a solo founder or an early-stage company, it does everything you need without the price tag.

Where Xero wins

Xero is the more powerful platform. If you're dealing with multi-currency sales, meaningful inventory, project accounting or a bigger finance team, Xero's depth and its enormous app-store ecosystem pull ahead. We're a Xero Gold Partner too, so we'll happily set you up on it — it's just more than most startups need on day one.

The honest answer

Start on FreeAgent unless you already know you need Xero's complexity. It's included, it's simpler, and switching to Xero later is straightforward if you outgrow it. Paying for power you don't use is just burning runway.

Our verdict

Most startups: FreeAgent. It's included in our fees, easy to live in, and covers everything an early-stage company needs. Move to Xero when genuine complexity — multi-currency, inventory, a finance team — makes its extra power worth paying for. We support both, so the switch is painless whenever it's right.

Quick answers

About this comparison

Is FreeAgent or Xero better for a startup?

For most early-stage startups, FreeAgent — it's simpler, cheaper (free with Mettle or included in our packages) and built for small businesses. Xero is better once you need multi-currency, inventory or a larger finance team.

Is FreeAgent really free?

Yes — it's free with a Mettle business account and included in every one of our accounting packages, saving up to £330 a year versus subscribing directly.

Can I switch from FreeAgent to Xero later?

Yes, and it's straightforward. Many startups begin on FreeAgent and move to Xero as they scale. We're partners with both and handle the migration.

Are both MTD compatible?

Yes — FreeAgent and Xero are both fully compatible with Making Tax Digital for VAT and Income Tax.

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