Sage Accounting suits UK businesses that want payroll and an AI assistant included in every plan. Xero suits businesses that want plans that grow with them, with no extra licence for each user, HMRC-recognised Making Tax Digital tools and payroll from its Grow plan. Both submit VAT returns to HMRC, so payroll headcount and team size usually decide it.
Sage and Xero are the names UK accountants tend to mention first, and they're both set up for Making Tax Digital. The differences show up in the plan details: what's included, how many people payroll covers, and how each one uses AI to cut admin.
Sage Accounting and Xero for UK firms
| Sage Accounting | Xero | |
|---|---|---|
| Plans | Three plans | Ignite, Grow, Comprehensive and Ultimate |
| Payroll | Sage Payroll in all three plans | From Grow: 1 person; Comprehensive: 5 people |
| AI assistant | Sage Copilot in all three plans | JAX, described as your AI finance partner |
| VAT returns to HMRC | Copilot helps file the VAT return | Submit VAT returns to HMRC |
| Making Tax Digital | MTD for VAT; Sage Sole Trader for Self Assessment | HMRC-recognised, MTD-compliant; MTD for Income Tax ready |
| Users | Not listed per plan | No per-user licence on any plan |
| Cash flow | Cash flow forecast | 60-day forecast on Grow, 90-day on Comprehensive |
| Construction | Not stated | CIS calculations and reports |
| Trying it | Not stated on the pages I read | One month free |
What Sage Accounting brings
Sage's UK page is built around Sage Copilot. It drafts payment reminders in your tone, chases VAT tasks, checks your data for common mistakes HMRC would care about and helps you file the VAT return. All three plans include Sage Payroll, with PAYE and National Insurance calculated and ready to submit.
- Payroll included from the first plan.
- Copilot nudges ahead of VAT deadlines.
- Sage Sole Trader as a separate product for Self Assessment.
What Xero brings
Xero's UK plans page lists the same core on every plan: invoices and quotes, online invoice payments, reconciliation, smart document capture, real-time reports, VAT returns to HMRC and CIS calculations. Grow adds payroll for 1 person and a 60-day cash flow forecast; Comprehensive adds payroll for 5 people, a 90-day forecast, expenses for 5 users and multiple currencies.
- MTD for Income Tax ready on every listed plan.
- No licence charge for each extra user.
- Construction Industry Scheme support built in.
Chasing invoices and paperwork
Late invoices are a headache for most small firms, and both tools tackle them. Sage lets you set automatic payment reminders, and Sage Copilot drafts the chasing emails in your tone; you check and hit send. Xero's plans all include invoices and quotes, online invoice payments and smart document capture for receipts and bills. If you've got a stack of unpaid invoices right now, that's the first thing I'd test in each trial.
Payroll headcount is the deciding detail
Read the payroll lines side by side. Sage's UK page says all three Sage Accounting plans include Sage Payroll. Xero UK's plans page shows payroll for 1 person on Grow and 5 people on Comprehensive. A company director who's the only person on payroll will be fine on either; a café with a handful of staff needs to check exactly where each one tops out before signing up.
Sole traders and Making Tax Digital
If you're a sole trader getting ready for Making Tax Digital for Income Tax, the two take different routes. Xero marks every listed plan as MTD for Income Tax ready. Sage points sole traders to Sage Sole Trader, a separate product for Self Assessment and Making Tax Digital. Ask your accountant which one they file through, because that often settles it. For more options, see my list of accounting software tools.
New to the terms? My explainer on invoicing and basic accounting terms helps before you start comparing plans.
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My advice on Sage or Xero
Count how many people are on your payroll, then check where each plan's payroll stops. If payroll and VAT reminders are your biggest headache, Sage puts both in every plan. If you've got construction work, several people raising expenses, or you trade in multiple currencies, Xero's plan ladder is built for that.
Do you make accounting, payroll or bookkeeping software? Tool makers can ask to be considered for a featured place in comparisons like this one.
Frequently asked questions
Does Sage Accounting include payroll?
Yes. Sage's UK page says all three Sage Accounting plans include Sage Payroll and Sage Copilot.
Does Xero include payroll?
From the Grow plan, which covers payroll for 1 person. Comprehensive covers 5 people.
Is Xero ready for Making Tax Digital?
Yes. Xero describes itself as HMRC-recognised and MTD-compliant software, and its plans are listed as MTD for Income Tax ready.
Can I try Xero before committing?
Yes. Xero UK offers one month free so you can try it first.
