Xero vs FreeAgent

Which businesses should shortlist each product?

FreeAgent deserves a close look for an owner-managed UK business that wants bookkeeping, project billing and a visible tax workflow together. Xero deserves a close look where different payroll schedules, a connected application stack or conversational financial queries are important. These are starting points for a shortlist, not universal winners: the best fit depends on the specific business, accountant and plan.

• A consultant should demonstrate the full journey from tracked time and reimbursable costs to an invoice and project profit.
• A business with weekly-paid staff should compare payroll schedules before comparing headline subscription prices.
• A limited company should identify who prepares and reviews year-end accounts, and whether the business fits the filing module's eligibility.

Sources: freeagent.com [1] ↗ · central.xero.com [2] ↗ · xero.com [3] ↗

Invoicing: compare the complete billing routine

Both products document repeating invoices and automated payment reminders. Xero also describes group invoicing and converting an accepted quote into an invoice. FreeAgent describes bringing timeslips and out-of-pocket expenses into invoices. For a service business, the useful comparison is how quickly a complete, accurate bill can be assembled from the work already recorded.

• Bring a sample retainer, a variable monthly invoice and an invoice with reimbursable expenses into the demonstration.
• Check who can edit invoices, whether reminders stop after payment, and how credit notes affect the outstanding balance.
• Compare transaction and payment-provider fees separately from the accounting subscription.

Sources: xero.com [1] ↗ · freeagent.com [2] ↗

Bank reconciliation: review the automation, not just the feed

Xero documents automatic reconciliation that uses rules, existing-record matches, previous decisions and predictions. High-confidence items can be reconciled automatically; uncertain items remain for review. Automation can be controlled per bank account and users can inspect the reasoning and correct matches. FreeAgent documents Open Banking feeds, machine-learning categorisation, transaction searching and support for foreign-currency bank accounts. Its approach centres on explaining imported transactions to accounting categories.

• Confirm support for the actual bank and account type; a general bank-feed claim does not establish compatibility with every account.
• Test a transfer, refund, payment-processing fee and one payment covering several invoices.
• Measure the corrections required on your sample month; neither supplier's marketing establishes an independently verified accuracy rate.

Sources: xero.com [1] ↗ · freeagent.com [2] ↗

MTD and company filing are separate buying decisions

Both suppliers document MTD VAT filing. FreeAgent explicitly lists invoice-basis and cash-basis VAT returns and the Flat Rate Scheme. For MTD Income Tax, FreeAgent describes preparing quarterly updates from recorded income and expenses and submitting the final declaration; Xero also documents a digital-record-to-return workflow for Income Tax. Company filing is a separate check: FreeAgent's documented year-end module targets FRS 105 micro-entity accounts and supports CT600 filing for most micro-entities. Do not assume that this covers every company or tax situation.

• Ask the accountant to confirm the legal entity, accounting basis, VAT scheme, income types and filing obligations.
• Demonstrate reviewing figures, correcting an error and retaining submission confirmations.
• Software capability does not by itself establish that a return is complete or tax treatment is correct.

Sources: xero.com [1] ↗ · xero.com [2] ↗ · freeagent.com [3] ↗ · freeagent.com [4] ↗ · freeagent.com [5] ↗

Payroll: frequency can matter more than headcount

FreeAgent documents included monthly payroll, RTI submissions, payslips, P60s, pension-contribution calculations and additional employees without an extra payroll charge. Xero's UK support documentation lists weekly, fortnightly, four-weekly, monthly, quarterly and annual pay frequencies, with a payroll-admin role required to change them. This gives a concrete reason to investigate Xero when the workforce is paid on different schedules. It does not establish that every specialist payroll requirement is covered.

• FreeAgent warns that selecting cash-basis accounting removes payroll and stock features from that account setup.
• Check pensions, statutory pay, corrections, benefits and the actual employee pay schedule during evaluation.
• For monthly payroll, compare the complete employer workflow rather than assuming a paid payroll allowance means better functionality.

Sources: freeagent.com [1] ↗ · central.xero.com [2] ↗ · freeagent.com [3] ↗

Projects and foreign currency: do not confuse an unknown with a missing feature

FreeAgent documents project income, costs, billable and non-billable time, fixed-price or time-based budgets and project profit-and-loss exports. Xero documents project estimates, job costs and invoicing for deposits or progress payments. Compare those workflows against one real project. FreeAgent also documents foreign-currency bank accounts and expense conversion, so it would be misleading to describe it as having no foreign-currency support. The full end-to-end revaluation and settlement workflow was not verified in this review.

• Ask both suppliers to show the margin after staff time, subcontractor costs, refunded expenses and a credit note.
• For overseas trading, demonstrate an invoice, settlement and exchange difference in the same currency scenario.

Sources: freeagent.com [1] ↗ · xero.com [2] ↗ · freeagent.com [3] ↗ · freeagent.com [4] ↗

AI: distinguish a conversational assistant from document automation

Xero's JAX documentation covers financial questions, charts and assistance creating invoices or quotes. Xero says JAX chat follows existing user permissions and currently carries no additional charge, while reserving the right to change pricing. FreeAgent's Smart Capture extracts document data, suggests categories and matches receipts or bills to transactions. Its support guidance sets access-level requirements and describes re-approval when a receipt is attached to an already approved transaction. This is meaningful AI-assisted bookkeeping even though a comparable general conversational assistant was not verified.

• JAX chat and automatic bank reconciliation are distinct behaviours; the chat opt-in description should not be presented as a guarantee that every Xero AI feature only runs on a prompt.
• FreeAgent's documented Smart Capture controls should not be described as absent merely because there is no verified chat assistant.
• Use an unfamiliar receipt, an intentionally ambiguous transaction and a restricted user account to evaluate review controls. Compare corrected output with the underlying records.

Sources: xero.com [1] ↗ · xero.com [2] ↗ · support.freeagent.com [3] ↗

Price the plan your workflow actually needs

The ordinary monthly UK Xero prices checked were £18 for Ignite, £39 for Grow, £55 for Comprehensive and £70 for Ultimate, excluding VAT. Ignite lists 20 invoices and 10 bills; payroll is £1.50 per person. Grow includes one payroll person, Comprehensive five and Ultimate ten, with additional usage charges. Multiple currencies are listed on Comprehensive and Ultimate; projects are listed on Ultimate. The company-accounts-and-tax option is £120 annually excluding VAT. FreeAgent's standard monthly prices were £19 for sole traders, £27 for partnerships/LLPs and £33 for limited companies, excluding VAT. Introductory offers are temporary and are not the continuing cost.

• Eligible NatWest, Royal Bank of Scotland and Ulster Bank customers can receive FreeAgent while keeping the qualifying account; Mettle has a monthly-transaction condition. Optional add-ons can still be charged.
• FreeAgent Smart Capture includes ten extractions monthly; unlimited capture costs £5 per month plus VAT.
• Include your ordinary subscription, staff or feature usage, capture needs, payments and implementation costs in the comparison.

Sources: xero.com [1] ↗ · freeagent.com [2] ↗ · support.freeagent.com [3] ↗

A practical decision before you migrate

Run the same sample month in the shortlisted plan, involving the person who will maintain the books and the accountant who reviews them. Start with real workflow complexity rather than a demonstration made entirely of straightforward invoices. Export the result and reconcile it to the original records before making a decision.

• List the features that are essential, useful and irrelevant for your business; a capability you never use should not decide the purchase.
• Agree opening balances, outstanding invoices and bills, payroll history, bank-feed cutover and document retention before migration.
• Treat undocumented or untested features as questions to resolve, rather than assigning a negative finding without evidence.

Evidence and limitations

• This is documentation research, not a hands-on product benchmark or accountant review of a particular business.
• Price and plan details are a dated snapshot; supplier checkout and contract terms control the purchase.
• No tax eligibility thresholds are reproduced; this piece describes supplier capabilities rather than giving personal tax advice.
• Do not claim a specific time saving, accuracy level, support response time or migration success rate from these sources.
• Do not treat all automation as generative AI, or use one AI feature's permissions to infer every AI control.
• Foreign-currency settlement and revaluation, audit-history depth, period locks and advanced inventory remain outside this bounded review.