Sage vs Xero UK: Which Is Better in 2026?

Sage vs Xero UK — the short answer

For most UK small businesses, Xero wins on simplicity and price at the small end, while Sage wins once payroll, construction (CIS) or stock get serious. A five-person VAT-registered business pays £1,404 over three years for Xero Grow against £1,548 for Sage Standard, before VAT. Choose on payroll size and Making Tax Digital (MTD) needs, not the headline monthly price.

What is Sage, and what is Xero?

Sage vs Xero is the comparison almost every UK small business owner runs into sooner or later. Both are accounting packages that record sales, chase invoices, reconcile the bank, file VAT and — with the right plan — run payroll. Both are HMRC-recognised and Making Tax Digital ready. The difference is not what they do in broad terms. It is how they charge for it, how much payroll they include, and which kind of business each one suits best once you look past the first month's price.

Sage is the older of the two in the UK market. It grew up on desktop software — Sage 50 Accounts still exists for businesses that want their accounts on their own machines — and its cloud product, Sage Accounting, now sits alongside it. Sage has always sold hard into payroll and construction, and that shows in the plans: payroll is included in Sage Accounting from the Start plan upwards, and the Standard plan includes the Construction Industry Scheme (CIS). If you employ people or work with subcontractors, Sage was built with you in mind from the start.

Xero grew up in the cloud. There is no desktop version to fall back on, and that is a strength as much as a limit: everything lives online, the bank feed is the centre of the product, and the plans are simpler to read. Xero charges less at the bottom end — its Simple plan is £7 a month — and its mid-range Grow plan at £39 a month includes payroll. Xero's own pages say it connects to more than 1,000 apps, which matters if you already run other tools and want them to talk to your accounts without retyping everything.

UK Payroll Calculators is a free UK payroll and tax calculator hub, and this guide is written for the person who has to live with the choice — the owner doing their own books at the kitchen table, or the employer running payroll for a small team. Every price below comes from the vendors' own published UK price lists and was checked on 15 November 2026. Comparison pages go stale fast, and two well-known ones we read while preparing this guide still showed old plan names and old prices, so we have dated every figure and shown the arithmetic, so you can check it yourself.

One warning before the detail. Both vendors run promotions that change often. At the time of checking, Xero offered 90% off for the first six months for eligible new UK customers, while Sage showed 90% off for ten months on Accounting plans in one place and twelve months free then list price in another. Promos vary, and a discount that ends after six months is not a price. Every total in this guide uses list prices, and says so. If a promo tempts you, work out the cost over three years on list prices first, then treat the discount as a bonus.

If you already employ people, the software choice is really a payroll choice as well as an accounts choice. The cost of your team dwarfs the cost of either package — our employer cost calculator shows what five people on £30,000 each actually cost once employer National Insurance is added, and the worked example later in this guide uses the same figures. Keep that scale in mind: a £4-a-month difference between plans is £144 over three years, which is real money, but it is small next to one month of employer National Insurance.

How much do Sage and Xero cost in the UK in 2026?

Start with the list prices, because everything else in this guide builds on them. The table below is the current UK list price for each plan, as published on the vendors' own UK pages and checked on 15 November 2026. All prices exclude 20% VAT unless the row says otherwise. VAT-registered businesses can usually reclaim the VAT on the subscription; non-VAT-registered businesses cannot, so the price including VAT is the price they actually pay, and the three-year table later in this guide shows both.

UK list prices from the vendors' own published UK price lists, checked 15 Nov 2026. All prices excl. 20% VAT unless stated. Sage Intacct, the large-business product, starts from £1,200 a month plus VAT and is outside this comparison.

Three things stand out in that table. First, the bottom of the market is a dead heat on price: Xero Simple and Sage Sole Trader both cost £7 a month, and Sage Sole Trader Free costs nothing at all for a non-VAT sole trader. If you are a sole trader with no employees and no VAT registration, the software decision costs you somewhere between nothing and £7 a month, and the right question is not price but whether the free plan does what Making Tax Digital will ask of you — covered later in this guide.

Second, the middle of the market is where the two vendors actually compete, and the gap is small. Xero Grow at £39 against Sage Standard at £43 is £4 a month, or £48 a year. Xero Comprehensive at £55 against Sage Plus at £59 is the same £4-a-month gap. Over three years that gap is £144 in both cases, as the next section shows in full. Do not let a £4 monthly difference decide a choice you will live with for years. Decide on payroll, CIS, stock and users, then let the £4 fall where it falls.

Third, Sage 50 Accounts is a different kind of product at a different price. From £129 a month plus VAT for Standard and from £262 a month plus VAT for Professional, it costs several times the cloud plans, because it is desktop software aimed at businesses that want their accounts on their own systems with deeper control. Most small businesses reading this guide will never need it. If a salesperson steers you towards Sage 50 when Sage Accounting would do, ask what the cloud plan cannot do for you, in writing, before you agree.

A note on what the table does not say: payroll employee allowances. Both vendors include payroll in their mid-range and top plans, but they state the employee allowance differently in different places — one says each plan allows for a different number, the other says payroll is included with employee limits and extras charged per employee per month. We are not going to state an exact allowance for either vendor as a fact, because the vendors' own pages do not agree with each other clearly enough to quote. What is verifiable is that payroll is included in Sage Accounting from Start upwards and in Xero from Grow upwards, and that if you have more than a handful of employees you should confirm the employee allowance at checkout, before you pay, and get it in writing if it matters to your decision.

What does three years of Sage or Xero actually cost?

A monthly price tells you almost nothing about what software costs. You will pay it every month for years, and the only honest comparison is the total over a realistic period, with VAT shown both ways. The table below does that for three real business sizes, using list prices checked on 15 November 2026, over 36 months. The arithmetic is shown in full so you can redo it.

Three-year subscription totals, our own arithmetic from the vendors' published UK list prices checked 15 Nov 2026. Excl. VAT column is the subscription cost; incl. VAT column adds 20%. VAT-registered businesses can usually reclaim the VAT; non-VAT businesses pay the incl. VAT figure. Sage Plus is the plan that lists inventory and multi-currency; Xero Comprehensive is the nearest-priced Xero tier used here for comparison.

Read the table slowly, because it corrects two common mistakes. The first mistake is comparing monthly prices without VAT. A non-VAT sole trader on Xero Simple does not pay £252 over three years; they pay £302.40, because they cannot reclaim the £50.40 of VAT. That is not a large sum, but it is the real sum, and a comparison that hides it is not honest. The second mistake is treating a small monthly gap as a small total gap. £4 a month sounds like nothing. Over three years it is £144, and over five years it is £240. That is still not a reason on its own to pick the cheaper plan — a plan that cannot run your payroll properly will cost you far more than £144 in accountant time — but it is a reason to do the three-year maths before you sign up, not after.

Now put those totals next to what employing people costs, because that is the comparison that puts the software price in its place. The next section works out a five-person payroll in full, using the same 2026/27 rates our own calculators use, and the software totals above start to look very small indeed.

Before that, one practical point about the sole trader rows. Sage Sole Trader Free at £0 is genuinely free for a non-VAT sole trader, and it is MTD-ready. If your business is that simple, free is hard to argue with — but check what you lose. Free plans always have limits, and the limit that matters is usually the one you discover in April, when a return is due. Xero Simple at £7 a month caps invoices at ten a month and does not handle bills, which is fine for a business sending a handful of invoices and hopeless for one sending twenty. Count your invoices for a normal month before you choose the cheapest plan. The cheapest plan that cannot do the job is the most expensive plan you can buy.

Which is better for payroll and employing staff?

For an employer, this is the question that matters most, and it is the question most comparison pages skip. They compare invoicing and bank feeds and never mention what the people on your payroll actually cost. That is a strange omission, because the payroll cost is many times the software cost, and the software has to handle it correctly every month without fail.

Here is the worked example, done by hand from the 2026/27 rates published by GOV.UK and cross-checked against the arithmetic method of our own live calculators, which we verified against the same GOV.UK rates. Five employees, each paid £30,000 a year. The figures apply to England, Wales and Northern Ireland tax bands. They assume no student loan, no salary sacrifice and no extra pension contributions beyond the figures shown, and National Insurance here is annualised — in real payroll it is worked out per pay period, so a monthly payroll will show slightly different figures month to month that add up to the same annual total.

Employer National Insurance first. For 2026/27, employer Class 1 National Insurance is 15% on earnings above the Secondary Threshold of £5,000 a year, according to GOV.UK guidance on rates and thresholds for employers for 2026 to 2027, which applies from 6 April 2026 to 5 April 2027 and was verified on 15 November 2026. For one employee on £30,000:

Employer National Insurance for one employee on £30,000, our own arithmetic, 15 Nov 2026. Rate and threshold: GOV.UK, rates and thresholds for employers 2026 to 2027.

For five employees, that is £3,750 times five, which is £18,750 a year in employer National Insurance before any relief. Then the Employment Allowance applies: eligible employers can claim up to £10,500 a year for 2026/27, which brings the net employer National Insurance bill down to £18,750 less £10,500, which is £8,250 a year. That is £1,650 per employee per year, or £137.50 per employee per month, on top of the salary itself. Not every employer is eligible for the allowance — a company with a single director and no other employees cannot claim it, and where two or more companies are connected only one of them can claim — so check eligibility on GOV.UK before you count on it. If you are not eligible, the bill stays at £18,750.

Now the employee's side, because your staff will ask what £30,000 means in their pocket, and because a payroll package has to get this right too. The Personal Allowance for 2026/27 is £12,570, the basic rate of Income Tax is 20% up to £50,270, and employee National Insurance is 8% on earnings between £12,570 and £50,270, with 2% above that. For one employee on £30,000:

Employee take-home pay on £30,000, our own arithmetic, 15 Nov 2026. Rates: GOV.UK 2026/27 (Personal Allowance £12,570; basic rate 20% to £50,270; employee National Insurance 8% £12,570–£50,270). England, Wales and Northern Ireland bands; no student loan, no salary sacrifice, no extra pension. Auto-enrolment pension contributions are extra and are NOT in these figures.

Two things follow from those tables. First, the software price is a rounding error next to the payroll. Five people on £30,000 cost £150,000 in salaries, plus £8,250 in net employer National Insurance if the allowance applies, plus auto-enrolment pension contributions on top of that — and the difference between Xero Grow and Sage Standard over three years is £144. Pick the package that runs your payroll correctly and that your accountant can work with. A payroll mistake costs more than £144 in one month.

Second, the payroll features that matter are not the ones on the sales page. What matters is whether the plan you are buying includes payroll at all, whether it files Real Time Information to HMRC, whether it handles auto-enrolment (the workplace pension scheme), and whether it copes when someone is off sick, on parental leave, or on holiday. Both Sage Accounting from Start upwards and Xero from Grow upwards include payroll, which means a five-person employer is covered on either side at the mid-range plans. The question is what happens as you grow: at what headcount does the included payroll stop being enough, and what does the vendor charge per extra employee per month after that? Neither vendor states that plainly enough on its price list to quote here as a fact, so ask at checkout and get the answer in writing before you commit. If you run payroll for a team, our payroll finance guide explains how payroll, cash flow and tax fit together, and our employer National Insurance calculator works out the employer National Insurance bill for any salary in seconds. For the person on the receiving end, our take-home pay guide walks through the same calculation step by step, and the paternity pay calculator and annual leave calculator cover two of the situations that catch small employers out — a new father, and a part-time worker's holiday entitlement.

There is a curiosity here worth pausing on, because it surprises most new employers: the software is rarely the hard part of payroll. The hard part is the rules — thresholds, allowances, leave, sick pay — and the rules change every April. A package that files correctly and reminds you when something is due is worth more than a package with a prettier dashboard. Before you judge either product on its looks, ask your accountant which one they would rather receive your books from. Their answer will save you more money than any feature list.

Which handles Making Tax Digital and VAT better?

Making Tax Digital is the rule that decides this question for a large number of small businesses, and it is the rule most comparison pages treat as a footnote. It should be near the top of your decision, because it is not optional: if your income is above the threshold, you must keep digital records and send quarterly updates to HMRC using compatible software. A package that is not ready for that is not a bargain at any price.

The thresholds come from GOV.UK guidance on Making Tax Digital for Income Tax, last updated on 26 March 2026 and verified on 15 November 2026. The key fact is that the threshold is based on qualifying income — your self-employment and property turnover before expenses, not your profit — and it falls in steps over the next three years. Both Sage and Xero state that their software is MTD-ready and HMRC-recognised, so neither product fails this test outright. The difference is which plan you need to be ready, and whether the free or cheapest plan covers you.

Making Tax Digital for Income Tax thresholds. Source: GOV.UK guidance, "Find out if and when you need to use Making Tax Digital for Income Tax", last updated 26 Mar 2026, verified 15 Nov 2026.

Read that table against your own turnover, not your profit. A sole trader with £55,000 of turnover and £40,000 of expenses has qualifying income of £55,000, not £15,000, and has been inside Making Tax Digital since 6 April 2026. A landlord with £25,000 of rental turnover and a small side business bringing total qualifying income over £30,000 comes inside it from 6 April 2027. The threshold keeps falling, so a plan that is fine this year may not be fine next year. Sage Sole Trader Free is described by Sage as MTD-ready, which is a genuine reason to consider it if you are a non-VAT sole trader. Xero Simple is aimed at non-VAT businesses, and it is worth confirming at checkout that the plan you buy covers the MTD submissions you will need, rather than assuming the cheapest plan does everything.

For VAT, the position is simpler and older: VAT-registered businesses have been inside Making Tax Digital for VAT for years, and both products handle VAT returns. What differs is the plan: Xero Simple is for non-VAT businesses, so a VAT-registered business needs Ignite at £18 a month or above on the Xero side. On the Sage side, a VAT-registered small business is looking at Start at £20 a month or above. Neither is expensive. The cost that catches people out is not the subscription but the time: quarterly VAT returns and quarterly MTD updates mean four deadlines a year instead of one, and the software has to make those deadlines easy rather than stressful. Our VAT calculator works out VAT on any amount at the standard 20% rate, and if you are wondering whether VAT registration itself is worth it, that calculation is the place to start — not the software page.

One more practical point. HMRC's own guidance is the authority on when you must use Making Tax Digital, and it is worth reading the GOV.UK guidance on Making Tax Digital for Income Tax directly before you choose, because the thresholds and the definition of qualifying income are the two things people get wrong most often. The GOV.UK rates and thresholds for employers for 2026 to 2027 is the matching authority for the employer National Insurance figures used in the worked example above, and it is the page to bookmark if you run payroll.

How do Sage and Xero compare feature by feature?

Price tables tell you what you pay. Feature tables tell you what you get for it. The table below compares the two products on the features that actually change a small business owner's week, using only what the vendors' own UK pages state clearly. Where a vendor does not state a figure plainly on its price list, the table says so rather than guessing — a blank filled with a guess would be worse than a blank left honest.

Feature comparison from the vendors' own published UK pages, checked 15 Nov 2026. Where a feature is not stated plainly on the price list, the table says "confirm at checkout" rather than stating a figure we cannot verify.

The table shows a pattern that runs through this whole comparison. Sage includes more of the specialist features — CIS, stock, multi-currency — inside its named plans, and tells you which plan carries them. Xero keeps its plans simpler and leaves more to its app ecosystem, which is genuinely large: more than 1,000 connected apps, according to Xero's own pages. Neither approach is wrong. They suit different businesses. If you want CIS and stock in the box without adding anything, Sage Standard or Plus answers that directly. If you want a simple core product and you are happy to add a connected app for the specialist job, Xero's approach can work well — but price the connected app before you decide, because an app that costs £15 a month wipes out the £4-a-month saving on the subscription in the first month.

The desktop row deserves a word of its own. Sage 50 Accounts is the only desktop product in this comparison, and for most small businesses that is a reason to avoid it, not to buy it: cloud software updates itself, backs itself up, and lets your accountant look at the same books you are looking at. But there are businesses — usually larger ones, or ones with poor internet, or ones with strict data rules — that genuinely want their accounts on their own machines. If that is you, Sage is the only one of the two that offers it, and the price starts from £129 a month plus VAT. Everyone else should treat the desktop option as irrelevant and compare the cloud plans only.

On support, be honest with yourself about what you will actually use. Both vendors include support, and both vary the hours and channels by plan. The support that matters is the support you can reach at 9pm on a Sunday when a VAT return is due on Monday. Before you buy, check the support hours for the exact plan you are buying, not the support hours advertised for the product as a whole. The same applies to the mobile app: both have one, both let you send an invoice from a van or a site, and neither is a reason on its own to choose one product over the other.

Which is better for CIS and construction?

Construction is where this comparison stops being close. If you work in construction — as a contractor paying subcontractors, or as a subcontractor being paid under deduction — the Construction Industry Scheme changes what your software has to do, and Sage has built for that market for far longer than Xero has.

CIS is HMRC's scheme for the construction industry. A contractor deducts tax from payments to subcontractors and pays it to HMRC, and the deduction rate depends on the subcontractor's verification status. The software has to record the deductions, produce the statements subcontractors need, and file the monthly CIS return. Getting that wrong means penalties and unhappy subcontractors, and it is not a job you want to do in a spreadsheet alongside your accounts.

Sage Accounting Standard at £43 a month and Plus at £59 a month both include CIS. That is stated plainly on Sage's price list, and it is the single clearest reason a construction business would pick Sage over Xero. Xero's plan prices checked for this guide do not list CIS as included, which does not mean Xero cannot handle construction — it means you would need to confirm at checkout, and probably add a connected app, before you could rely on it. For a contractor running monthly CIS returns, that uncertainty is itself an answer: the product that lists CIS in the plan is the product to buy.

The same logic applies to the subcontractor's side. A subcontractor needs to see the deductions on their statements, reclaim what they are owed, and keep records that match the contractor's. Sage's CIS handling covers both sides of the relationship. If you are a subcontractor rather than a contractor, the question to ask is simpler: does the plan you are buying produce the CIS statements you need without extra cost? On Sage Standard, the answer is yes. On Xero, ask before you pay.

There is one more construction point that rarely appears in comparison pages but matters on site: invoices in construction are often large, irregular and tied to stages of a job, and a plan with a low invoice cap will not cope. Xero Simple allows up to ten invoices a month, which is fine for a small service business and not fine for a busy subcontractor. Sage Sole Trader Free is aimed at the simplest sole traders. If your invoicing is lumpy — nothing for three weeks, then twelve invoices in a week — buy a plan with room to spare. The cost of the next plan up is a few pounds a month; the cost of discovering the cap in the middle of a billing run is a day of your time.

If construction is your world, our IR35 calculator is worth a look alongside this guide, because many construction engagements sit near the off-payroll rules, and the hourly rate converter helps when a day rate has to become an hourly figure for a quote. Neither replaces advice on your own contracts, but both stop you guessing at the numbers.

Which should you choose for your size of business?

This is the section to read if you have skipped the rest. The table below gives a recommendation by business type, based on the prices, the payroll maths and the feature comparison above. It is a starting point, not a verdict carved in stone: if your business sits between two rows, read both and take the one that matches your payroll and your paperwork, not your headcount alone.

Recommendations from the prices and features in this guide, checked 15 Nov 2026. Confirm payroll employee allowances at checkout — neither vendor states them plainly enough on its price list to quote as a fact.

A few patterns in that table are worth spelling out. The smallest businesses have the easiest decision: the price is between nothing and £7 a month, and the right choice is the plan that covers Making Tax Digital for your income level. The five-person business has the most balanced decision: both mid-range plans include payroll, the three-year gap is £144, and the deciding factor is usually CIS or the accountant's preference. The construction business has the clearest decision of all: Sage, because CIS is in the plan. And the growing business with stock or multiple currencies has the decision that most rewards reading the plan details rather than the headline price, because the feature that matters — inventory or multi-currency — sits in a named plan on one side and needs confirming on the other.

Two cautions. First, do not buy for the business you hope to be in three years. Buy for the business you are now, and switch later if you outgrow the plan — switching between plans from the same vendor is easy, and switching vendors is covered in the next section. A sole trader who buys the top plan "to grow into" is paying £59 a month for features they will not touch for a year. Second, ask your accountant. If your accountant works in one product all day, your books will be cheaper to prepare in that product, and the saving will be larger than any subscription gap in this guide. That is not a technical argument, but it is a real one, and it decides more choices than any feature table.

For employers weighing the wider costs of a growing team, the best HR systems guide covers the software that sits alongside the accounts — holidays, absence and records — and the best absence management software guide and best workforce planning software guide cover the planning side. If your team includes NHS staff, the NHS pay calculator guide explains how NHS pay and pension tiers affect take-home pay, and the SC3 form guide covers the form that comes up when statutory pay is involved. For the money side of hiring, the best CRM for recruitment agencies guide is the comparison for agencies, and our pro-rata salary calculator and overtime calculator cover the two calculations that come up most often when a new starter's hours are not standard.

How do you switch between Sage and Xero?

Switching accounting software is the part nobody wants to think about when they are choosing, and it is the part that costs the most when it goes wrong. The honest answer is that switching is straightforward if you plan it, and miserable if you do it in a rush at year end. Here is what it actually involves, priced in pounds and weeks rather than in vague reassurance.

First, the timing. The cleanest time to switch is the start of a new tax year or a new VAT quarter, when there is a natural break in the books. The worst time is the week before a VAT return or a payroll run. If you are switching from Sage to Xero, pick a date at least four weeks before your next VAT return is due, and tell your accountant the date before you tell anyone else.

Second, the cost. The subscription itself is the smallest part: Xero Grow at £39 a month is £468 a year, and you may pay for both products for a month or two while they run side by side. Running both at once — the old product for history, the new product for live work — is the safest way to switch. You would be paying for one subscription anyway, so the extra cost is the second plan for two months: about £78 to £118 at mid-range prices (£39 × 2 = £78 at Xero Grow, £59 × 2 = £118 at Sage Plus). The larger cost is time: cleaning up the old data, checking that opening balances match, and re-entering anything that does not transfer cleanly. For a five-person business with a few hundred transactions, allow a full day of your time or your bookkeeper's time to check the migration, and a week of keeping an eye on the new system before you trust it completely. If you pay an accountant or bookkeeper by the hour, that day is the real switching cost, and it will be larger than a year of the subscription difference between the two products.

Third, the data. The items that transfer cleanly are usually customers, suppliers, the chart of accounts and outstanding invoices. The items that cause trouble are history — old transactions, reconciled bank feeds and payroll history — and the items that do not transfer at all are usually the ones you discover last, such as recurring invoice templates and saved reports. Export everything from the old product before you cancel it, and keep the export: once the subscription ends, getting data out can become difficult or impossible. Do not cancel the old product until the new one has run a full VAT quarter and a full payroll cycle correctly.

Fourth, payroll. If the switch involves payroll, the payroll history matters more than the accounts history, because HMRC holds the record and your employees' tax codes and year-to-date figures have to match. Move payroll at the start of a tax year if you possibly can. If you must move mid-year, your new payroll setup needs the year-to-date figures for every employee, and you should check the first payslip from the new system against the old one line by line. Our take-home pay guide shows how a payslip should add up, and the 40k after-tax guide works through a higher salary in the same way, so you can check a payslip against a known-good calculation before you trust it.

Fifth, the direction matters. Moving from Sage to Xero is the more common direction, because Xero's cloud-first design appeals to businesses leaving desktop software behind. Moving from Xero to Sage happens too, usually when a business grows into CIS, stock or multi-currency work and wants those features inside the plan rather than added on. Neither direction is a mistake. The mistake is switching for the monthly price alone and discovering the payroll or CIS gap afterwards. If the reason for switching is a feature — CIS, stock, payroll limits — write the feature down, confirm the new plan includes it, and get that confirmation in writing before you migrate anything.

What mistakes cost businesses the most when choosing?

The expensive mistakes in this comparison are all made before the purchase, and all of them are avoidable. They are worth listing plainly, because every one of them has cost a real business real money.

Choosing on the monthly price alone. A £4-a-month gap is £144 over three years. A payroll plan that does not cover your headcount, or a CIS return filed late because the software did not handle it, costs more than £144 in a single month. Do the three-year maths, then choose on features.

Buying the cheapest plan and discovering the cap. Xero Simple allows up to ten invoices a month and no bills. Sage Sole Trader Free is for non-VAT sole traders. Both are fine products at their level, and both are the wrong product for a business that has outgrown them. Count your invoices, check your VAT status, and buy the plan that fits the business you actually run.

Ignoring Making Tax Digital. The thresholds fall every year — over £50,000 from April 2026, over £30,000 from April 2027, over £20,000 from April 2028 — and they are based on turnover before expenses, not profit. A plan that is fine this year may not be fine next year. Check your qualifying income against the table earlier in this guide before you buy.

Forgetting VAT on the subscription. Every price in this guide is shown excluding VAT unless stated. If your business is not VAT-registered, you pay the price including VAT and cannot reclaim it. A £39-a-month plan costs a non-VAT business £46.80 a month, or £1,684.80 over three years. That is the real price, and it should be the price you compare.

Not asking the accountant. Your accountant will prepare your year-end accounts from whichever product you choose. If they work in one product all day, your accounts will be cheaper and faster in that product. That saving is larger than the subscription gap, and it repeats every year.

Switching at the wrong time. Switching the week before a VAT return or a payroll run is how migrations go wrong. Switch at the start of a tax year or a VAT quarter, run both products side by side for a month, and do not cancel the old one until the new one has completed a full VAT quarter and a full payroll cycle.

Believing a comparison page's prices. Prices change, plans are renamed, and promotions come and go. Two comparison pages we read while preparing this guide still showed plan names and prices that the vendors' own pages no longer list. Always check the vendor's own published UK price list on the day you buy, and work out the three-year total on list prices before you let a promotion decide for you.

Not checking the payroll employee allowance. Both vendors include payroll in their mid-range plans, but neither states the employee allowance plainly enough on its price list to quote as a fact. If you employ more than a handful of people, confirm the allowance at checkout and get it in writing. Discovering the limit after you have migrated payroll is the worst time to discover it.

What should you do before you pay for either one?

Work through this list in order, and do not pay for anything until every box is ticked.

• Count your invoices for a normal month, and check whether you are VAT-registered.
• Work out your qualifying income for Making Tax Digital and check it against the thresholds table.
• Count your employees and confirm the payroll employee allowance for the plan you are considering, at checkout, in writing.
• If you work in construction, confirm CIS is included in the plan you are buying.
• Ask your accountant which product they would rather receive your books from.
• Check the vendor's own published UK price list on the day you buy, and work out the three-year total on list prices, including VAT if you cannot reclaim it.
• If you are switching, pick a start date at the start of a tax year or a VAT quarter, and plan to run both products side by side for a month.

If you are still unsure after all of that, the tie-breaker is simple: a sole trader or a very small business with no staff should take the cheapest plan that covers Making Tax Digital for their income; a five-person employer should take the mid-range plan their accountant prefers, and let the £144 three-year gap fall where it falls; a construction business should take Sage Standard, because CIS is in the plan. None of those answers is exciting. All of them are cheaper than the mistakes listed above.

And if you want to know what your team costs before you commit to anything, your next step is to work out what your team actually costs with our employer cost calculator.

One more option worth a look if cost is your main concern: Zoho Books is a lower-cost accounting alternative for small businesses that covers invoicing, VAT and Making Tax Digital, so it is worth comparing alongside Sage and Xero before you commit.

Disclosure: links to Zoho Books in this article are affiliate links, and we may earn a commission if you buy through them, at no extra cost to you.