Registering for VAT? Your accounting software choice just changed
The cheapest accounting plan in the UK market cannot file a VAT return. The moment you register, the maths that made it cheapest stops applying — and a £121.20 advantage becomes £9.60.
Last verified 31 July 2026. Prices are ex VAT and taken from each vendor’s own UK pricing pages. Promotional offers change roughly monthly and are normally for new customers only — check the live price before you subscribe.
QuickBooks Sole Trader cannot file VAT. VAT capability starts on Simple Start at £16 a month. So registering for VAT moves you from a plan costing £186 over 24 months to one costing £297.60 — and QuickBooks’ £121.20 lead over Xero collapses to £9.60.
That is 40p a month across two years. At that margin, price has stopped being a reason to choose anything.
This matters because VAT registration is not always a choice. Cross the registration threshold set by HMRC and you are in, whether or not you planned for it. If you picked your software on price and the price you picked on was £1 a month, the ground has moved.
We are not quoting the VAT registration threshold
The VAT registration threshold is an HMRC figure and it changes. We are not restating it from memory here, because a stale threshold in a blog post is exactly the kind of thing that gets someone registered late. Check the current figure and the rules on GOV.UK or with your accountant. This article is about what happens to your software once you are registered, not about when you must register.
The restriction most people find out about too late
QuickBooks Sole Trader is the cheapest entry plan in this comparison at £10 a month, and it is the only one in our pricing table recorded as unable to file VAT.
It is not a bug and it is not hidden — Sole Trader is designed for unincorporated, non-VAT-registered businesses, and it is priced accordingly. The problem is purely that people shop on the £1 introductory rate, never look at the plan boundaries, and then discover the limit at the worst possible moment.
| Plan | Monthly, ex VAT | Can file VAT? | 24-month total |
|---|---|---|---|
| QuickBooks Sole Trader | £10 | No | £186 |
| QuickBooks Simple Start | £16 | Yes — VAT starts here | £297.60 |
| Xero Ignite | £16 | Not recorded as restricted | £307.20 |
| FreeAgent Sole Trader | £19 | Not recorded as restricted | £399 (or £0 via bank) |
| Sage Accounting Start | £18 +VAT | Not recorded as restricted | £378 |
| Sage Sole Trader Free | £0 | No — non-VAT only | £0 |
Ex VAT, verified 31 July 2026. Sage quotes +VAT and is normalised here. “Not recorded as restricted” means our pricing research did not find a VAT restriction on that plan — confirm with the vendor before you rely on it. Promotions change roughly monthly.
Two plans in that table are hard “no”s for a VAT-registered business: QuickBooks Sole Trader and Sage Sole Trader Free. Between them they are the two cheapest options in the market. That is not a coincidence — it is what the price buys.
The £9.60 collapse
Before VAT registration, QuickBooks is £121.20 cheaper than Xero over 24 months. After it, the gap is £9.60 — a 92% reduction in the reason to prefer it on price.
| Scenario | QuickBooks | Xero Ignite | QuickBooks advantage |
|---|---|---|---|
| Not VAT registered | £186 Sole Trader | £307.20 | £121.20 |
| VAT registered | £297.60 Simple Start | £307.20 | £9.60 |
Ex VAT over 24 months, verified 31 July 2026. Simple Start: £16/mo with 90% off for six months (£1.60), so 6 × £1.60 + 18 × £16 = £297.60. Xero Ignite: £16/mo with 80% off for six months (£3.20), so 6 × £3.20 + 18 × £16 = £307.20.
Forty pence a month. That is what is left of the cheapest-in-market argument once VAT enters the picture.Fizoral
The reason the gap almost vanishes is simple: at standard rate both plans are £16 a month. The entire remaining difference is the introductory discount — 90% off versus 80% off, for six months, on a £16 base. £1.60 against £3.20 is £1.60 a month for six months. £9.60. That is the whole gap.
If you want the full side-by-side rather than the price line alone, read Xero vs QuickBooks.
What to do if you are already on Sole Trader
If you are on QuickBooks Sole Trader and registering for VAT, you have two real options: upgrade to Simple Start at £16, or treat registration as the moment to re-open the whole software decision.
Option one: upgrade in place
The path of least resistance. Your data, bank feeds and history stay put and you move up a plan tier. It costs £111.60 more over 24 months than staying on Sole Trader. If QuickBooks suits you, this is fine — just do it with your eyes open rather than discovering the bill later.
One thing to check: introductory discounts are normally for new customers. Do not assume that upgrading gives you the 90%-off Simple Start rate. Confirm what an existing customer actually pays before you plan around £297.60.
Option two: reconsider properly
VAT registration is a natural re-evaluation point, because the thing that anchored your original decision has gone. With £9.60 separating QuickBooks and Xero over two years, the sensible question is no longer “which is cheapest” but “which will I actually use”.
- Check your bank first. If you hold a NatWest, RBS, Ulster Bank or Mettle account, FreeAgent is free — better than either. See how to get FreeAgent free.
- Ask your accountant. At a £9.60 difference, their preferred package is worth more than the saving.
- Look at where you go next. If payroll or multi-currency is coming, look at the tier above rather than the entry plan. Our software pillar has the full ladders.
- Do not migrate mid-quarter. Especially if you are inside Making Tax Digital — see what you submit in an MTD quarterly update.
MTD and VAT are separate things
VAT registration and Making Tax Digital for Income Tax are different obligations with different thresholds and different timetables. Being VAT registered does not tell you whether you are in MTD for Income Tax — that depends on your qualifying income. See the April 2027 £30,000 threshold or the MTD pillar.
Check plan boundaries yourself: QuickBooks UK · Xero UK · FreeAgent · Sage UK.
VAT and software questions, answered
What changes, what it costs, and what to do about it.
Can QuickBooks Sole Trader file a VAT return?
No. QuickBooks Sole Trader at £10 a month cannot file VAT. VAT capability starts on Simple Start at £16 a month, so registering for VAT forces a plan change if you are on Sole Trader.
How much more does QuickBooks cost once you need VAT?
Simple Start is £16 a month against Sole Trader’s £10, with a six-month 90% introductory discount taking it to £1.60. Over 24 months that is £297.60 against £186 — £111.60 more.
Is QuickBooks still cheaper than Xero once you are VAT registered?
Yes, but only just. QuickBooks Simple Start is £297.60 over 24 months against Xero Ignite’s £307.20 — a difference of £9.60 across two years, or 40p a month. Before VAT registration the gap is £121.20.
Which accounting software should a VAT-registered sole trader use?
Once VAT is in play the price gap between QuickBooks Simple Start and Xero Ignite is £9.60 over 24 months, so cost stops being the deciding factor. Choose on fit — bank feeds, your accountant’s preference, the app you will actually open. And check whether your bank gives you FreeAgent free, which beats both.
Does Sage’s free tier work if I am VAT registered?
No. Sage Sole Trader Free is non-VAT only, and it is capped at 5 invoices a month. VAT registration means moving to a paid Sage plan — Accounting Start is £18+VAT a month, £378 over 24 months ex VAT.
Should I pick VAT-capable software before I have to register?
If registration is plausible within your planning horizon, yes — factor it in now. Switching plans mid-year is manageable, but switching vendors is not, and the cheapest-today choice is not always the cheapest across the term. Check the current VAT registration threshold on GOV.UK, as it is set by HMRC and can change.
Read next
Up to the software pillar, across to the sibling posts, down to the head-to-head and the review.
Up — pillar
Best UK accounting software, priced over 24 months
Every entry plan, every promotion, every total — and where each one stops being suitable.
Across — sibling post
The accounting software discount cliff
Why the £1 and £3.20 prices behind this whole comparison only last six months.
Across — sibling post
How to get FreeAgent free with NatWest, RBS or Mettle
The option that beats both QuickBooks and Xero regardless of VAT status, if your bank qualifies.
Down — head to head
Xero vs QuickBooks
The full comparison behind the £121.20 and £9.60 figures on this page.
Down — review
QuickBooks review
Sole Trader versus Simple Start, what each plan can and cannot do, and who each is for.
Down — what to buy
Cheapest UK accounting software over 24 months
The full workings, including the VAT-capable ranking rather than the headline one.