Accounting Software for Small Businesses Explained

Accounting software can make it easier to keep on top of your business finances. It can reduce paperwork, save repeated typing and help you see what you are earning, spending and owed.

But how much does it actually do? Can it prepare your accounts and tax return? And will you still need an accountant?

This guide explains what to expect, what to check before subscribing and how Craigerne Accountancy can help you get started.

What can accounting software do

Most cloud accounting packages let you work through a web browser, with a mobile app for certain everyday tasks. Depending on the package and subscription, useful features include:

• Bank feeds: import transactions from supported bank accounts.

• Invoices: create and send invoices, track unpaid amounts and send reminders.

• Receipts and expenses: upload documents or photograph receipts, with some tools extracting the details.

• Bookkeeping: organise income and spending into categories and match payments to invoices.

• Reports: show business income, costs and profit, plus money customers owe you.

• Tax tools: help with estimates, VAT or other submissions where supported.

These features can reduce the amount of information you enter more than once. Availability, limits and extra charges vary, so check the specific plan.

Is it easy to use

You do not need to become an accountant to handle the everyday tasks. The aim is to learn a few useful routines: sending an invoice, uploading a receipt and checking what a bank transaction relates to.

There is still a learning curve, particularly at the start. Correct opening figures, sensible categories and the right settings make a difference.

At Craigerne Accountancy, we can help you set up your software and show you how to use the features relevant to your business. You can start with the basics and build confidence as you go.

Does it really make bookkeeping easier

It can, especially if you currently type transactions into a spreadsheet or sort through receipts at the end of the year.

For example, you might photograph a supplier receipt when you buy something, then match it to the payment when it appears through the bank feed. Keeping the document and transaction together makes them easier to find later.

However, imported transactions and suggested categories still need checking. A loan paid into your bank account should not be treated as sales income, and personal spending should not simply be recorded as a business expense.

Software reduces repetitive work, but the records still need to reflect what actually happened. A short, regular bookkeeping routine helps prevent a backlog.

Can it prepare my accounts and do the filings

Some packages can handle parts of this process, but bookkeeping, preparing annual accounts and filing tax returns are different functions.

Software can turn your bookkeeping records into reports showing income, expenses and profit. Those records provide the starting point for preparing your annual accounts and tax returns, reducing the need to enter the same information again.

Depending on the product and the features you subscribe to, it may also support submitting VAT returns, personal tax returns or company accounts and Corporation Tax returns to HMRC and Companies House. Some functions are built in, while others need an add-on or your accountant’s professional software. We can help you establish what is included and what additional support you need.

The key is to distinguish a report generated from your records from a completed set of accounts or a return that is ready to file. Missing transactions, the treatment of equipment purchases and expenses that are not allowable for tax can all affect the final figures.

Before filing, someone still needs to check that the records are complete and that any necessary accounting and tax adjustments have been made. At Craigerne Accountancy, we can agree who handles the bookkeeping, who reviews the figures and who prepares and submits each return.

Does it link to my Self Assessment

It can, but check exactly what the product supports.

It can help connect the two. Your bookkeeping records provide the business income and expense figures needed for your tax return, reducing repeated data entry. The exact process depends on whether you are within Making Tax Digital and which software you use.

Some filing tools are designed for accountants, while others can be used directly by business owners. Buying a bookkeeping subscription does not necessarily give you everything needed to complete your personal tax return. We can explain the appropriate route for your circumstances.

Your business records may only cover part of your tax position. Employment income, savings interest, dividends, property income and other relevant details may also need to be included. A business profit figure on a dashboard is not necessarily your final taxable profit or personal tax bill.

Craigerne Accountancy can help bring the information together and check that the chosen filing route covers your circumstances.

Can software automate Making Tax Digital filings

Yes, some software can automate submissions as well as prepare the figures.

Compatible software can use your bookkeeping records to prepare quarterly updates and support the annual tax submission, reducing manual entry. You or your accountant can manage the filing process through the appropriate software.

Automatic preparation is different from automatic submission. Some providers go further: FreeAgent, for example, can schedule quarterly submissions once configured. This does not extend to its year-end submissions. The available automation depends on the provider and settings.

The process should be agreed in advance: who keeps the records up to date, who checks them, whether approval is required before submission and who checks that HMRC has accepted it. An automated submission can still contain incomplete or incorrectly categorised information.

We can help configure a suitable process and explain which parts your chosen software automates.

If Making Tax Digital for Income Tax applies to you, compatible software is needed to maintain digital records, send quarterly updates and submit your annual tax return. Quarterly updates are summaries of business income and expenses, not separate tax returns.

You may use one suitable product or a combination of compatible tools. Spreadsheets can still play a role when connected through appropriate bridging software. The software must support the income sources and submissions you need. HMRC’s software guidance explains what to check.

We can help you check what applies to you and choose a workable approach. Our Making Tax Digital guide explains the wider requirements.

Could it reduce my accountancy fees

Possibly, if it reduces the work involved. Doing the everyday bookkeeping yourself can reduce the work you need to pay an accountant or bookkeeper to do. Complete, well-organised records can also help avoid additional charges for missing paperwork, correcting entries or reconstructing the books.

That principle applies whoever prepares your accounts. It does not guarantee that every accountant will reduce a fixed fee or include all support at no extra cost.

However, buying software does not automatically reduce your fees. The overall cost also depends on:

• How much bookkeeping you do yourself.

• The quality and completeness of your records.

• The accounts, tax returns and advice you need.

• Software subscriptions, setup, training and any ongoing support.

Poorly maintained software records can still take time to put right. The sensible comparison is the combined cost of software and professional support, alongside the time it saves you.

At Craigerne Accountancy, we can discuss the division of work and explain what is included in your fee before you commit.

Can Craigerne Accountancy access the software and help me

Yes. With your permission, Craigerne Accountancy can have a separate accountant or administrator login, where supported, with access appropriate to the work you have agreed.

A practical arrangement is for you to handle the core day-to-day work: raise invoices, upload receipts and check incoming bank transactions. Craigerne Accountancy can help you learn the process, resolve queries and review the records at agreed intervals.

Because you work from the same records, Craigerne Accountancy can look at the transaction you are asking about and help put it right. The aim is to build your confidence and maintain cleaner books throughout the year, reducing the amount of sorting out needed later.

You should use the software’s invitation and permissions settings rather than share your personal password. Software access and authorisation to act for you with HMRC are separate arrangements.

Access also does not mean someone is continuously monitoring your records. We would agree how often reviews take place and which tasks each of us will handle.

Which software providers are available and how much do they cost

Xero, FreeAgent, QuickBooks and Sage are among the options available, alongside other accounting packages and specialist tools. There is no single best choice for every business.

Many packages charge a monthly or annual subscription, with the cost depending on the features, number of users and level of functionality. Some providers offer free or lower-cost options for simpler needs, and software may sometimes be included with a qualifying business bank account.

Look beyond an introductory discount and consider the ongoing cost, VAT and any extras for payroll, receipt processing or tax filing. A lower-priced plan may be enough for a straightforward business, while more complex requirements can justify a fuller package.

Craigerne Accountancy can help you compare suitable providers and choose a package that fits your business, budget and confidence with technology. If you already use software, we can first discuss whether it meets your needs before recommending a change.

We can help you choose suitable software or make better use of the package you already have. Our advice is guided by what suits your business.

How do I choose the right package

Start with what your business needs. Consider your business structure, transaction volume, invoicing, VAT, payroll, stock and any other systems you use. Check that the software supports your bank and the filing requirements relevant to you.

Compare the ongoing subscription price as well as any introductory discount. Ask whether receipt processing, extra users, payroll, tax filings or other features cost more.

A trial can help you judge whether the everyday tasks feel manageable. It is also worth checking how you can export your records if you later change provider.

We can help you assess suitable options before you subscribe, so you pay for the features you need.

Can I keep using spreadsheets or switch from another system

The right approach depends on your reporting obligations and how you prefer to work. A simple spreadsheet may still suit some businesses, although applicable digital filing rules must be met.

If you are moving to new software, you do not necessarily need to re-enter every historic transaction. The amount to transfer depends on the changeover date, reporting needs and what the new system can import. Opening balances, unpaid invoices and outstanding bills need particular care.

We can help plan the changeover and check the starting figures, while making sure the records you need remain accessible.

How Craigerne Accountancy can help

At Craigerne Accountancy, we combine software certification with strong practical experience across a range of accounting packages. We can help you choose a suitable system, get set up and confidently manage your day-to-day bookkeeping.

We support small businesses in Peebles and the Scottish Borders, whether you are starting from scratch or looking to improve your existing bookkeeping routine.

Our aim is to get you comfortable with the everyday tasks, with professional support available where you need it. You remain involved in your finances while giving your accountant clearer, better-organised records.

Depending on the support you need, we can:

• Help you choose a suitable package and subscription.

• Set up your business details, opening figures and bookkeeping categories.

• Help connect supported bank feeds and establish receipt and invoicing routines.

• Show you how to handle the everyday tasks.

• Use agreed accountant access to answer questions and help resolve problems.

• Review your records and prepare accounts and tax submissions within your agreed service.

You may want to do most of the bookkeeping yourself, share the work with us or ask for more ongoing support. We can discuss an arrangement that suits your business and confidence with technology.

Thinking about accounting software, or already paying for a package you are struggling to use? Get in touch with Craigerne Accountancy to discuss your options and request a free quote.

Self Assessment Tax Return Deadlines Explained (2026/27)

Missing a Self Assessment deadline can lead to unnecessary penalties and interest from HMRC. The good news is that, with a little planning, it's easy to stay on top of your obligations.

Who Needs to Complete a Self Assessment Tax Return?

You may need to complete a Self Assessment tax return if you:

• Are self-employed.

• Receive rental income from property.

• Have untaxed income.

• Need to report Capital Gains Tax.

• Receive certain investment or overseas income.

• Are a partner in a business partnership.

• Need to claim specific tax reliefs or allowances.

• Have been asked by HMRC to complete a tax return.

Important: A high salary on its own no longer automatically means you need to complete a Self Assessment tax return. If all of your income is taxed through PAYE, you may not need to file a return unless HMRC requests one or you have other income to report.

If you're unsure whether you need to file, it's worth checking before the deadline to avoid potential penalties.

The Key Self Assessment Deadlines

For most taxpayers, there are just three dates to remember. If you are completing a tax return for the tax year 6 April 2025 to 5 April 2026, your key deadlines are:

• 5 October 2026 – Register for Self Assessment (first-time filers only).

• 31 January 2027 – Submit your online tax return and pay any tax due for the 2025/26 tax year. This is also the deadline for your first Payment on Account for 2026/27 (if applicable).

• 31 July 2027 – Make your second Payment on Account (if applicable).

Most Self Assessment tax returns are now submitted online. A separate 31 October deadline applies only to paper tax returns. If you're eligible to have tax collected through your PAYE tax code, you'll normally need to file online by 30 December.

What Are Payments on Account?

Many people are surprised when their first Self Assessment tax bill is larger than expected.

This is because HMRC may ask you to make Payments on Account towards your next year's tax bill.

Who Do Payments on Account Apply To?

Payments on Account usually apply if:

• Your Self Assessment tax bill is more than £1,000, and

• Less than 80% of your tax has already been collected through PAYE or another source.

If your Self Assessment tax bill is £1,000 or less, or most of your tax has already been deducted before you receive it, you will not normally have to make Payments on Account.

A Simple Example

Imagine you've completed your 2025/26 Self Assessment tax return. The return calculates that you owe £8,000 in tax.

Because your tax bill is over £1,000, HMRC assumes you will earn a similar amount next year and will ask for payments in advance:

• 31 January 2027: Balancing Tax due for 2025/26 - £8,000

• 31 January 2027: First Payment on Account for 2026/27 - £4,000

  • Total due on 31 January 2027- £12,000

• 31 July 2027: Second Payment on Account for 2026/27 - £4,000

Although your tax return calculated a tax bill of £8,000 for the 2025/26 tax year, HMRC is also asking you to pay half of your estimated tax for the following year in advance.

When you later submit your 2026/27 tax return, HMRC compares the tax you've already paid in advance with the amount actually due:

• If you've paid too much, you'll normally receive a refund or have the overpayment set against future tax.

• If you've paid too little, you'll simply pay the remaining balance.

Can Payments on Account be reduced?

If you expect your tax bill to be lower than the previous year, you may be able to reduce your Payments on Account. Take care not to reduce them too far, as HMRC may charge interest if you underpay.

Craigerne Tip: We encourage clients to prepare their tax return well before January. Knowing your tax bill early gives you time to budget for any Payments on Account and avoids last-minute surprises.

What Happens If You Miss a Deadline?

Missing a Self Assessment deadline can quickly become costly. HMRC enforces a strict, escalating penalty regime for late filing and late payments—even if you ultimately owe no tax at all. 

Here is exactly how the penalties stack up if you miss the 31 January deadline:

• 1 day late: An immediate £100 automatic penalty applies the moment you miss the midnight deadline.

• 3 months late: HMRC charges an additional £10 per day for up to 90 days, adding a maximum of £900 to your bill.

• 6 months late: A further penalty of 5% of the tax due or £300 (whichever is greater) is added.

• 12 months late: Another 5% of the tax due or £300 (whichever is greater) is applied. In serious cases, the fine can be up to 100% of the tax due. 

Late Payment Penalties and Interest

Filing your tax return on time is only part of the process—you also need to pay any tax due by the deadline.

If payment is made late, HMRC will charge interest on the outstanding amount from the day after the payment deadline. Depending on your circumstances and which penalty regime applies, HMRC may also charge late-payment penalties if the tax remains unpaid. 

If you're struggling to pay, it's important to contact HMRC as soon as possible. In many cases, agreeing a Time to Pay arrangement before penalties arise can help reduce or avoid some late-payment penalties. 

What Information Will You Need?

Having your paperwork ready makes completing your tax return much easier.

Depending on your circumstances, you may need:

• Employment income (P60 or P45).

• Self-employment income and expenses.

• Rental income and expenses.

• Bank interest.

• Dividend income.

• Pension contributions.

• Gift Aid donations.

• Capital Gains information.

Keeping organised records throughout the year can save considerable time when your tax return is due.

Common Mistakes We See

Some of the most common issues include:

• Leaving everything until January.

• Forgetting to register for Self Assessment.

• Missing allowable business expenses.

• Forgetting rental or dividend income.

• Losing receipts and records.

• Underestimating the first tax bill because of Payments on Account.

Getting advice early can often save both tax and stress.

Top Tips

• Register early if this is your first tax return.

• Keep digital records throughout the year.

• Don't wait until January to gather your paperwork.

• Set money aside regularly for your tax bill.

How Craigerne Accountancy Can Help

At Craigerne Accountancy, we help individuals, landlords and business owners complete accurate Self Assessment tax returns on time.

We can help you:

• Prepare and submit your tax return.

• Claim all allowable expenses and tax reliefs.

• Understand your tax bill before it's due.

• Help you budget for Payments on Account.

• Deal with HMRC on your behalf if required.

Whether it's your first tax return or you've been filing for years, we'll make the process straightforward, accurate and stress-free.

Making Tax Digital for Income Tax: What You Need to Know

Making Tax Digital (MTD) for Income Tax is now being introduced by HMRC.

If you're self-employed or a landlord, it's important to understand whether the new rules apply to you and what you need to do before your start date.

The good news is that, with the right software and a little preparation, the transition is usually straightforward.

What is Making Tax Digital?

MTD is HMRC's programme to modernise the UK tax system.

Instead of keeping paper records and completing one annual Self Assessment tax return, affected taxpayers will:

• Keep digital accounting records.

• Use HMRC-compatible software.

• Submit quarterly updates to HMRC.

• Complete a Final Declaration after the end of the tax year.

The aim is to make tax reporting more accurate while giving taxpayers a better view of their finances throughout the year.

Who Needs to Comply?

MTD for Income Tax is being introduced in stages based on your total qualifying income from self-employment and property.

• From April 2026: Individuals with qualifying income over £50,000.

• From April 2027: Individuals with qualifying income over £30,000.

• Expected from April 2028: Individuals with qualifying income over £20,000, subject to legislation.

What is qualifying income?

The MTD income threshold is based on your qualifying gross income from self-employment and property businesses before expenses are deducted. This includes UK property income and may also include overseas property or self-employment income if it forms part of your UK Income Tax reporting. Employment income, dividends and pension income do not count towards the threshold.

If you're unsure whether the rules apply to you, we're happy to help.

When Is My First MTD Submission Due?

If you join Making Tax Digital from 6 April 2026, your first quarterly reporting period covers: 6 April 2026 to 5 July 2026. Your first quarterly update must be submitted to HMRC by 7 August 2026, just over one month after the quarter end.

Other reporting period and submission deadlines are as follows:

• Quarter 2: Period covered: 6 July to 5 October. Submission deadline: 7 November

• Quarter 3: Period covered: 6 October to 5 January. Submission deadline: 7 February

• Quarter 4. Period covered: 6 January to 5 April. Submission deadline: 7 May

After your fourth quarterly update, you'll complete a Final Declaration, which replaces much of the current Self Assessment reporting process. This is normally due by 31 January following the end of the tax year.

Note - these are the standard quarterly periods. Some businesses may instead use calendar quarters (1 April to 30 June etc.) depending on their software and accounting period.

Do I need to pay tax quarterly now?

No, quarterly updates do not mean you'll pay tax every three months.

They simply keep HMRC updated on your income and expenses. Your tax payment dates remain unchanged.

What Should You Do Now?

If you think MTD may apply to you, we recommend taking these simple steps.

1. Check your income

Work out your annual self-employment and rental income to see whether you exceed the relevant threshold.

2. Move to digital records

If you're still relying on paper records or spreadsheets, now is the ideal time to move to digital bookkeeping.

3. Choose compatible software

You'll need HMRC-compatible software to comply with MTD. Choosing the right software now will make the transition much easier.

4. Get everything ready before your deadline. Don't wait until your first quarterly submission is due.

Setting everything up in advance gives you time to become familiar with the software and avoids unnecessary stress.

Do I Need Accounting Software?

Yes. Most taxpayers affected by MTD will need HMRC-compatible accounting software.

While spreadsheets can still be used in certain circumstances, they generally need to be linked to compatible software to meet HMRC's digital requirements.

Cloud accounting software also offers several additional benefits:

• Keep your records organised throughout the year.

• See your income and expenses in real time.

• Reduce paperwork.

• Estimate your tax position earlier.

• Make year-end tax reporting much simpler.

How Craigerne Accountancy Can Help

Making Tax Digital doesn't have to be complicated.

At Craigerne Accountancy, we can help you:

• Confirm whether MTD applies to you.

• Calculate whether you meet the income thresholds.

• Recommend suitable accounting software.

• Set up your digital bookkeeping.

• Prepare and submit your quarterly updates.

• Complete your Final Declaration.

• Provide ongoing support throughout the year.

Whether you're self-employed, a landlord, or both, we'll ensure you stay compliant while keeping the process as straightforward as possible.

Get in touch today to make your transition to Making Tax Digital simple and stress-free.