How Much Does Xero Cost

At Towerstone Accountants we provide specialist limited company accountancy services for directors and owner managed businesses across the UK. We created this webpage for business owners who want practical guidance on choosing and using accounting software, including day to day bookkeeping tasks, invoicing, bank feeds, and reporting. Our aim is to help you keep accurate records, reduce admin time, and stay compliant with HMRC and Companies House requirements.

Xero is one of the most popular accounting software platforms in the UK and it is a question I am asked constantly by business owners at all stages. How much does Xero actually cost. Is it good value. Do I need all the features. And why do some people seem to pay very different amounts for what looks like the same software.

The honest answer is that Xero’s cost depends on how you use it, what plan you choose, and whether you use it on its own or alongside an accountant. The headline monthly price is only part of the story. The real cost includes add ons, payroll, VAT, support, and sometimes the cost of getting things set up properly in the first place.

In this article I will break down exactly how much Xero costs in the UK, what is included in each plan, what is not included, and how to decide which option actually makes sense for your business. Everything here is based on real world UK usage rather than marketing headlines.

What Xero is and why pricing can be confusing

Xero is cloud based accounting software designed for small businesses, sole traders, and limited companies. It replaces spreadsheets and desktop software with a live system that connects your bank, tracks income and expenses, and produces reports.

Pricing can feel confusing because:

• There are multiple plans

• Features differ between plans

• Payroll is charged separately

• Prices can change over time

• Discounts are sometimes offered through accountants

Two businesses both using Xero can pay very different amounts and still both be using it correctly.

Xero pricing in the UK overview

In the UK, Xero is priced on a monthly subscription basis. You pay per organisation, not per user.

Xero currently offers three main plans for UK businesses:

• Starter

• Standard

• Premium

Each plan builds on the one below it and the jump in price is usually driven by features rather than storage or users.

Xero Starter plan cost

The Starter plan is the cheapest Xero option in the UK.

It is designed for very small businesses, freelancers, and sole traders with simple needs.

Typical cost:

• Around £15 per month plus VAT

What the Starter plan includes:

• Sending quotes and invoices

• Entering bills and expenses manually

• Bank reconciliation

• Basic reporting

• VAT returns

However there are important limitations.

The Starter plan is capped. You can only:

• Send a limited number of sales invoices per month

• Enter a limited number of bills per month

Once a business grows beyond that level, the Starter plan quickly becomes restrictive.

Who the Starter plan is suitable for

In practice, the Starter plan works best for:

• Very small sole traders

• Freelancers with low transaction volumes

• Businesses just starting out

• Side businesses with minimal activity

It is usually not suitable for limited companies with regular invoicing or supplier bills.

Xero Standard plan cost

The Standard plan is the most commonly used Xero plan in the UK.

Typical cost:

• Around £30 per month plus VAT

This is the plan most accountants recommend for established small businesses.

What the Standard plan includes:

• Unlimited sales invoices

• Unlimited bills and expenses

• Bank reconciliation

• VAT returns including MTD VAT

• Basic cash flow reporting

• Short term business snapshots

For most limited companies and VAT registered businesses, this is the minimum practical level.

Why the Standard plan is popular

The Standard plan removes the transaction limits that make the Starter plan frustrating.

It allows businesses to:

• Invoice freely

• Process supplier bills properly

• Scale without hitting artificial caps

From experience, most businesses outgrow the Starter plan far sooner than they expect.

Xero Premium plan cost

The Premium plan is the most expensive standard option.

Typical cost:

• Around £42 per month plus VAT

The main difference between Standard and Premium is multi currency support.

What the Premium plan includes:

• Everything in Standard

• Multi currency bank accounts

• Foreign currency invoicing

• Exchange rate tracking

If your business trades only in pounds sterling, Premium is usually unnecessary.

Who actually needs Xero Premium

Premium tends to suit:

• Businesses invoicing in foreign currencies

• Companies with overseas suppliers

• E commerce businesses trading internationally

• Businesses with foreign currency bank accounts

For UK only businesses, Premium often adds cost without benefit.

Xero payroll costs

Payroll is not included in the main Xero subscription. It is charged separately.

UK payroll pricing is usually based on:

• Number of employees

• Monthly payroll runs

Typical payroll costs:

• Around £5 per month base fee

• Plus a small fee per employee

For example, a company with five employees might pay an extra £10 to £15 per month for payroll on top of the main Xero subscription.

Payroll includes:

• PAYE calculations

• RTI submissions to HMRC

• Payslips

• Pension auto enrolment integration

Payroll costs are easy to overlook when comparing headline prices.

VAT and Making Tax Digital

VAT functionality is included in all Xero plans in the UK.

This includes:

• MTD compliant VAT returns

• Digital record keeping

• Direct submission to HMRC

There is no extra charge for Making Tax Digital compliance.

This is one of Xero’s strengths compared to some cheaper software options.

Additional Xero costs people often miss

The monthly subscription is not always the full cost.

Other common costs include:

• Payroll add ons

• Expense management tools

• Receipt capture tools

• Add on apps

• Accountant fees for setup or review

These costs vary widely depending on how the business operates.

Xero Expenses and receipt capture

Xero offers expense and receipt capture features, but some functionality may require add ons or higher plans.

Costs can include:

• Additional per user fees

• Mobile app usage limits

• Advanced expense approvals

For some businesses, this replaces separate expense software. For others, it adds another layer of cost.

Xero app marketplace and integrations

Xero integrates with hundreds of third party apps.

Common examples include:

• Payment processors

• Stock management systems

• CRM software

• E commerce platforms

Some integrations are free. Many are paid monthly subscriptions.

This can significantly increase the overall software cost but also improve efficiency.

Using Xero through an accountant

One important point many people miss is that accountants often get discounted Xero pricing.

If you use Xero through an accountant:

• The subscription may be cheaper

• The cost may be bundled into accountancy fees

• Setup and support may be included

In many cases, the total cost is lower than subscribing directly yourself and then paying separately for help.

Direct subscription vs accountant subscription

Subscribing directly through Xero gives you full control but no setup support.

Using Xero through an accountant often includes:

• Chart of accounts setup

• VAT setup

• Payroll setup

• Ongoing review

From experience, businesses that use Xero without guidance often spend more time fixing mistakes later.

Is Xero good value for money

Whether Xero is good value depends on how you use it.

Xero tends to offer good value where:

• Bank feeds are used properly

• Bookkeeping is kept up to date

• Reports are actually reviewed

• Integration replaces manual processes

It offers poor value if it is treated as a storage box for transactions that no one looks at until year end.

Comparing Xero to cheaper alternatives

Xero is not the cheapest accounting software in the UK.

Cheaper options exist, but they often lack:

• Strong bank feeds

• Good VAT handling

• Accountant friendly reporting

• Scalability

The real comparison is not price alone but time saved and errors avoided.

Hidden cost of poor setup

One of the biggest indirect costs is poor initial setup.

Common issues include:

• Incorrect VAT codes

• Poor chart of accounts

• Misused bank rules

• Duplicate entries

Fixing these later often costs far more than setting things up correctly from the start.

Cost of Xero for sole traders

For sole traders, typical monthly costs might look like:

• Starter plan at £15 plus VAT

• Or Standard plan at £30 plus VAT

The right choice depends on transaction volume rather than business size.

Many sole traders underestimate how quickly they will exceed Starter limits.

Cost of Xero for limited companies

For limited companies, typical monthly costs are:

• Standard plan at around £30 plus VAT

• Plus payroll if applicable

This is usually the realistic minimum for a compliant setup.

Cost of Xero for VAT registered businesses

VAT registered businesses almost always need at least the Standard plan.

This ensures:

• Unlimited transactions

• Proper VAT tracking

• MTD compliance

Trying to run a VAT registered business on the Starter plan often leads to frustration.

Annual cost of Xero

When budgeting, it helps to think annually.

Approximate annual costs might be:

• Starter plan around £180 plus VAT

• Standard plan around £360 plus VAT

• Premium plan around £500 plus VAT

• Payroll add ons extra

This gives a more realistic picture of the commitment.

Can you change Xero plans later

Yes. Xero plans can be upgraded or downgraded at any time.

This flexibility is useful when:

• A business grows

• Transaction volumes increase

• International trading starts

However downgrading is not always practical once you rely on features like unlimited invoicing.

Is there a free version of Xero

Xero does not offer a permanent free plan in the UK.

Occasionally there may be:

• Free trial periods

• Introductory discounts

• Accountant arranged promotions

These are temporary rather than long term solutions.

Does Xero replace an accountant

No. Xero is a tool, not a replacement for professional advice.

Xero handles:

• Recording transactions

• Producing reports

• Submitting VAT returns

It does not:

• Decide what is allowable

• Plan tax efficiently

• Review legality of dividends

• Protect against HMRC issues

The cost of Xero should be seen alongside accountancy support, not instead of it.

How to choose the right Xero plan

From experience, choosing the right plan comes down to a few questions:

• How many invoices do you raise each month

• Are you VAT registered

• Do you have employees

• Do you trade in foreign currencies

Answering these honestly usually points clearly to the right plan.

Common mistakes when choosing a Xero plan

The most common mistakes include:

• Choosing the cheapest plan without checking limits

• Forgetting payroll costs

• Ignoring future growth

• Assuming all features are included

These mistakes often lead to switching plans quickly.

Is Xero worth the cost

In my experience, Xero is worth the cost when it is:

• Set up correctly

• Used consistently

• Reviewed regularly

• Supported by good advice

It becomes expensive when it is underused or misused.

Final thoughts

So, how much does Xero cost in the UK. At a basic level, anywhere from around £15 to £42 per month plus VAT, with additional costs for payroll and add ons.

The real question is not just how much Xero costs, but how much value you get from it. Used properly, it saves time, reduces errors, and improves visibility over your finances. Used poorly, it becomes another monthly expense that creates false confidence.

In my experience, the best outcomes come when Xero is treated as part of a wider system, supported by an accountant, and chosen at the right level from the start rather than upgraded reactively later on.

You may also find our guidance on what is xero and xero vs quickbooks vs sage helpful when exploring related accounting software tasks. For a broader overview of software options and setup guidance, you can visit our accounting software hub.