Last updated: February 2026
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If you’re hiring your first employee or you’ve been muddling through payroll on spreadsheets, the best payroll software for small businesses is one that handles the tax calculations, HMRC submissions and pension duties without requiring you to become a payroll expert. The good news is that most of the popular UK accounting platforms now include payroll as a built-in feature or affordable add-on, so you can keep everything in one place.
In this guide, we’ll walk you through what to look for, what the main options cost, and which software suits different types of small business. We’re focusing specifically on accounting software that includes payroll, rather than standalone payroll tools, because for most small businesses, having your books and your payroll in one system saves a lot of time and avoids a lot of headaches.
Why use accounting software with built-in payroll?
The biggest advantage of running payroll through your existing accounting software is that everything talks to each other. When you process a pay run, the wages, tax and National Insurance figures flow straight into your accounts. You don’t need to re-enter numbers, reconcile between two systems, or worry about whether your books match your payroll records.
This matters more than you might think. If you’re using separate tools for accounting and payroll, it’s surprisingly easy for small discrepancies to creep in. Come year-end, those discrepancies can turn into a real headache. An integrated system removes that risk almost entirely.
There’s also a practical benefit: one login, one subscription, one support team. When you’re running a small business, simplicity is worth paying for.
What to look for in small business payroll software
Before comparing specific products, it helps to know which features actually matter for a typical UK small business. Not everything on a feature list is equally important.
HMRC compliance is non-negotiable. Your payroll software must be able to submit Real Time Information (RTI) directly to HMRC. This means sending Full Payment Submissions (FPS) every time you pay someone and Employer Payment Summaries (EPS) when needed. All four of the platforms we cover below do this, but it’s the first thing to check with any software you’re considering.
Auto-enrolment pension management is the second must-have. If you employ anyone, you have legal duties around workplace pensions. Good payroll software will assess employees, calculate contributions and submit data to your pension provider automatically. Doing this manually is both time-consuming and risky.
Beyond those essentials, think about how many employees you have (this affects pricing), whether you need weekly or monthly pay runs, and whether your team includes a mix of salaried staff and hourly workers. If you’re a contractor or freelancer who’s set up a limited company, you’ll want software that handles director’s payroll efficiently, including optimising salary and dividend splits.
The four main options compared
Here’s how the leading UK accounting platforms stack up when it comes to payroll.
Sage Payroll
Sage is our top pick for most UK small businesses overall, and its payroll is a big part of why. Sage Business Cloud Payroll is available as an add-on to Sage Accounting, starting at £10 per month (excluding VAT) for up to 10 employees on the Essentials tier. If you need more advanced features like time tracking and enhanced reporting, the Standard tier costs £20 per month, and Premium (which adds comprehensive HR tools) costs £40 per month. Additional employees beyond the first 10 are charged per head, starting from £1.30 per month on Essentials.
Sage’s payroll walks you through a simple four-step process each pay run. It handles RTI submissions, auto-enrolment, statutory payments (maternity, paternity, sick pay) and year-end reporting. The interface is clean and it’s genuinely hard to get lost. If you already use Sage Accounting, the integration is seamless: payroll journals post to your accounts automatically.
Sage is a strong choice if you have a handful of employees and want something reliable that you can run yourself without any payroll training.
QuickBooks Payroll
QuickBooks offers payroll as an add-on to its accounting plans in two tiers: Standard Payroll and Advanced Payroll. Standard starts from around £5 per month (plus a per-employee fee) and covers the essentials: pay runs, RTI submissions, auto-enrolment and payslip generation. Advanced Payroll adds features like timesheets, rotas, leave management and over 30 built-in reports.
The main selling point of QuickBooks Payroll is how tightly it integrates with QuickBooks Online accounting. If you’re already a QuickBooks user, adding payroll feels like a natural extension rather than bolting on a separate tool. The reporting is particularly good: you can pull detailed breakdowns of payroll costs by department, project or time period, which is helpful if you need to keep a close eye on staffing expenses.
QuickBooks suits growing businesses that need solid reporting and might have slightly more complex payroll needs, such as multiple pay schedules or a mix of salaried and hourly staff. You can read our full QuickBooks review for more detail on the accounting side.
FreeAgent (payroll included)
FreeAgent takes a different approach: payroll is included in every plan at no extra cost. The software itself costs £29 per month (plus VAT) for a limited company, or £24 per month for sole traders. However, if you bank with NatWest, Royal Bank of Scotland, Ulster Bank or Mettle, you can get FreeAgent completely free, which makes it one of the most cost-effective options available.
FreeAgent’s payroll covers the core requirements. You can run monthly or weekly pay runs, submit RTI to HMRC, generate payslips and manage auto-enrolment. It also handles directors’ payroll well, including the annual earnings period method that many small company directors use to optimise their tax position.
Where FreeAgent falls slightly short is scale. It’s designed for small teams, and if you have more than 10 or so employees, you may find its payroll features a bit basic compared to Sage or QuickBooks. But for freelancers, contractors and small limited companies with a few staff, the fact that payroll comes included (potentially for free) is hard to argue with. See our FreeAgent review for the full picture.
Xero Payroll
Xero offers payroll as an add-on across its business plans, starting from £1.50 per employee per month (or £1 per employee on the Ultimate plan at £65 per month). This per-employee model can work out very affordably if you only have a small team, though costs do scale up as your headcount grows.
Xero’s payroll handles RTI, auto-enrolment, statutory payments and payslip distribution. It integrates neatly with the wider Xero ecosystem, and because Xero is popular with accountants, your bookkeeper or accountant can access your payroll data directly through their Xero partner dashboard. This can be a real advantage if you work closely with an accountant who already uses Xero.
The main consideration with Xero is that payroll is only available on certain plans, and you’ll need to factor in the per-employee cost on top of your accounting subscription. For businesses with more than a handful of staff, the monthly total can climb above what Sage or QuickBooks would charge. That said, if your accountant recommends Xero, the payroll add-on is a convenient way to keep everything in one ecosystem.
Which one should you choose?
The right choice depends on your situation. Here are some common scenarios.
You’re a freelancer or contractor with one or two employees (including yourself as a director). FreeAgent is the obvious starting point, especially if you can get it free through your bank. The built-in payroll covers everything you need without adding to your monthly costs.
You run a small business with 3 to 15 employees and want something straightforward. Sage Payroll on the Essentials or Standard tier gives you reliable, well-supported payroll at a reasonable price. It’s our top recommendation for most small businesses in this bracket.
You need detailed payroll reporting or have complex pay arrangements. QuickBooks Advanced Payroll is worth the investment. The reporting depth and flexibility around pay schedules give you more control than the other options.
Your accountant uses Xero and you want them to have direct access. Go with Xero and add the payroll module. The convenience of having your accountant work directly in the same system can save you both time and money, particularly at year-end.
A few things to watch out for
Whichever software you choose, there are a couple of practical points worth flagging.
First, make sure you understand the full cost. Some platforms advertise a low monthly fee but charge extra per employee or per pay run. Add up what you’ll actually pay each month based on your team size before committing.
Second, check that the software handles your pension provider. Most popular workplace pension schemes (NEST, The People’s Pension, Smart Pension and others) integrate with all four platforms, but if you use a less common provider, it’s worth confirming before you switch.
Finally, remember that from April 2026, Making Tax Digital for Income Tax begins for self-employed people and landlords earning over £50,000. While MTD for Income Tax is primarily about recording income and expenses digitally (not payroll directly), having your accounting and payroll in one HMRC-recognised system puts you in a strong position for compliance across the board.
Getting started
If you’re currently running payroll manually or using HMRC’s Basic PAYE Tools, switching to proper payroll software is one of the best investments you can make in your business. The time you save each month, plus the peace of mind of knowing your tax calculations and submissions are being handled correctly, more than justifies the cost.
Most of the platforms above offer free trials, so you can test the payroll process before committing. Our advice: pick the one that matches your accounting software (or the one you’re planning to move to), start a trial, and run a test pay period. You’ll know within one pay cycle whether it feels right.