Free vs Paid VAT Software: UK SME Costs Compared

What free and paid VAT software usually include

Every product on HMRC's software finder can file a VAT return. The difference is in the limits, the checks and the help you get when something goes wrong.

Questions to ask before you choose free software

• What are the limits? Check how many returns, businesses or users the free version covers, and what happens when you go over.
• Could the free version end? Free tiers are a provider's choice. Ask how much notice you would get, and how you would move to another product.
• Does it check your figures? A return cannot be changed once it is submitted, so checks before sending matter.
• Who helps if HMRC rejects a return? An error a few days before the deadline is when support counts.
• Does it fit how you keep records? If you use a spreadsheet, you need software that takes your figures from a file, not retyping.

What paid VAT software costs over a year

Prices change, so always check each provider's own pricing page. As a guide, bridging software that files from your spreadsheet is usually the cheapest paid option, and full accounting software costs more each month because it does much more than VAT.

For Swift VAT Pro, the yearly cost is:

• One business: £5 a month, or £50 a year paid annually. One return every 30 days is included, which covers quarterly filing. Any extra return in the same 30 days is £5.
• Up to 20 businesses: £20 a month, or £200 a year.
• Up to 100 businesses: £50 a month, or £500 a year.
• Unlimited businesses: £100 a month, or £1,000 a year.

Every plan has a 7-day free trial with no card needed. See the pricing page.

The real cost of getting it wrong

• Late returns: each late VAT return earns a penalty point. Once you reach the threshold, 4 points for quarterly filers, you get a £200 penalty, and another £200 for each later late return.
• Mistakes: a return cannot be amended once sent. Errors are corrected on a later return or reported to HMRC.
• Your time: a tool that needs figures retyped takes longer each quarter, and copying figures by hand is not a digital link under Making Tax Digital.

For more on how points work, see VAT penalty points explained.

When free is enough, and when to pay

• Free can be enough if you have one business, simple figures, and you are comfortable with the limits and terms.
• Low-cost bridging software makes sense if you keep your records in a spreadsheet and want checks, reminders and help when you need it.
• Accounting software makes sense if you want bookkeeping, invoicing and bank feeds in the same system. It files your VAT return too, so you do not need both. See bridging software vs accounting software.

Final thoughts

Free VAT software can work, but check its limits and terms before you rely on it. If you keep your records in a spreadsheet, paid bridging software usually costs £50 to £60 a year for one business and adds checks, reminders and support for a few pounds a month.

Disclaimer: This guide gives general information, not advice for your business. Prices for other providers change, so check their websites. If you are unsure how the rules apply to you, speak to an accountant or contact HMRC.