Wave Accounting vs FreeAgent: The MTD Dealbreaker
Wave is free but FreeAgent costs £19/month. For UK sole traders facing MTD, that price gap hides a much bigger problem. Here's the real comparison.
Wave Accounting is free. FreeAgent costs £19 a month. If that sentence settles the debate for you, stop reading now, because the price tag is almost certainly the wrong thing to optimise for in 2025.
For UK sole traders earning between £50,000 and £80,000, the wave accounting vs freeagent decision is not really about bookkeeping features. It is about whether your software will keep you legally compliant when Making Tax Digital for Income Tax lands in April 2026, and what happens to your workflow, your quarterly deadlines, and your bank account if you choose wrong.
- Wave Accounting is US-built and has no confirmed MTD for Income Tax compatibility, making it a compliance risk for UK sole traders from April 2026.
- FreeAgent is MTD-ready and HMRC-recognised, but at £19/month it costs over £200 a year for features many sole traders will never use.
- The free-vs-paid framing misses the real question: which tool keeps you compliant with the fewest hours of your time per quarter?
- A third category of MTD-first apps built specifically for UK sole traders now exists, and it is worth knowing about before you commit to either.
- Switching software mid-year creates data migration headaches; the best time to make this decision is before your next accounting period begins.
What Each Product Actually Is
Before comparing them, it is worth being precise about what these two tools were built to do, because they come from completely different starting points.
- Making Tax Digital for Income Tax (MTD ITSA)
- HMRC's mandatory scheme requiring sole traders and landlords with income above £50,000 to keep digital records and submit quarterly updates to HMRC from April 2026. Those earning above £30,000 follow in April 2027. Standard Self Assessment will no longer be sufficient.
Wave Accounting
Wave is a Canadian company, acquired by H&R Block in 2019. It was built for North American small businesses and freelancers who want free invoicing and bookkeeping. The product is genuinely polished, and for a US or Canadian sole trader it is hard to beat at zero cost. Wave makes its money through payment processing fees and optional payroll services.
For UK users, Wave offers:
- Bank transaction import (manual CSV or connected accounts)
- Invoicing and receipt scanning
- Basic profit and loss reporting
- No VAT-specific UK workflows
- No confirmed MTD ITSA compatibility
That last point is the one that matters. Wave does not appear on HMRC's list of MTD-compatible software for Income Tax, and the company has not publicly committed to building that functionality. For a sole trader approaching the April 2026 threshold, this is not a minor inconvenience. It is a structural problem.
FreeAgent
FreeAgent is a Scottish company, founded in Edinburgh in 2007 and acquired by NatWest Group in 2018. It was built specifically for UK freelancers and small businesses. It is on HMRC's MTD list, it handles Self Assessment filing, and it has UK-specific tax logic baked into its architecture.
At £19 per month (£14.50 if you bank with NatWest or Royal Bank of Scotland, where it is free for the first year), FreeAgent is not cheap. But it is a genuinely UK-native product trying to solve a UK tax problem.
The MTD Compliance Question Wave Cannot Currently Answer
Here is where the wave accounting vs freeagent debate gets uncomfortable for Wave users. From April 2026, HMRC will require sole traders earning above £50,000 to submit quarterly updates directly to HMRC's systems via MTD API compatible software. That means your accounting software needs to be able to talk to HMRC's API.
Wave cannot currently do this. There is no public roadmap suggesting it will.
If you are using Wave today and your income sits between £50,000 and £80,000, you are currently running a countdown clock. You will either need to find bridging software (a workaround that involves exporting data from Wave and uploading it via a second, MTD-compatible tool) or you will need to switch entirely before your first quarterly deadline.
Bridging software is not illegal, but it is messy. It adds a second subscription, a second login, and a second opportunity for something to go wrong in the chain between your records and HMRC's systems. As we covered in HMRC Approved MTD Software List: What It Really Means, being on HMRC's approved list means the software has passed specific API tests. Wave has not passed them.
FreeAgent, by contrast, already supports MTD for VAT and is actively developing MTD for Income Tax support. Given that NatWest owns the company and has regulatory skin in the game, the likelihood of FreeAgent being MTD-ready by April 2026 is high.
Feature Comparison: What a Plumber Earning £65,000 Actually Needs
Let us make this concrete. Say you are a self-employed plumber turning over £65,000 a year. You have around 80 business transactions a month: materials, fuel, tool purchases, subcontractor payments, and customer invoices. You spend roughly three hours a month on admin now, and you would rather spend one.
Here is what the comparison looks like in practice:
Invoicing and Quotes
Both Wave and FreeAgent handle invoicing competently. Wave's invoicing is arguably cleaner and easier to customise. FreeAgent's is functional but slightly more rigid. For a plumber who sends 15-20 invoices a month, neither will frustrate you.
Edge: Wave, marginally.
Bank Feeds
FreeAgent connects to most major UK banks via Open Banking. Wave supports UK bank connections but the quality varies. Several UK sole traders report that Wave's automatic bank feeds disconnect more frequently than FreeAgent's, requiring manual re-authentication.
Edge: FreeAgent.
Expense Categorisation
FreeAgent has UK-specific expense categories aligned with HMRC's Self Assessment categories. Wave uses generic categories that do not map directly to UK tax forms. This matters more than it sounds. If you are categorising expenses in Wave, you may find yourself doing a translation exercise at year-end to make the figures match what your accountant or tax app needs.
If you want to go deeper on which expenses you might be missing entirely, How to Track Expenses as a Sole Trader Without the Shoebox covers the categories most tradespeople overlook.
Edge: FreeAgent.
Self Assessment Integration
FreeAgent can submit your Self Assessment directly to HMRC. Wave cannot. For a sole trader who pays an accountant to do this, the difference may be negligible. For someone who does it themselves, FreeAgent eliminates the step of exporting data and entering it into a separate HMRC portal or software.
Edge: FreeAgent, significantly.
Quarterly MTD Submissions
FreeAgent: building this functionality. Wave: no confirmed plans.
Edge: FreeAgent, decisively.
Mobile App
Both have mobile apps. Wave's is generally rated slightly higher on the App Store for ease of use. FreeAgent's app covers the basics but is less polished on mobile than on desktop.
Edge: Wave.
The Hidden Cost of Free
Wave's free model is not entirely free, and it is worth being clear about what you are actually trading.
Wave's payment processing charges 1.4% plus 20p per UK card transaction if you use Wave Payments to collect invoices. If you collect £65,000 through Wave Payments, that is roughly £930 in processing fees annually. By comparison, taking bank transfers directly costs nothing.
The free model also means Wave's customer support is limited. There is no phone support and live chat is reserved for paying customers using Wave's premium features. When something breaks in your bank feed two days before a quarterly deadline, this matters considerably.
FreeAgent at £228 a year buys you email and phone support, a UK-specific product, and a reasonable expectation of MTD compliance. Whether that is worth it depends on how much your time costs per hour. If you bill at £45 an hour and FreeAgent saves you four hours of admin confusion over the year, it has paid for itself.
The Option Neither Brand Wants You to Consider
The wave accounting vs freeagent comparison assumes these are the only two options. They are not.
A newer category of MTD-first apps has emerged specifically for UK sole traders who find FreeAgent over-engineered and Wave structurally unfit for UK compliance. These tools are built around a single workflow: capture income and expenses, categorise them correctly for HMRC, and submit quarterly updates without requiring an accounting degree.
TapTax sits in this category. It is built from the ground up for Making Tax Digital, priced for sole traders rather than small businesses with employees, and designed so that a plumber or electrician can complete a quarterly update in minutes rather than hours. There is no bloat from invoicing modules you will never use, no payroll features you do not need, and no North American tax logic that does not apply to you.
If you are choosing between Wave and FreeAgent primarily because you have not heard of anything else, it is worth taking five minutes to understand what you are actually buying before committing.
When Wave Actually Makes Sense for UK Sole Traders
This post is not a Wave hit piece. For a specific subset of UK sole traders, Wave is still a reasonable choice right now:
- Your income is comfortably below £50,000 and will remain so past April 2027 (the lower MTD threshold)
- You have a separate accountant who handles your Self Assessment and will manage any MTD bridging
- You primarily need free invoicing and basic bookkeeping records
- You bank with an institution that Wave connects to reliably
In that scenario, Wave does what it promises. It is only when you add MTD compliance to the requirements that Wave's North American foundations become a structural liability.
When FreeAgent Makes Sense
FreeAgent earns its subscription fee if:
- Your income is above £50,000 and MTD ITSA compliance is non-negotiable
- You bank with NatWest or RBS (where FreeAgent is free for the first year)
- You want to file your own Self Assessment without buying separate software
- You have employees or subcontractors and need payroll integration
- You value phone support from a team that understands UK tax
FreeAgent is not the most affordable option on the market, but it is a coherent UK tax product backed by a bank with regulatory incentives to keep it compliant. That is not nothing.
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The Verdict: A Price Difference That Is Not What It Seems
The wave accounting vs freeagent question started with a £228 annual price gap. But for a UK sole trader earning £65,000 with an April 2026 MTD deadline approaching, the real cost of getting this wrong is not £228. It is the time spent migrating data mid-year, the stress of finding a bridging solution three weeks before a quarterly deadline, and the theoretical £200 penalty for a missed or non-compliant submission.
Wave is a good product built for the wrong tax system. FreeAgent is a solid product built for the right tax system, priced at a level that prices out many of the sole traders who need it most.
If you opened this post wondering whether you can justify FreeAgent's monthly fee, the better question is: can you afford to be on software that has no confirmed MTD for Income Tax roadmap when April 2026 arrives?
The answer to that question is simpler than any feature comparison.
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