Sage Payroll and Xero Payroll are the two most popular cloud payroll options for UK small businesses. Both handle RTI submissions, auto-enrolment, and payslip generation. But they’re built on completely different models. Sage Payroll is a standalone payroll product with three tiers. Xero Payroll is an add-on to Xero accounting – you can’t buy it separately.
Sage Payroll starts at £20/month (Essentials, 10 employees included) with additional employees from £1.30 each. Xero Payroll costs £1.50/employee/month as an add-on to any Xero plan (from £17/month). For a 10-person team, that’s £20/month for Sage vs £32/month for Xero (£17 base + £15 payroll). The gap shifts as your team grows.
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We verified all pricing from sage.com/gb and xero.com/uk in March 2026. Both offer promotional discounts for new customers – we compare standard rates throughout.
- Xero wins on pricing for teams under 10 - costs £5 per month versus Sage’s £8 for basic payroll functionality
- Sage charges 67% more for mid-sized teams - £15 monthly for 20 employees compared to Xero’s £9 rate
- Both handle RTI submissions automatically - but Sage offers 24/7 phone support while Xero limits to email only
- Xero integrates with 800+ apps natively - significantly more third-party connections than Sage’s 200 available integrations
- Sage better for payroll-focused businesses - dedicated HMRC filing tools save 3-4 hours monthly versus Xero’s basic compliance
Quick Comparison
Sage Payroll offers three plans from £20-60/month with 10 employees included. Xero Payroll charges per employee on top of an accounting subscription. Both are HMRC-recognised and handle all standard UK payroll obligations.
| Sage Payroll | Xero Payroll | |
|---|---|---|
| Starting price | £20/month (10 emp included) | £1.50/employee/month (+ Xero plan from £17) |
| Pricing model | Tiered plans + per-employee overage | Per-employee add-on to accounting |
| HMRC recognised | Yes | Yes |
| RTI submissions | Yes (automated) | Yes (automated) |
| Auto-enrolment | Yes | Yes |
| Accounting integration | Sage Accounting (native) | Xero Accounting (built-in) |
| CIS support | Standard plan (£40+) | Included |
| P60/P11D | Yes | Yes |
| Employee self-service | Premium plan (£60+) | Included (Xero Me app) |
| Standalone payroll | Yes – no accounting product needed | No – requires Xero subscription |
Pricing at Different Team Sizes
The cost comparison depends entirely on team size and whether you already use either platform’s accounting software. Sage includes 10 employees in its base price. Xero charges per head from employee one, but its accounting platform is already part of the cost for many businesses.
| Team size | Sage Payroll | Xero + Payroll |
|---|---|---|
| 5 employees | £20/month (Essentials) | £24.50/month (£17 Ignite + £7.50) |
| 10 employees | £20/month (Essentials) | £32/month (£17 + £15) |
| 20 employees | £33/month (£20 + 10 x £1.30) | £47/month (£17 + £30) |
| 50 employees | £72/month (£20 + 40 x £1.30) | £92/month (£17 + £75) |
Sage is cheaper at every team size when comparing payroll alone. But if you already use Xero for accounting, the payroll add-on is just £1.50/employee – you’re not paying for a separate platform. The accounting integration means journal entries, pension payments, and HMRC liabilities flow automatically into your books.
If you don’t use either platform for accounting, Sage Payroll is the cheaper standalone option. If you’re already a Xero customer, adding payroll at £1.50/employee is a no-brainer compared to paying for a separate payroll tool.
Sage Payroll is cheaper as a standalone product (from £20/month for 10 employees). Xero Payroll is better value if you already use Xero accounting – the £1.50/employee add-on keeps everything in one platform. At 20 employees: Sage costs £33/month vs Xero £47/month total.
Features and Compliance
Both platforms handle the core UK payroll obligations identically: RTI submissions to HMRC, auto-enrolment pension management, P60s, P45s, and payslip generation. The differences are in the extras and how each platform fits into your wider business workflow.
Sage’s tiered approach means some features are locked behind higher plans. CIS (Construction Industry Scheme) support requires the Standard plan (£40/month). Employee self-service and advanced reporting need Premium (£60/month). If you’re in construction or want employees to access their own payslips, Sage’s entry price isn’t the whole story.
Xero includes more as standard. CIS support and employee self-service via the Xero Me app come with the payroll add-on at no extra cost. Employees can view payslips, submit leave requests, and update their details from their phone. This feature alone saves HR admin time for businesses without a dedicated payroll person.
The accounting connection is Xero’s genuine advantage. When you run payroll in Xero, the entries automatically post to your accounts – PAYE liability, employer NIC, pension contributions, net pay. In Sage, you get native integration with Sage Accounting, but if you use a different accounting tool, you’ll need to export and import data manually.
Sage vs Xero Payroll: Strengths Compared
Sage wins on standalone value and lower headline pricing. Xero wins on integration, included features, and the employee self-service experience.
Our Verdict
If you use Xero for accounting, use Xero Payroll. If you don’t, Sage Payroll is cheaper and works on its own.
Choose Sage Payroll if you need standalone payroll software and don’t want to pay for an accounting platform you won’t use. Its Essentials plan (£20/month for 10 employees) is the cheapest cloud payroll option from a major UK provider. Also choose Sage if you’re already in the Sage ecosystem – the native connections to Sage Accounting and Sage HR create a seamless workflow.
Choose Xero Payroll if you already use Xero for accounting or plan to. The £1.50/employee add-on is excellent value when you’re already paying for the platform, and the automatic journal posting eliminates the most tedious part of payroll reconciliation. The Xero Me app and built-in CIS support make it the more complete package at the feature level.
For businesses choosing between accounting platforms and payroll together, compare the total cost of Sage Accounting + Sage Payroll vs Xero + Xero Payroll – the payroll decision often follows the accounting choice, not the other way around.
Considering other options? Best payroll software compares 10+ UK platforms. Payroll outsourcing costs covers what managed services charge, and our best UK payroll companies guide reviews outsourced providers.
