MTD: Can I Use a Spreadsheet or Do I Need Software?
This is one of the most common questions about Making Tax Digital. The answer is you can use a spreadsheet for record keeping, but you still need MTD software to submit to HMRC.
The Two Parts of MTD Compliance
MTD has two requirements:
- Keep digital records — your income and expenses must be stored digitally
- Submit to HMRC digitally — quarterly updates, EOPS, and Final Declaration must be sent through MTD-compatible software via HMRC's API
A spreadsheet can satisfy requirement 1 but not requirement 2.
Using a Spreadsheet for Record Keeping
You can absolutely use Excel, Google Sheets, or any spreadsheet to record your income and expenses. HMRC doesn't mandate a specific tool for record keeping — it just needs to be digital (not paper).
What HMRC requires in your digital records:
- Date of each transaction
- Amount
- Category (the type of income or expense)
A simple spreadsheet with columns for date, description, category, and amount is fine.
Why You Still Need Software
The problem with spreadsheets is the submission part. You can't email a spreadsheet to HMRC or upload it to their website. MTD submissions must go through HMRC's API — and only MTD-compatible software can do that.
This is where you have two options:
Option 1: Spreadsheet + Bridging Software
Bridging software connects your spreadsheet to HMRC's MTD API. You keep your records in a spreadsheet, and the bridging software reads your figures and submits them to HMRC.
This was popular for MTD for VAT and some products exist for MTD for Income Tax. The downsides:
- Extra step — you need to map your spreadsheet data to the right format
- Error-prone — if your spreadsheet layout changes, the bridge may break
- Still costs money — bridging software isn't usually free
- No validation — a spreadsheet won't catch mistakes before you submit
Option 2: All-in-One MTD Software
Purpose-built MTD software handles both record keeping and submission in one place. You enter your income and expenses, and the software formats and submits everything to HMRC.
Benefits over the spreadsheet approach:
- One tool, no bridging needed
- Guided workflow — the software tells you what to enter and when to submit
- Validation — catches common mistakes before submission
- Deadline tracking — reminds you when quarterly updates are due
- HMRC connection — authenticates with your Government Gateway and submits directly
What About HMRC's Free Software?
HMRC is building its own free MTD software for people with simple affairs. It will be available through your Government Gateway account. However:
- It's designed for very simple tax situations (one self-employment or one property income, basic expenses)
- It won't have features like receipt scanning, reports, or accountant access
- It may not be ready for all users by April 2026
If your affairs are simple enough for HMRC's free tool, it's worth trying. For anything more, you'll want third-party software.
Read our full comparison in Free MTD Software from HMRC — What You Need to Know.
The Real Cost Comparison
| Approach | Cost | Effort |
|---|---|---|
| Spreadsheet + bridging software | £50–£150/year | High — manual formatting, mapping |
| HMRC free software | Free | Medium — limited features |
| Purpose-built MTD software | £79–£200/year | Low — guided, all-in-one |
| Accountant handles everything | £300–£800/year | None — but expensive |
Our Recommendation
If you already have a well-organised spreadsheet and you're comfortable with the bridging approach, it can work. But for most people, purpose-built MTD software is simpler and not much more expensive than bridging software alone.
ClearMTD costs £9/month or £79/year — less than most bridging software. You enter your income and expenses, and it handles the rest: digital records, quarterly submissions, EOPS, and Final Declaration, all submitted directly to HMRC.
No spreadsheet formatting. No bridging. No mapping columns.
Check if MTD applies to you with our free MTD checker, or start your free trial.