Key takeaways
- Spreadsheets are still allowed under MTD for Income Tax, but only with bridging software and unbroken digital links to HMRC.
- If one software product creates your records, sends quarterly updates and submits your tax return, HMRC says nothing else needs linking.
- Once a record has been sent in a quarterly update, it must not be retyped or copied and pasted elsewhere. This is where spreadsheets most often slip.
- No penalty points apply to late quarterly updates in 2026 to 2027. From 2027 to 2028, four missed deadlines mean a £200 penalty.
- Clear Books is HMRC recognised making tax digital software with free plans for sole traders and landlords, including quarterly updates and year-end filing.
For years, a tidy spreadsheet was all many sole traders and landlords needed: one tab for income, one for expenses and a quick tot-up in January. Making Tax Digital for Income Tax has changed that routine. Since 6 April 2026, everyone in scope has to keep digital records, send HMRC a summary every quarter through compatible software and submit a tax return at the end of the year.
Your spreadsheet can still play a part, but the rules on how figures travel from a cell to HMRC are stricter than many expect. That is why so many spreadsheet users are moving to full MTD accounting software. Here is what HMRC requires, where spreadsheets tend to creak and how to decide which route suits you.
Can you still use spreadsheets for Making Tax Digital?
Yes. HMRC’s guidance on creating digital records says you can keep your records in a spreadsheet and use compatible software that connects to it to make your submissions. That connecting software is known as bridging software.
A spreadsheet cannot send anything to HMRC by itself, and you cannot type totals into HMRC’s systems by hand. Your figures have to reach the bridging software through a digital link, such as linked cells, a CSV import, an automated transfer or an API connection. Retyping numbers breaks that chain.
So the real choice is not “spreadsheet or software”. One route is a spreadsheet plus bridging software, where you keep records in Excel or Google Sheets and a separate MTD compatible software product reads them and files your submissions. The other is full MTD accounting software, where one product creates your records, sends your quarterly updates and submits your tax return.
If you want the detail on how bridges work, our guide to MTD bridging software covers it step by step.
What HMRC needs from making tax digital software
Whichever route you take, compatible software has three jobs: create and store digital records of your self-employment and property income and expenses, send quarterly updates, and submit your tax return by 31 January after the end of the tax year.
What each digital record has to show
For every transaction, HMRC asks you to record the amount, the date and the category. MTD for Income Tax uses the same income and expense categories as Self Assessment, so if you already complete a return you will recognise them. You still need to keep your original paperwork, such as bank statements and invoices, and HMRC says digital records must be kept for at least five years after the 31 January submission deadline for each tax year.
Who is in scope, and when
MTD for Income Tax is based on qualifying income: your combined gross income from self-employment and property, before expenses. Under HMRC’s timetable, anyone with qualifying income over £50,000 in 2024 to 2025 has used MTD since 6 April 2026. Those over £30,000 in 2025 to 2026 join on 6 April 2027, and those over £20,000 in 2026 to 2027 join on 6 April 2028.
Not sure where you fall? Our guide to who needs MTD for Income Tax walks through worked examples, and the MTD deadlines and timeline page lists every date in one place.
Where spreadsheets and bridging software get fiddly
Bridging software is a legitimate option, but it puts more of the compliance work on your shoulders. These are the points that tend to catch people out.
The copy and paste trap
Once a digital record has been sent in a quarterly update, HMRC says you must not move it by hand, within your spreadsheet or into other software. That rules out rewriting figures in another cell and using cut and paste or copy and paste. Spreadsheets invite exactly that kind of shuffling, whether you are tidying a tab, starting a fresh sheet for a new quarter or pasting bank lines into a summary.
Two products to keep in step
With a bridge, you maintain a spreadsheet and a separate piece of software. Column layouts, formulas and category labels all need to match what the bridge expects. A renamed column or a broken formula can mean a quarterly update goes out with the wrong totals, and HMRC is clear that checking your digital records are accurate before you send them is your responsibility.
Corrections take more steps
If you find a mistake in a spreadsheet, HMRC says you should correct it there and then digitally link your records to your bridging software again. If your fourth quarterly update has already gone, you may need to resend it or adjust a category total before you finalise the year.
Landlords have extra layers
Property records add their own wrinkles. If you have foreign property, HMRC asks for separate digital records for each overseas property. If you let residential property in the UK, you need to record which expenses are restricted finance costs, such as mortgage interest, even if you use the simpler categorisation option available when turnover is under £90,000. If you let jointly, you only record your share. Our guide to MTD for landlords explains the property rules in plain English.
What full MTD accounting software does differently
Full MTD compliant software removes the gap that bridging software exists to cross. HMRC’s own guidance says that if you use a single software product to create your records, send quarterly updates and submit your tax return, you do not need to digitally link it to anything else. In practice, there are no links to build or maintain, because your records flow straight into your submissions inside one system. You choose a category when you record each transaction, rather than mapping spreadsheet columns to HMRC’s boxes.
You also get a running view of your tax. HMRC notes that sending a quarterly update gives you an estimate of your tax bill, so you can plan ahead instead of waiting for January. And there is less typing: some software can bring in transactions from a bank feed or read the details from a receipt photo, although HMRC points out that you may still need to add categories or create records for anything that does not come through in full.
Why the switch is happening now
Three things are pushing spreadsheet users to change.
MTD is no longer a future plan. HMRC reported in August 2026 that more than 436,000 sole traders and landlords had sent their first quarterly update, with the first deadline falling on 7 August 2026. The next update, for the period to 5 October, is due by 7 November 2026.
The soft landing is temporary. Under HMRC’s penalty rules for MTD for Income Tax, there are no penalties for missing a quarterly update deadline in the 2026 to 2027 tax year. You still need to send all four updates before you can submit your tax return, and penalties for late returns and late payments still apply. From 2027 to 2028, each missed quarterly deadline earns a penalty point, and reaching four points brings a £200 penalty.
More people are about to join. From April 2027 the threshold drops to £30,000, so many sole traders and landlords are setting up now rather than rushing before their first deadline.
Spreadsheet or MTD software: a quick self-check
A spreadsheet with bridging software can work well if you have only a handful of transactions each month, you are confident with linked cells and you keep the same layout all year. It also makes sense if your accountant already runs a bridging process for you.
Full MTD accounting software is usually the simpler choice if you have more than one income source, such as a trade and a rental property, or if you let several properties or any overseas property. The same goes if you would rather not maintain formulas and links, or you want to see your estimated tax as the year goes on.
Still weighing it up? You can put your question to our free MTD assistant, which answers in plain English from HMRC guidance.
How to choose HMRC recognised MTD software
HMRC publishes a list of software that works with MTD for Income Tax on GOV.UK. Before you sign up for anything, check that it:
- appears on HMRC’s list for MTD for Income Tax
- covers every income source you have: self-employment, UK property and foreign property
- handles the whole year, meaning digital records, quarterly updates and the tax return, not just the quarterly part
- includes filing in the plan you choose, rather than behind a paid upgrade
- lets you export your data and invite your accountant
- offers the level of help you want, whether that is guides, email or phone support
How Clear Books handles MTD for Income Tax
Clear Books is UK accounting software that has helped sole traders, landlords and small businesses since 2008. It has been HMRC recognised for MTD for Income Tax since 14 February 2025, and you can look it up on HMRC’s list using its recognition reference, 4TLCTU. Our HMRC recognised software page explains what that recognition covers.
The free plans are designed with spreadsheet users in mind. Sole Trader Free and Property Free include MTD Income Tax quarterly updates, year-end filing, income and expense recording, no transaction limits and the option to invite your accountant. There is also a free plan for one overseas property, CIS subcontractors can use the free sole trader plan, and if you are a sole trader and a landlord, you can run a free account for each income type and switch between them with a single login.
There is no time limit and no upgrade wall when it comes to filing. If you later want automated bank feeds, bill and receipt scanning or invoicing, the paid Sole Trader and Property plans start at £5 a month plus VAT. You can compare everything on our pricing page, and if you are self-employed, our guide to MTD for sole traders covers the rules for your situation.
Moving from a spreadsheet to MTD software in four steps
- Check your dates. Confirm when MTD applies to you and which quarterly update period you are in.
- Sign up and authorise your software. Create your account and let HMRC know you are using it through your Government Gateway, as part of signing up for MTD for Income Tax.
- Bring your records in from the start of the tax year. Your new software needs a complete set of digital records for the year before your next quarterly update. Clear Books lets you import your existing figures to get started, and a CSV import counts as a digital link.
- Send your next update and archive the spreadsheet. Keep the old file safe, because records need to be kept for at least five years after the 31 January deadline.
- With that done, the kettle can go on. Each quarterly update becomes a quick review and submit, not an evening with formulas.
Ready to leave the spreadsheet behind? Get free MTD software.
Frequently asked questions
Is a spreadsheet MTD compliant on its own?
No. A spreadsheet can hold your digital records, but it cannot send anything to HMRC. You need digitally linked bridging software, or full MTD software that does everything in one place. Our guide to MTD bridging software explains the difference.
What is the difference between MTD compatible software and HMRC recognised MTD software?
In everyday use, both describe software on HMRC’s Making Tax Digital list. Recognition means HMRC has confirmed the software meets its standards for digital record keeping and online filing. Read more on our HMRC recognition page.
Can I switch from a spreadsheet to MTD software partway through the tax year?
Yes. Bring in your digital records from the start of the tax year so your next quarterly update is complete, and use a digital method such as a CSV import rather than retyping figures. Our MTD for Income Tax guide explains how quarterly updates build towards your year-end tax return.
Do I still need to submit a tax return under MTD for Income Tax?
Yes. After your four quarterly updates, you submit your tax return through your compatible software by 31 January after the end of the tax year. The MTD deadlines page sets out every date.
Is free MTD software suitable for landlords?
For many landlords, yes. The Clear Books Property Free plan covers MTD quarterly updates and year-end filing for one property or a grouped set, with no transaction limits. The paid Property plan adds profitability tracking per property. See the free MTD software page for what is included.
Can my accountant send my quarterly updates for me?
Yes. HMRC allows an agent to keep your digital records and send updates on your behalf, and the Clear Books plans for sole traders and landlords let you invite your accountant into your account. Accountants can find out more on our accountants and bookkeepers page.
