Can I Use Spreadsheets for Making Tax Digital?

TL;DR
Yes. Spreadsheets can still be used for Making Tax Digital (MTD) in many situations when paired with compatible bridging software and proper digital record keeping.
For many sole traders and landlords with relatively straightforward income and expenses, a spreadsheet-based approach can be a simpler and lower-cost alternative to full accounting software.

The key is understanding:
• what HMRC actually requires
• when spreadsheets are suitable
• and when accounting software may make more sense.

What HMRC Actually Requires for MTD

One of the biggest misconceptions around Making Tax Digital is that everyone now needs to move over to software like Xero or QuickBooks.

That is not strictly true.

HMRC’s main requirements are:

• digital record keeping
• digital submission of information to HMRC
• digital links between records and submissions.

In practice, this means your records need to be stored electronically and submitted digitally.

Where people often become confused is around how this needs to be done.

In my experience, many smaller business owners and landlords think:

• they now need to complete four full tax returns each year
• they must completely change how they currently work
• or they are no longer allowed to use spreadsheets at all.

None of those are necessarily true.

For many people, MTD is more of an admin and process change than a complete overhaul of their bookkeeping.

You can read more about the wider MTD requirements here.

Can Excel Still Be Used for Making Tax Digital?

Yes. Excel and spreadsheets can still be used for MTD in many cases.

However, spreadsheets themselves do not submit information directly to HMRC. This is where bridging software comes in.

In practice, many people are already using spreadsheets successfully to track:

• income
• expenses
• invoices
• rental income
• repairs and maintenance
• mileage
• CIS income and deductions.

For someone with relatively simple records, spreadsheets can still be a perfectly workable option.

I’ve seen many smaller businesses with only a handful of monthly transactions being pushed towards full accounting software when, realistically, their bookkeeping requirements are relatively straightforward.

Using full software for very small transaction volumes can sometimes feel like using a sledgehammer to crack a nut.

That does not mean software is bad. For some businesses it absolutely makes sense. But for simpler situations, spreadsheets may still be entirely suitable.

What Counts as a Digital Record?

One area that causes confusion is what HMRC actually means by a “digital record”.

For MTD purposes, the important part is that key transaction details are recorded electronically.

This would typically include:

the date
the amount
the category or description
and details of the supplier or customer where relevant.

For example, entering rental income and expenses into a spreadsheet would count as digital record keeping.

Paper receipts themselves do not necessarily need to be stored digitally in every situation. However, many people choose to keep digital copies because it can make record keeping easier and more organised over time.

In practice, taking a photo of receipts and storing them in cloud storage or organised folders is often a sensible approach, particularly if HMRC ever requests supporting documents later on.

What Is Bridging Software?

Bridging software acts as the link between your spreadsheet and HMRC.

It allows spreadsheet figures to be submitted digitally while remaining compliant with MTD rules.

A simple workflow may look something like this:

1. Record income and expenses in a spreadsheet
2. Categorise transactions
3. Create totals or summaries
4. Connect the spreadsheet to bridging software
5. Submit the figures digitally to HMRC.

This allows many people to continue using a system they are already familiar with rather than learning entirely new bookkeeping software.

In my experience, a lot of people are not necessarily worried about spreadsheets themselves. They are worried about whether the submission process will still be compliant. That is usually where bridging software solves the problem.

HMRC states: 

If you use spreadsheets to record income and expenses, bridging software can connect to them and make your submissions to HMRC.

Source: HMRC guidance on Making Tax Digital

https://www.gov.uk/guidance/choose-the-right-software-for-making-tax-digital-for-income-tax: Can I Use Spreadsheets for Making Tax Digital?

How a Spreadsheet-Based MTD Setup Works

For many smaller sole traders or landlords, the practical day-to-day process is often simpler than they expect.

Typically, the process involves:

• updating income and expenses regularly
• storing digital copies of records where appropriate
• maintaining categories consistently
• reviewing totals before submission.

One thing people often overcomplicate is the idea that they suddenly need to become accountants.

In reality, good bookkeeping habits matter far more than trying to create complicated systems.

In my experience, consistency is usually more important than the software itself.

If records are incomplete, disorganised or missing entirely, the software alone does not solve that issue.

A simple spreadsheet that is updated regularly can often work perfectly well for straightforward situations.

Who Is This Approach Best Suited To?

A spreadsheet-based approach may work well for:

• sole traders with relatively low transaction volumes
• landlords with straightforward rental income
• subcontractors with predictable income and limited expense categories
• people already comfortable using Excel
• businesses wanting a simpler and lower-cost setup.

For example, many landlords receive:

• regular monthly rental income
• mortgage interest charges
• insurance costs
• occasional repair expenses.

That can often be tracked quite comfortably within a spreadsheet.

Similarly, some sole traders may only issue a small number of invoices each month while having relatively limited expenses.

In situations like these, moving immediately into full accounting software may not always be necessary.

I’ve also seen many people who already use spreadsheets successfully and simply want guidance on how to adapt their existing process to remain compliant.

For them, bridging software can often be a much easier transition than moving to an entirely different platform.

If you are unsure whether a spreadsheet-based setup is suitable for your situation, you can take the MTD suitability quiz here.

When Spreadsheets May Not Be Enough

Spreadsheets are not suitable for everyone.

There are situations where accounting software may become the more practical option.

Examples include:

• very high transaction volumes
• payroll
• stock and inventory management
• multiple businesses or income streams
• more complex VAT requirements
• businesses needing automation and integrations.

The key issue is usually complexity rather than turnover alone.

For example, a business could receive a small number of large payments each month and still manage perfectly well using spreadsheets.

On the other hand, a business with hundreds of smaller transactions may benefit significantly from software automation.

Organisation and discipline also matter.

If someone struggles to:

• keep records updated
• retain receipts
• separate personal and business spending
• or maintain consistency,

then spreadsheets can become difficult to manage over time.

In those situations, software may provide more structure and automation.

Common Mistakes to Avoid

Some of the most common spreadsheet issues are surprisingly simple.

These include:

• broken formulas
• missing cells from calculations
• inconsistent categories
• manually retyping figures incorrectly
• leaving bookkeeping until year end.

In my experience, leaving everything until the last minute is one of the biggest causes of stress.

Regular updates, even monthly, are usually far more manageable than trying to reconstruct an entire year at once.

Another important area is record keeping.

Many people still keep paper receipts in folders, envelopes or shoeboxes. That is not automatically a problem.

However, keeping digital copies where possible is sensible and can make life much easier later on.

A simple habit such as taking photos of receipts and storing them in cloud storage can go a long way towards staying organised.

Spreadsheet vs Accounting Software: Cost & Complexity

One area people do not always consider initially is the long-term cost of software subscriptions.

Introductory offers can sometimes make software appear extremely cheap at first, but costs can build up over time.

Option	Approximate Ongoing Cost
Xero Ignite	~£192 + VAT per year
QuickBooks Simple Start	~£192 + VAT per year
QuickBooks Sole Trader Plus	~£120 + VAT per year
TaxCalc bridging software with spreadsheets	~£24 + VAT per year

Introductory offers are often available for accounting software, but it is still worth considering the longer-term ongoing subscription costs when comparing options.

For some businesses, those additional software costs are completely worthwhile because of:

• automation
• integrations
• scalability
• convenience.

But for others with relatively simple bookkeeping needs, the additional complexity and ongoing subscription costs may not always provide meaningful value.

I’ve also seen people feel overwhelmed by the number of software platforms now available.

Many are heavily marketed through banks and online advertising, which can create the impression that software is the only compliant route available.

In reality, HMRC allows different approaches depending on your circumstances.

Final Thoughts

Making Tax Digital has created a lot of confusion, particularly for smaller businesses and landlords who are simply trying to stay compliant without overcomplicating things.

In my experience, many people are mainly looking for:

• reassurance
• a clear process
• and a system that feels manageable.

For simpler situations, spreadsheets can still be a perfectly viable option when paired with the right workflow and bridging software.

That does not mean spreadsheets are always the best choice. The right solution depends on:

• transaction volume
• complexity
• organisation
• and personal preference.

But equally, many people may not need to jump immediately into full accounting software simply because MTD is changing how submissions work.

The most important thing is choosing an approach that is:

• compliant
• manageable

and realistic for your situation.