Blog · 4 November 2026

MTD-compatible software: do you need accounting software, or will a spreadsheet and bridging software do?

The single most common misunderstanding about Making Tax Digital for Income Tax is that it forces you onto full accounting software. It does not. What MTD actually requires is two things: digital records of your income and expenses, and quarterly updates sent to HMRC through software that is recognised as compatible. A spreadsheet can be the first half of that pair — but it cannot be the second. That is where bridging software comes in.

The two requirements, kept separate

GOV.UK's guidance splits the obligation in two, and keeping the two halves apart is what makes the choice clear:

A spreadsheet has no connection to HMRC's systems, so it can never submit anything on its own — and HMRC provides no software of its own for MTD for Income Tax. You must use a commercial product from HMRC's recognised list, and you cannot submit quarterly updates through your HMRC online account. First, check which wave you are in: the Making Tax Digital checker works out your start date from your qualifying income.

Option 1: full accounting software

Full accounting packages keep your digital records inside the software itself — income, expenses, bank feeds and invoicing in one place — and submit your quarterly updates through their built-in connection to HMRC. This is the simplest route if you want one tool doing everything, and it suits people with many transactions, multiple income sources, or a business that is growing. The trade-off is cost: a monthly subscription, and a new system to learn if you have always worked from a spreadsheet.

Option 2: your spreadsheet plus bridging software

Bridging software does one job only: it reads the figures out of your existing spreadsheet and sends them to HMRC through the MTD connection. Your spreadsheet stays the record-keeping system; the bridging tool is the filing system. This route suits sole traders and landlords whose records are already tidy in a spreadsheet and who do not want to rebuild their bookkeeping in a new package. Bridging products are typically charged annually rather than monthly, which usually makes them the cheapest compliant route — but check the current price and HMRC recognition on GOV.UK's software finder before buying, because prices and product lists change.

There is one condition that matters more than any other, and it is the one people get wrong: the link between your spreadsheet and the bridging software must be a digital link. The figures must flow electronically from your records into the submission. Reading a total off the screen and typing it into the submission form by hand does not count — and neither does copying figures from a paper notebook. In practice the bridging tool reads the cells directly, or imports a file your spreadsheet exports. If your process involves retyping a number anywhere between record and return, it is not compliant.

What “recognised” actually means

HMRC tests that a product can keep digital records, send quarterly updates and file the final declaration in the right format, and maintain digital links through the chain. Recognition is a technical confirmation, not a recommendation: HMRC does not endorse or rank individual products, and being on the list says nothing about how good a product is to use. If a product is not on the recognised list, it has not been confirmed as compatible — however well it handles spreadsheets. Be wary of any spreadsheet template sold as if it were itself MTD software: a template is a record-keeping aid, and you still need bridging software or a compatible all-in-one product to submit.

Choosing between the two routes

Whichever route you pick, the rhythm is the same: four quarterly updates a year (due 7 August, 7 November, 7 February and 7 May), an end-of-period statement per business, and a final declaration by 31 January. The landlord's full annual cycle is explained in MTD for landlords: quarterly updates, end-of-period statements and the final declaration, and every wave's dates are on the MTD deadline calendar. Miss a quarterly update and the points system starts counting — see MTD penalty points explained, or test a missed deadline on the penalty estimator.

A practical checklist before you buy

1. Confirm you are on the recognised list — use GOV.UK's software finder (or its questionnaire) for MTD for Income Tax, not MTD for VAT: the lists differ.
2. Match the product to your businesses — self-employment, property, or both; a product that handles only one will not cover a trader who is also a landlord.
3. Test the digital link — figures should flow from your records into the submission without retyping. If a demo requires manual entry, that is a warning sign.
4. Start before your mandatory date — you can sign up voluntarily, and a trial quarter on real figures beats a first quarter under deadline pressure. The April 2027 wave is covered in MTD April 2027: what the £30,000 wave means.
5. Keep the records, not just the submissions — the bridging tool transmits summary figures; you remain responsible for the underlying digital records being accurate and complete.

Sources

• GOV.UK — Find out if and when you need to use Making Tax Digital for Income Tax (waves and thresholds; recognised compatible software required)
• GOV.UK — Quarterly updates: periods and deadlines (7 August / 7 November / 7 February / 7 May)
• GOV.UK — Penalties for Making Tax Digital for Income Tax (points system; 2026/27 grace year only)

Free information tool — not tax advice. Figures follow GOV.UK guidance as checked on 4 November 2026. Confirm your own position with HMRC or an accountant, and check a product's current recognition and price on GOV.UK's software finder before buying.