Can I still use spreadsheets under Making Tax Digital?

Can I still use spreadsheets under Making Tax Digital?

Making Tax Digital (MTD) is often described as a “move to digital record keeping,” and for many people that immediately triggers a worry: “Does this mean I have to abandon spreadsheets?” It’s an understandable question. Spreadsheets are familiar, flexible, inexpensive, and—when designed well—powerful enough to manage everything from a simple sole trader’s income and expenses to complex multi-entity reporting. The reassuring answer for most small businesses and landlords is that spreadsheets can still have a place under MTD. The less comforting part is that how you use them matters, and in some scenarios you’ll need additional software or connectors to comply.

This article breaks down what MTD requires, what “digital records” and “digital links” actually mean in practice, where spreadsheets fit, and what extra steps you may need to take to keep using them confidently. It’s written for practical decision-making: if you like spreadsheets, you’ll come away understanding when they’re fine, when they’re risky, and how to set up an approach that won’t cause headaches at filing time.

What Making Tax Digital is trying to achieve

MTD is a long-term programme intended to reduce errors and improve the efficiency of tax administration by shifting record keeping and submissions into digital systems. Instead of relying on manual rekeying, paper records, or “box total” entries typed into online forms, the direction of travel is: keep records digitally and send updates using software that communicates with HMRC’s systems.

The practical implication is that MTD isn’t just about “submitting returns online” (which most people already do). It’s about the journey of the numbers—from your source data to the final submission—being supported by digital record keeping and, in many cases, digital transfer of data between systems. Spreadsheets can support that journey, but only if the overall process meets the rules that apply to your situation.

Spreadsheets versus “MTD-compatible software”

When people hear “MTD-compatible software,” they often imagine they must replace spreadsheets with a full accounting package. In reality, there are several ways to be MTD-compatible, and not all of them mean ditching spreadsheets. Broadly, businesses typically fall into one of these approaches:

1) Accounting software end-to-end: Records are entered into an accounting package (invoicing, expenses, bank feeds, VAT, etc.), and the package sends the required submissions.

2) Spreadsheets for records + bridging for submission: You keep your records in a spreadsheet, then use “bridging software” (or an add-in) to submit the VAT Return or other required updates to HMRC.

3) Spreadsheets feeding software: The spreadsheet remains your primary tool, but totals are pulled into or exported to software that handles the submission and sometimes additional compliance steps.

So, yes, spreadsheets can remain central—especially for simpler operations—provided you respect the digital requirements and choose a submission method that fits.

Which parts of MTD matter for spreadsheet users

MTD requirements can vary depending on the tax and the phase of implementation. The detail that trips people up is not that spreadsheets are forbidden, but that certain steps must be digital. The key concepts that affect spreadsheet users most are:

Digital record keeping: You need to keep certain information in a digital form. A spreadsheet counts as digital, so long as it contains the required records and is kept properly.

Digital links: Where information is transferred from one place to another in the process of preparing your submission, MTD often expects those transfers to be digital rather than manual copy-and-paste or retyping.

Submission through software: You cannot always submit directly through older online portals or manual entry screens. Instead, submissions need to be made through software that connects to HMRC’s systems (via an API).

For spreadsheet users, the first point is typically easy: a spreadsheet is digital. The second and third points are where planning is needed.

What “digital records” look like in a spreadsheet

In plain terms, digital records are the underlying details you use to calculate your tax position. When you use an accounting package, those records are stored in the software. When you use a spreadsheet, the spreadsheet becomes the record store. The practical question is: are you capturing the required detail, and are you keeping it in a usable digital form?

A spreadsheet-based record system can be as simple as a single tab with date, description, supplier/customer, net, VAT, and gross. It can also be more structured, with separate tabs for sales invoices, purchase invoices, expenses, mileage, and bank transactions. The more your activity grows, the more helpful structured design becomes—not because MTD demands it, but because it reduces errors and saves time.

A common misconception is that “digital records” means you must scan every receipt or store every invoice image in a system. In practice, you typically need the key transactional data recorded digitally. Storing digital copies of evidence is good practice (and may help with audit trail and internal control), but it’s not always the defining factor for MTD compliance. If you do store images, link them consistently to the relevant spreadsheet row (for example, a receipt file name or URL in a column), so you can retrieve evidence quickly if needed.

Understanding “digital links” in everyday terms

“Digital links” sounds technical, but the real-world idea is simple: HMRC wants to reduce transcription errors caused by manual copying and rekeying. If your process involves moving totals from one file to another, or from your spreadsheet into a submission form, the expectation in many MTD situations is that this movement should be done digitally.

Digital links can include things like:

• Cells linked by formulas within a spreadsheet (e.g., a VAT summary tab pulling from transaction tabs).
• Data imported into a spreadsheet from a CSV export from another system (e.g., a bank download).
• A spreadsheet exported and then imported into bridging software without manual retyping of figures.
• A copy-and-paste that retains a direct digital transfer can be a grey area; in general, relying on copy-and-paste as the “link” is often discouraged because it is easy to alter data and break audit trails.

The safest spreadsheet-based design is one where raw data sits in structured tabs, calculations flow via formulas to a VAT/summary tab, and bridging software reads the final VAT box figures directly from mapped cells. That creates a clean, defensible chain from source entries to submission without manual rekeying at the final step.

VAT: the most common place spreadsheet users meet MTD

For many businesses, the first time MTD becomes real is MTD for VAT. Historically, some people used spreadsheets to calculate VAT and then typed nine box totals into an online portal. Under MTD for VAT, that manual entry route is generally replaced by software submission.

This is where bridging software comes in. Bridging software is designed for people who keep VAT records in spreadsheets but need a compliant way to submit the VAT Return. Typically, you maintain your VAT spreadsheet, the bridging tool connects to HMRC, you map each VAT Return box to specific cells in your spreadsheet, and the software submits the numbers.

In that model, spreadsheets remain the heart of your bookkeeping, and bridging software handles the “send the return” function. Many people find this approach comfortable because it changes only one part of their existing workflow: the submission step.

When spreadsheets are a good fit under MTD

Spreadsheets can be an excellent fit under MTD when your activity is relatively straightforward and you or your team are disciplined with consistent data entry. They work particularly well for:

• Simple sole traders and freelancers: A manageable number of transactions, straightforward expense categories, and simple VAT treatment.

• Landlords with uncomplicated portfolios: Rental income and common expense types, particularly if you’re not dealing with complex partial exemption or unusual VAT situations.

• Micro-businesses with stable processes: If you have a consistent way of recording invoices, expenses, and bank movements and you can maintain it month after month.

• Businesses that already have strong spreadsheet templates: Some businesses have refined spreadsheets over years, with controls, validations, and clear audit trails. Replacing them could introduce more risk than keeping them.

The theme is not “small equals spreadsheet-friendly” but “simple, controlled, and consistent equals spreadsheet-friendly.”

When spreadsheets start to struggle

Spreadsheets can still be compliant under MTD, but they can become fragile as complexity increases. Warning signs that your spreadsheet approach may be reaching its limits include:

• Increasing transaction volume: More rows mean more chance of duplicates, missed entries, or incorrect formulas.

• Multiple people editing: Shared spreadsheets can work, but version control, accidental overwrites, and inconsistent data entry become real issues without strong controls.

• Complex VAT scenarios: Partial exemption, multiple VAT schemes, mixed supplies, or frequent adjustments can be handled in spreadsheets, but they require careful design and review.

• Many bank accounts or payment platforms: Reconciling multiple sources manually can become time-consuming and error-prone.

• Poor audit trail: If you can’t easily explain how a figure was calculated, or if formulas are overwritten with hardcoded numbers, you’re at greater risk of mistakes.

These aren’t reasons you must abandon spreadsheets, but they are reasons to consider whether adding structure, controls, or a hybrid approach would reduce stress and risk.

Bridging software: what it does and what it doesn’t

Bridging software is sometimes misunderstood as “turning a spreadsheet into accounting software.” It doesn’t. Bridging software generally does one core job: take your final VAT Return values (or other required totals) and submit them through an API connection to HMRC. Some bridging tools include extra features such as data checks, error warnings, or additional reporting, but the main point is submission.

That means you are still responsible for the quality of the underlying records and calculations. If your spreadsheet is incorrect, bridging software will faithfully submit incorrect numbers. So, bridging is not a shortcut around bookkeeping discipline; it is a way to keep your spreadsheet workflow while meeting the “submission through software” requirement.

Designing a spreadsheet workflow that is easier to defend

If you want to keep using spreadsheets under MTD, the goal is to make your process more robust and less dependent on last-minute manual tweaks. Here are practical design principles that help:

Use structured tables, not free-form lists. Keep consistent columns (date, reference, supplier/customer, category, net, VAT rate, VAT amount, gross). Structured tables reduce the chance that formulas miss rows.

Separate raw data from calculations. Have one area/tab where you input transactions and another where totals are calculated. Avoid entering data directly into summary areas.

Lock formula cells. Protect sheets or lock ranges so that totals aren’t accidentally overwritten. Even a simple protection layer can prevent major errors.

Use validation rules. Data validation drop-downs for categories and VAT rates reduce inconsistent entries (“Travel” vs “Travl” vs “Travel expenses”).

Keep a clear adjustment mechanism. Sometimes adjustments are legitimate (bad debt relief, fuel scale charge, reverse charge treatment depending on circumstances). Build a dedicated adjustments section rather than overwriting totals.

Create an audit tab. Simple checks like “VAT amount equals net times rate,” “no negative VAT unless credit note,” “dates within period,” and “sum of net by rate” can catch issues early.

These steps help you comply in spirit and in practice: they reduce manual intervention and create a clearer digital trail.

Can I type figures from a spreadsheet into a submission screen?

This is one of the most frequent questions because it’s the most “human” way to do it: calculate totals, then type them in. Under MTD for VAT, the intention is to avoid that manual step and instead submit through compatible software. If you are still typing values into a web form (when one is available), you’re generally not following the direction of the MTD rules. The compliant path is to submit through software that connects digitally, which is why bridging solutions exist.

Even if a manual route appears possible in some contexts, relying on it is risky because access to manual submission methods can change and may not align with your obligations. If you want to keep spreadsheets, plan for a software submission method that does not depend on retyping totals.

What about copy-and-paste?

Copy-and-paste sits in an awkward middle ground. It is “digital” in the sense that you aren’t retyping numbers, but it is still a manual action and can break the integrity of the record trail. The safest approach is to build a process where the spreadsheet totals flow into the submission method through mapping or import, rather than human copying.

If your bridging tool supports cell mapping, that’s usually the cleanest approach: the bridging software reads the values from specific cells that are calculated by formulas. That reduces the opportunity for accidental changes or mis-pastes and makes your workflow repeatable period after period.

Spreadsheets and MTD for Income Tax: what to expect

MTD for Income Tax (often discussed in relation to self-employed individuals and landlords) has been a major point of interest because it changes the rhythm of reporting. Instead of a single annual return, the model involves periodic updates and an end-of-period finalisation. In that world, many people wonder whether spreadsheets will be viable.

Spreadsheets can still be used as the record-keeping tool, but you should expect that you will need software to send the required updates. For some people, that may mean a bridging-style solution (if available for the relevant submissions), while others may choose a lightweight accounting product that accepts spreadsheet imports or integrates with your workflow. The key is the same: digital records can live in a spreadsheet, but submissions generally need to go through compatible software.

Practically, the more frequent the reporting, the more valuable it becomes to streamline your process. A spreadsheet that is “only updated at year end” may need to evolve into something that is maintained regularly. If you already enjoy spreadsheets and keep them up to date, that may be a natural fit. If you tend to do bookkeeping in a burst once a year, the discipline change may be the biggest adjustment, not the technology.

Spreadsheet imports and bank feeds: hybrid ways to stay spreadsheet-first

Some people think the only choice is “spreadsheets or accounting software.” In reality, you can combine them. For example:

• Bank transactions to spreadsheet: Download transactions from the bank, categorise in a spreadsheet, and calculate totals. This can work well, but you need a consistent process for identifying duplicates and ensuring completeness.

• Spreadsheet to software import: Keep your spreadsheet for day-to-day tracking, then periodically import data into software that handles submission and reporting. This can reduce submission friction and create a backup audit trail.

• Software for bank feeds, spreadsheet for analysis: Use software to capture transactions and submit to HMRC, but export data into spreadsheets for custom reporting, budgeting, or management dashboards.

The “best” hybrid depends on what you value. If you love the flexibility of spreadsheets for analysis and planning, you can keep that benefit while letting software handle compliance mechanics.

Controls and governance: the part nobody talks about

One reason spreadsheets get a bad reputation is not because they are inherently flawed, but because many are unmanaged. Under MTD, good governance becomes more important. A well-governed spreadsheet process can be reliable; an unmanaged one can become chaotic.

Consider building simple governance habits such as:

Version control: Save each VAT period file with a consistent naming convention and lock it once submitted. This prevents accidental changes after filing.

Change logs: Keep a “notes” tab where you record any significant changes, such as adding a new VAT rate column, correcting an error, or changing categories.

Access control: Limit who can edit formulas or structure. Allow data entry, but keep calculation areas protected.

Periodic checks: Reconcile totals to bank statements and verify that VAT calculations match expectations (for example, check that standard-rated sales VAT aligns with a rough percentage of standard-rated net sales).

These steps aren’t about bureaucracy. They are about making your spreadsheet approach robust enough to handle digital compliance expectations.

Common spreadsheet pitfalls under MTD (and how to avoid them)

Pitfall 1: Broken formulas. Someone inserts a row, changes a range, or overwrites a formula. Avoid this with structured tables, locked cells, and periodic audit checks.

Pitfall 2: Inconsistent VAT treatment. A transaction is coded at the wrong VAT rate. Avoid this with validation drop-downs and a column that calculates expected VAT from net and rate.

Pitfall 3: Missing transactions. Manual entry or ad-hoc updates can miss items. Avoid this with bank reconciliation routines and a checklist of income sources.

Pitfall 4: Duplicate entries. This happens when importing bank lines and also entering invoice-based records. Avoid it with a consistent method: either bank-based bookkeeping or invoice-based bookkeeping, plus a clear reconciliation step.

Pitfall 5: Last-minute “plug” adjustments. People sometimes type a number into a VAT box to “make it match.” This is dangerous. Build an adjustments section so every change has a reason and a traceable calculation.

Fixing these issues is often cheaper than switching systems, especially if you like your spreadsheet workflow. But if you see these pitfalls repeatedly, it may be a sign to adopt software earlier.

Do I need to keep my spreadsheet in a specific format?

There is no single mandated spreadsheet format. What matters is that your records include the required information and your process supports compliant submission. That said, certain formats make life easier:

• Use one row per transaction.
• Include consistent date formats and references.
• Use separate columns for net and VAT amounts rather than embedding VAT within gross figures.
• Record VAT rates (or VAT categories) explicitly so you can summarise correctly.
• Keep the VAT period boundaries clear (for example, a “VAT period” field or filters by date).

If you work with an accountant or bookkeeper, align your spreadsheet structure with what they need. A spreadsheet that feels intuitive to you but is hard for someone else to review can increase costs and reduce confidence.

How to choose bridging software if you want to keep spreadsheets

If you decide to keep spreadsheets and use bridging, focus on practical criteria that align with your workflow:

Ease of mapping: Can you map VAT box fields to specific spreadsheet cells and save that mapping for future periods?

Compatibility: Does it work with your spreadsheet format (Excel, Google Sheets, or both) and your operating system?

Multi-entity support: If you have multiple VAT registrations, can it handle them easily?

Audit and error checking: Does it provide basic validation or warnings that help catch obvious mistakes before submission?

Support and documentation: When something goes wrong close to a deadline, you want clear guidance and responsive support.

Cost structure: Some tools charge per submission, others per year, others per entity. Pick the model that matches your frequency and complexity.

Also consider what you want in the long term. If you expect your business to grow, you might choose a tool that can scale with you or can act as a stepping stone toward fuller accounting software.

Are Google Sheets and Excel treated differently?

From a conceptual standpoint, both are spreadsheets and can serve as digital records. The difference is usually practical: how you control access, how you manage versions, and how your submission method integrates.

Excel is often preferred when you want strong local control, robust functionality, and the ability to lock down workbook structure. Google Sheets can be excellent for collaboration and accessibility, but it requires disciplined permissions and careful handling of changes because it’s easy for multiple edits to happen quickly. Either can work; the deciding factor is how you manage the workflow and how you connect to submission software.

What if I use spreadsheets but my accountant files everything?

Many small businesses keep records in spreadsheets and hand them to an accountant, who then prepares and submits the returns. Under MTD, this can still be workable, but it depends on the arrangement and the specific obligations.

The main consideration is that the overall process needs to meet the digital requirements, even if parts are handled by different people. If you keep digital records in a spreadsheet and provide that spreadsheet to your accountant, and the accountant uses compatible software to submit, that can be a sensible division of labour. The accountant may request a particular template or structure to ensure smooth digital links. The closer your spreadsheet aligns with their process, the easier (and cheaper) it tends to be.

If you rely on an accountant, it’s worth agreeing on a stable template and timetable—particularly where more frequent updates are involved—so you’re not scrambling to reformat data before each submission.

Spreadsheets and error risk: being honest about trade-offs

It’s tempting to frame the decision as “spreadsheets are fine” versus “spreadsheets are risky.” The truth is more nuanced. Spreadsheets can be accurate and compliant, but they put more responsibility on you to maintain structure and controls. Accounting software can reduce certain risks through built-in validations, bank feeds, and locked reporting logic, but it introduces other risks (misconfiguration, incorrect settings, reliance on automation without review, subscription costs, and learning curve).

Under MTD, the question becomes: which tool best supports your accuracy and your routine? If spreadsheets help you understand your numbers and you maintain them regularly, they can be a strong choice. If spreadsheets encourage last-minute work, manual patches, or confusion, software may be the safer path.

A practical checklist: staying spreadsheet-based under MTD

If you want to keep spreadsheets, use this checklist as a practical guide. You don’t need to do everything perfectly on day one, but each item strengthens your compliance and reduces stress.

1) Make your spreadsheet the source of truth. Avoid separate “shadow” records in notebooks, emails, or scattered files.

2) Build a clear VAT or tax summary tab. Totals should flow from transaction data via formulas, not manual typing.

3) Use bridging or compatible software for submission. Plan for the submission step rather than relying on manual entry routes.

4) Protect formulas and structure. Lock calculation cells and use validation where possible.

5) Keep an audit trail. Record adjustments transparently and keep a notes tab for unusual items.

6) Reconcile regularly. Reconcile to bank statements and ensure transaction completeness.

7) Save period snapshots. Keep a copy of each period’s spreadsheet as it was when submitted.

8) Review before submission. Run a simple reasonableness check (e.g., VAT as a percentage of net sales, trend checks period to period, high-value anomalies).

This checklist is not about making spreadsheets more complex. It’s about making them repeatable and reliable.

So, can you still use spreadsheets under MTD?

In most practical scenarios, yes—spreadsheets can still be used under Making Tax Digital. A spreadsheet is a digital tool, and with a well-structured template and disciplined process, it can serve as your digital record-keeping system. The key is that MTD often requires submissions through compatible software and expects digital continuity in how figures flow from records to returns. For many spreadsheet users, that means adopting bridging software or a connector to handle submissions without manual rekeying.

If your records are simple, your spreadsheet is well-designed, and you’re comfortable maintaining it regularly, continuing with spreadsheets can be a sensible, cost-effective option. If your situation is growing in complexity or your spreadsheet process is already fragile, consider strengthening your controls or moving to a hybrid approach where software handles submission and core compliance while spreadsheets remain your analysis and reporting engine.

Ultimately, MTD doesn’t have to be the end of spreadsheets. For many, it’s simply a nudge to make spreadsheets more structured, more disciplined, and connected to the submission process in a more digital way.