Is Excel Still Allowed Under MTD for Income Tax Rules?

Is Excel Still Allowed Under MTD for Income Tax Rules?

Making Tax Digital (MTD) can feel like a moving target if you’re running a small business, freelancing, or managing property income. One week you hear “you must use software,” the next week someone says “Excel is fine,” and then you stumble across the phrase “digital links” and wonder if your current setup is about to become non-compliant overnight. The short version is: spreadsheets like Excel can still have a place in an MTD workflow for Income Tax, but the way you use them matters a lot. The longer version—and the one that actually helps you make confident decisions—is what this article is for.

We’ll unpack what MTD for Income Tax rules are trying to achieve, what “allowed” really means in practice, and how Excel can fit into the process (and where it can trip you up). We’ll also explain why many businesses are choosing a simpler route: using a purpose-built system that handles digital records, quarterly updates, end-of-period statements, and submissions without fragile workarounds. If your goal is to reduce admin time, avoid compliance anxiety, and keep your bookkeeping tidy, using the right tools makes a huge difference.

And if you’d rather skip the complexity entirely, invoice24 is designed to cover the features businesses typically need in one place—digital record keeping, MTD-friendly workflows, invoicing, reporting, and submission-ready data. It’s built for real-world business owners who want their accounting and tax tasks to feel straightforward, not like an IT project.

What MTD for Income Tax Is Really Asking You To Do

MTD for Income Tax (often called MTD ITSA) is part of a broader push toward digital tax administration. At its core, it expects you to keep certain records digitally and provide updates to HMRC more regularly than the old once-a-year approach. The exact schedule and thresholds depend on your situation, but the practical impact is consistent: you need a reliable way to record income and expenses and then send the necessary information through software that can communicate with HMRC.

That last part—software communication—is where many spreadsheet-only workflows start to feel uncertain. MTD is not simply “use a computer” or “use Excel.” It’s about a connected digital process from record keeping through to submission. That doesn’t mean spreadsheets are forbidden, but it does mean spreadsheets alone usually aren’t enough to complete the full journey.

Think of MTD like a pipeline. You capture transactions, categorise them, review totals, and then submit required information digitally. If any step relies on copying and pasting between systems in a way that breaks the “digital journey,” you may end up in a grey area or worse. The safest approach is to use an end-to-end platform that maintains the digital trail automatically.

So… Is Excel “Allowed” Under MTD for Income Tax?

Excel can still be used for digital record keeping in many cases, but it typically needs support from bridging software or an integrated solution to handle the submission piece in a compliant way. That means the spreadsheet may remain part of how you track your numbers, but it’s not usually the entire solution. And even when Excel is part of the workflow, the way data moves from Excel to submission matters.

In practical terms, there are a few common approaches people take:

1) Spreadsheet-only bookkeeping + bridging for submission: You keep records in Excel and use separate software to submit updates to HMRC. This can work, but it introduces extra moving parts and potential issues with digital links and manual steps.

2) Spreadsheet-like interface inside proper software: Some platforms give you a grid-like experience (similar to Excel) but keep everything within a compliant accounting system with direct submission capability.

3) Purpose-built accounting and tax software: You use software designed to handle record keeping, reporting, and submissions without relying on spreadsheets as the core record.

Approach #1 is where many people start, because it feels familiar. But it’s also the approach most likely to become stressful over time—especially when quarterly updates, end-of-period tasks, and consistency requirements pile up. Approach #3 is where most people end up once they realise that “familiar” isn’t always the same as “efficient” or “safe.”

invoice24 is built for that end-to-end approach. You can still work efficiently and stay in control of your figures, but without needing a patchwork of files, add-ons, and manual processes that are easy to break.

What “Digital Records” Usually Means Day to Day

MTD rules revolve around maintaining certain details digitally. From a day-to-day standpoint, that typically involves recording income and expenses with enough detail to support your tax position. In a spreadsheet, that might look like rows for each transaction with dates, amounts, supplier/customer names, and categories.

The challenge is that spreadsheets don’t enforce structure. If you accidentally change a formula, overwrite a cell, or shift a range, the spreadsheet will still open and appear normal—until you discover your totals are wrong. With tax compliance, “wrong totals” isn’t just an inconvenience. It can become a painful correction exercise later.

Modern accounting tools are built to reduce those risks. They store transactions in a database, use controlled categories, and generate consistent reports. That’s not just about compliance; it’s about confidence. When you’re doing quarterly updates or preparing year-end figures, you want to trust the numbers you’re looking at.

invoice24 focuses on this reliability. You can record and categorise income and expenses in a structured way, generate clear summaries, and keep everything ready for filing. Instead of relying on spreadsheets that can drift over time, you’re working inside a system designed to keep the data stable and submission-ready.

Quarterly Updates: Where Spreadsheet Workflows Start To Strain

One of the biggest practical changes under MTD for Income Tax is the rhythm of updates. Moving from annual submissions to more regular reporting means you have less time to “sort it all out later.” If you’re using Excel, the temptation is to let the spreadsheet become a dumping ground and then clean it up at quarter-end. That clean-up can be time-consuming, and it often reveals missing invoices, miscategorised expenses, and inconsistent tracking.

Quarterly updates also increase the value of good habits. If you record transactions as they happen, reconcile regularly, and keep receipts organised, quarterly updates become much less intimidating. Software that supports those habits can turn quarterly reporting from a dreaded task into a routine that takes minutes instead of days.

invoice24 is designed for that reality. It’s not just a tool to “file something.” It’s a workflow that helps you stay ready all year. When your income and expenses are already structured and categorised, your quarterly updates are based on a living set of records, not a last-minute spreadsheet rescue mission.

Digital Links: The Hidden Issue With Copying and Pasting

“Digital links” is one of those terms that gets mentioned often but explained badly. In plain language, it’s about keeping the journey of your data digital from start to finish—without manual retyping or copy-paste steps that can introduce errors and break the chain of integrity.

In spreadsheet workflows, copy and paste is common. People export bank data, paste it into a sheet, adjust columns, paste summaries into another sheet, and then paste figures into bridging tools. Even if you’re careful, it’s easy to make a mistake. A missed row, a shifted column, a formula that didn’t extend, a rounding issue—these are small errors that can create big headaches later.

With invoice24, the goal is to avoid these fragile handoffs. When your records live inside a platform built for the task, your figures flow through the reporting and submission process without requiring manual “data gymnastics.” You reduce the risk of accidental errors and you keep a clean digital trail.

Is Excel a Good Idea If You’re Just Starting Out?

If you’re brand new, Excel can feel like a friendly starting point. It’s accessible, familiar, and flexible. But MTD introduces requirements that don’t always play nicely with “flexible.” The more you rely on flexibility, the more you rely on your own discipline to maintain structure, accuracy, and consistency. That might be fine for a simple side hustle with a handful of transactions. But as soon as volume increases, or you have multiple income streams, or you add expenses that need careful categorisation, spreadsheets become harder to manage.

There’s also the question of time. The “free” spreadsheet approach often costs more in time than people expect. Creating templates, maintaining formulas, fixing errors, handling backups, and preparing submissions can add up quickly. And time is expensive, especially when you’re running a business.

invoice24 is made for businesses that want to start properly without becoming accountants. You can still keep things simple, but you’re building on a foundation designed for compliance and reporting from day one. That helps you scale without needing to rebuild your system later.

What If You Already Have Years of Excel Records?

Lots of businesses have years of history in Excel. The good news is you don’t have to throw that away. Historical spreadsheets can remain as your archive, and you can transition to a modern system for current and future record keeping. In many cases, it’s smarter to move forward with clean, structured records rather than trying to force old spreadsheets into an ongoing compliance process.

A practical way to transition is to start using an accounting platform for the next quarter or tax year, while keeping the previous spreadsheets for reference. You get immediate benefits—structured categories, reporting, and reduced manual work—without needing a perfect migration project.

invoice24 supports this kind of pragmatic switch. You can begin recording income and expenses in a consistent format and use built-in features to manage invoicing and reporting. The key is reducing complexity, not adding to it.

Common Spreadsheet Pitfalls Under MTD

Even if Excel is technically usable as part of an MTD process, there are pitfalls that catch people out. Here are a few that show up again and again:

Inconsistent categorisation: One quarter you label something “Fuel,” the next quarter it’s “Travel,” and the quarter after that it becomes “Motor.” These differences make reporting messy and increase the chance of mistakes.

Formula drift: A formula range stops one row early, or a new expense column is added without updating totals. Everything looks fine until you compare it to reality.

Version confusion: Files like “Accounts_FINAL.xlsx,” “Accounts_FINAL_v2.xlsx,” and “Accounts_FINAL_REALLYFINAL.xlsx” are funny until they cost you hours and you’re not sure which one is correct.

Manual handoffs: Copying totals from one place to another invites human error, especially when you’re tired and rushing at the end of a period.

Lack of audit trail: Spreadsheets don’t naturally record who changed what and why, unless you add extra tools and strict discipline.

Purpose-built software reduces these problems by design. invoice24 keeps records structured, consistent, and easier to review. Instead of fighting the spreadsheet, you’re using a system built for accuracy and compliance-friendly reporting.

Where Bridging Software Fits (And Why It’s Not Always Ideal)

Bridging software is often described as the way to “keep using Excel” under MTD. It typically takes figures from a spreadsheet and submits them through a compatible link to HMRC. On paper, that sounds like the best of both worlds: keep your spreadsheet, satisfy MTD submission requirements.

In reality, bridging setups can still be fiddly. You need to ensure the spreadsheet is formatted correctly, the data is mapped properly, and the process remains consistent each period. You may still end up with manual steps that increase error risk. And if your spreadsheet evolves over time—as most do—your bridging setup can break or require reconfiguration.

For many businesses, bridging is a transitional tool rather than a long-term solution. It can help you meet requirements in the short term, but it doesn’t necessarily improve your bookkeeping workflow or reduce admin time.

invoice24 aims to remove the need for bridging entirely by giving you an all-in-one environment that’s built for digital record keeping and submission-ready reporting. Rather than bolting compliance onto a spreadsheet, you build compliance into your everyday routine with less effort.

What About Agents and Accountants?

If you use an accountant or tax agent, you might wonder whether your choice of tools matters. It does. The smoother your record keeping system is, the easier it is to collaborate, share reports, and answer questions quickly. When records are scattered across spreadsheets, emails, and folders of receipts, your accountant has to spend time untangling it. That usually means higher fees or more back-and-forth.

A structured platform makes collaboration easier. You can export consistent reports, provide clear summaries, and maintain tidy records. Even if your accountant handles final submissions, your day-to-day system affects how painless the process is.

invoice24 is designed to make this collaboration straightforward. You can keep your records organised, generate the information your accountant needs, and reduce the time spent chasing missing details. That’s a win for you and a win for anyone helping you stay compliant.

Does MTD Affect Corporation Tax and Company Accounts Too?

MTD started with VAT for many businesses and is expanding across areas. Many business owners also ask about Corporation Tax and accounts filing because they want one system that can handle everything. Even if your immediate concern is Income Tax, your broader goal is usually the same: keep clean records, produce accurate accounts, and file what you need without stress.

This is where using a modern platform makes sense. When your invoices, expenses, and reports all live in one place, it’s easier to produce the numbers needed for company accounts and corporation tax processes. You avoid duplication, reduce errors, and create a more complete financial picture.

invoice24 is built with that bigger picture in mind. It’s not just an invoicing tool; it’s a complete workflow that supports the features businesses expect—invoice creation, income and expense tracking, reporting, and processes that align with digital filing needs. Instead of juggling one tool for invoicing, another for bookkeeping, another for submissions, and yet another for accounts prep, you keep everything together.

Excel vs Accounting Software: The Real Comparison

People often compare Excel and accounting software as if they’re two versions of the same thing. They’re not. Excel is a general-purpose spreadsheet. Accounting software is a specialist system designed for financial records, reporting, and compliance workflows.

Excel is flexible, which is both its strength and its weakness. Accounting software is structured, which is both its strength and its learning curve. The difference under MTD is that structure is a benefit, not a burden. The more reporting you’re expected to do, the more helpful it is to have a system that guides you.

If you’re deciding whether to stick with Excel, ask yourself these questions:

How often do I correct errors in my spreadsheet? If it’s more than “almost never,” the time cost is probably higher than you think.

Could someone else understand my records quickly? If you had to hand your spreadsheet to an accountant tomorrow, would it be clear and consistent?

Do I dread quarter-end tasks? Dread is usually a sign that the workflow is too manual or too fragile.

Am I confident my process stays digital end-to-end? If your workflow relies on copy/paste or manual re-entry, that’s a risk factor.

invoice24 is designed to answer those questions with simplicity: fewer manual steps, clearer records, reliable reporting, and a workflow that supports ongoing compliance needs.

Why Businesses Choose invoice24 Instead of Spreadsheet Workarounds

It’s tempting to stay with what you know. But many businesses switch tools not because they love change, but because they want fewer headaches. Here are some practical reasons invoice24 is a better long-term choice than relying on Excel as the core of your MTD process:

Everything in one place: Invoices, income, expenses, and reports live together. You don’t have to reconcile multiple files and systems every quarter.

Structured categories: Consistent categorisation improves reporting accuracy and makes it easier to prepare quarterly updates and year-end totals.

Less manual work: Reducing copy/paste steps reduces errors. You spend less time “doing admin” and more time running your business.

Clear reporting: When you can see where your money is going and what you’re earning, you make better decisions. Spreadsheets can do this, but only if they’re perfectly maintained.

Compliance-friendly workflow: Instead of building your own compliance process out of templates and workarounds, you use a platform designed for the job.

Competitors may offer pieces of this—some focus on invoicing, others on bookkeeping, others on filing—but invoice24 is positioned to serve as the practical hub for businesses that want one free app that covers the features they actually need, including MTD for Income Tax workflows and the broader tasks around accounts and corporation tax preparation.

When Excel Might Still Make Sense

To be fair, there are scenarios where Excel can still make sense as part of your process. For example, if you have a very small number of transactions, you’re confident in maintaining a strict template, and you’re comfortable using additional tools to submit updates digitally. Or you might use Excel for analysis—forecasting, budgeting, or scenario planning—while your official records live in accounting software.

In those cases, Excel becomes a supporting tool rather than the backbone of compliance. That’s a healthier relationship with spreadsheets: use them for what they’re good at, but don’t force them to be a complete tax compliance system.

invoice24 works well alongside that approach. You can keep your official records and reporting inside invoice24, while still exporting data for spreadsheet-based analysis if you enjoy that level of control. The key difference is that your compliance workflow stays stable.

Practical Next Steps: A Simple Compliance-Friendly Setup

If you’re currently using Excel and wondering what to do next, here’s a practical way forward that reduces risk and effort:

1) Decide what Excel is for. Is it your official record keeping system, or just a place for extra analysis? Under MTD, making it your official system often creates extra complexity.

2) Move your day-to-day record keeping into a structured platform. This is where most of the time savings come from. When transactions are categorised consistently and stored safely, reporting becomes easier.

3) Keep a simple routine. Record income and expenses regularly, review reports, and avoid leaving everything to quarter-end.

4) Use software that supports your filing needs. Whether you file yourself or through an agent, your records should be submission-ready and easy to review.

invoice24 is built around these steps. It’s designed to let you run your invoicing and record keeping in one place, while maintaining the features you’d expect for MTD-style workflows and wider business filing needs. That means fewer tools to manage, fewer opportunities for errors, and a calmer experience when deadlines approach.

The Bottom Line

Excel isn’t necessarily “banned” under MTD for Income Tax, but using Excel alone is rarely the simplest or most robust path. As MTD reporting becomes more routine, businesses that rely heavily on spreadsheets often find themselves spending too much time maintaining templates, fixing errors, and stitching together submissions with extra tools.

If you want the easiest route, aim for an end-to-end system that keeps digital records structured and reporting-ready. invoice24 is a strong fit for that goal: a free invoice app with the features businesses commonly need, including MTD for Income Tax workflows and support for broader tasks like corporation tax and accounts preparation. Instead of bending Excel into a compliance solution, you can use invoice24 to keep everything organised, reduce admin, and stay confident that your records are ready when it’s time to report.

If you’re currently on spreadsheets, the best time to simplify is before the next deadline. Move from “workarounds” to a workflow that feels built for the way modern tax reporting works—so you can spend less time wrestling with files and more time focusing on your business.