Making Tax Digital for sole traders: can you still use a spreadsheet?

Making Tax Digital for Income Tax (MTD for ITSA) started on 6 April 2026. If you're a sole trader who keeps your books in a spreadsheet, the big question is whether you have to switch to accounting software. The short answer, from HMRC's own guidance: no, you can keep using spreadsheets, as long as you use compatible "bridging" software to send your updates to HMRC. Here's what that means in practice.

Who has to use MTD for Income Tax, and when

You need to use MTD for Income Tax if you're a sole trader or landlord registered for Self Assessment, you have self-employment or property income (or both), and your qualifying income is over the threshold. The timetable, per gov.uk:

Qualifying income over…	In tax year…	Must use MTD from…
£50,000	2024/25	6 April 2026
£30,000	2025/26	6 April 2027
£20,000	2026/27	6 April 2028

Qualifying income is based on your gross self-employment and property income (turnover), not your profit. HMRC reviews your tax return each year and writes to you if you're over the threshold. But if no letter arrives, it's still your responsibility to check. HMRC has an online tool for this, and some people can get an exemption, for example if they're digitally excluded.

What changes under MTD

1. Digital records: you keep digital records of your self-employment and property income and expenses. A spreadsheet counts.
2. Quarterly updates: every three months, your software sends HMRC summary totals for each income and expense category. These are summaries, not tax returns, and you don't need to make accounting adjustments first.
3. Tax return: you still submit a return for the year, through compatible software, by 31 January following the tax year.

HMRC doesn't receive individual receipts or invoices, just category totals. MTD uses the same income and expense categories as Self Assessment, so a spreadsheet organised by the SA103 categories is already in the right shape. Our bookkeeping spreadsheet guide lists them.

Quarterly deadlines

With standard update periods (aligned to the 6 April tax year), each update covers from the start of the tax year to the end of the period, not just the last three months:

Update period	Deadline
6 April to 5 July	7 August
6 April to 5 October	7 November
6 April to 5 January	7 February
6 April to 5 April	7 May (following tax year)

Because updates are cumulative, you can correct earlier mistakes in the next update without resending old ones. You must send an update even if you had no income or expenses in the period. If your accounting period runs 1 April to 31 March, you can choose calendar update periods instead; the deadlines are the same. Our 2026/27 MTD deadlines page has the dates in one place.

Penalties

Late quarterly updates fall under a points-based penalty system: reach the threshold (4 points for those required to use MTD) and there's a £200 penalty. HMRC has said it won't apply penalty points for late quarterly updates during the 2026/27 tax year. Penalty points still apply to late tax returns, and you'll need to send your quarterly updates before you can submit your return. (Source: gov.uk.)

Bridging software: how spreadsheets fit in

HMRC describes two kinds of compatible software:

• Software that creates digital records: full accounting apps with bank feeds, receipt scanning or manual entry.
• Software that connects to your records: known as bridging software. It connects to records you keep elsewhere, such as spreadsheets, and makes your submissions to HMRC.

With bridging software, you carry on keeping your books in Excel or Google Sheets. At each quarter, the bridging tool reads your totals and sends the update. Some bridging products can also submit your end-of-year tax return; others only do quarterly updates. You can use one product for each separate submission, so check the product covers everything you need.

Choosing bridging software

• Use HMRC's software finder tool on gov.uk. Every listed product has been through HMRC's recognition process. HMRC doesn't recommend specific products.
• Check it supports all your income sources, both quarterly updates and the tax return (or pair it with another product that does), and your update periods (standard or calendar).
• Check how it reads your spreadsheet: which cells or ranges, which file formats, and whether it works with Google Sheets.
• Compare pricing. HMRC notes that free products exist for simple tax affairs, sometimes with limits such as a maximum number of transactions.

Setting your spreadsheet up for MTD

1. Categorise every transaction using the Self Assessment categories, with a dropdown so they stay consistent.
2. Build year-to-date totals per quarter (6 April to 5 July, to 5 October, to 5 January, to 5 April). That's exactly what each update reports.
3. Keep one totals area the bridging software can read. Most tools map specific cells or a summary table.
4. Record as you go. Quarterly updates mean you can't leave everything until January any more.
5. Keep the source records (receipts, invoices, bank statements) for at least 5 years after the 31 January deadline for each tax year.

Our £9 bookkeeping spreadsheet already has a Quarters tab with the four standard update periods, their deadlines and cumulative year-to-date income, expense and profit columns, laid out by SA103 category. You'd still need HMRC-recognised bridging software to send the updates.

What to do now

• Use HMRC's checker to confirm whether and when MTD applies to you.
• If you're in from April 2026 or 2027, pick bridging software (or full software) and sign up before your first update is due.
• If you're below £20,000, you're not currently in scope, but keeping digital, categorised records now still makes Self Assessment easier.

General information, not tax advice. Figures are for the 2026/27 tax year (England, Wales and Northern Ireland) and were checked against gov.uk on 15 October 2026. Rates change each April; check gov.uk or an accountant before you file or pay.