Can I still use a spreadsheet for Making Tax Digital for Income Tax?

Who has to use Making Tax Digital for Income Tax, and when?

It applies to sole traders and landlords who are registered for Self Assessment, once their qualifying income passes a threshold. GOV.UK sets out three steps:

Qualifying income	You use Making Tax Digital from
Over £50,000 in 2024 to 2025	6 April 2026
Over £30,000 in 2025 to 2026	6 April 2027
Over £20,000 in 2026 to 2027	6 April 2028

Qualifying income is the bit people get wrong. It is your total income from self employment and property before expenses, so turnover, not profit. HMRC's own example adds £25,000 of rent to £27,000 of self employment income and gets £52,000, which is over the first threshold even though the profit on both could be far lower. A salary paid through PAYE, dividends, pensions and a share of partnership profit do not count.

So can the spreadsheet stay?

It can. HMRC's guidance on choosing software describes bridging software, which connects to records you already keep in spreadsheets or other tools and makes the submissions to HMRC for you. Some bridging products also let you submit your tax return.

That matters. The spreadsheet is usually not the problem. It holds years of categories, formulas and habits that work. Throwing it away to move onto a new accounting package is a bigger change than the law asks for.

What the law does ask for is that the spreadsheet is kept in a particular way.

What does a digital record need to hold?

For each item of income or expense you record the amount, the date it was received or incurred, and the category. Every quarter, your software sends HMRC the totals for each category. HMRC does not receive the individual records, so the update carries totals, not receipts.

The update periods run from 6 April, and each one is cumulative:

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 the following tax year

If your accounts already run from 1 April to 31 March, GOV.UK suggests using calendar update periods instead, which keep the same deadlines.

Where do spreadsheets usually break the rules?

The digital link rule. Once a record has gone to HMRC in a quarterly update, it must not be moved by hand within your records or into other software. GOV.UK names the habits that break it: writing information out again in another cell or another program, and using cut and paste or copy and paste to move records.

The methods it accepts are linked cells in spreadsheets, importing and exporting files such as CSV or XML, automated data transfer, and transfer through an API.

Here is what it does not ban. Formulas are fine. A summary tab that adds up an income tab is fine. The rule is about moving a record from one place to another by hand once it is part of what you report, because that is where figures get dropped, doubled or typed wrong, and HMRC wants the chain from source to submission to be unbroken.

Now think about how a typical small business spreadsheet actually runs. A bank export gets pasted into a tab. Someone retypes the card statement because the columns never line up. A summary sheet is rebuilt each month from a copy of last month's. The rebuilt summary is exactly what the guidance rules out. The pasted export and the retyped statement are how records get created, and they are also where errors start, so replace them with an import.

How do you fix a spreadsheet so it meets the rule?

Keep the structure and replace the hand movements with links. In practice that usually means four things.

1. One input tab per source, fed by an import rather than a paste. A bank or card CSV dropped into a fixed location and pulled in by the sheet itself counts as an import.
2. Categories chosen from a fixed list, not typed free hand, so the totals your bridging software reads are always the same set.
3. Summary tabs built from formulas that reference the input tabs, never from values copied across.
4. The bridging software pointed at the summary range, so the figures it sends are the figures the sheet calculated.

In Google Sheets, most of this can be done with formulas and a short Apps Script that imports a file from a Drive folder on a schedule. Nothing is retyped, and the person who used to spend Friday afternoon pasting and checking gets that afternoon back. We do this kind of work in our Google Apps Script service, and the wider version of it is process automation.

How long does the fix take?

That depends on how the sheet was built, and the quickest way to find out is to trace one month from bank statement to summary and count the times a person moves a number by hand. A sheet with one bank account, one card and a tidy category list is a small job to link up properly. A sheet with five years of tabs, three people editing it and a summary nobody fully trusts is a bigger job, and that is the point where the question changes from fixing the spreadsheet to replacing it.

Either way, start before your first update period, not during it. Your digital records have to start from 6 April, or 1 April if you use calendar update periods, and it is far easier to change how data comes in on a quiet week in March than in the second week of July with the 7 August deadline coming.

What happens if a quarterly update is late?

Not much, in the first year. HMRC will not apply penalty points for late quarterly updates during the 2026 to 2027 tax year. After that, each late update earns a point, and 4 points brings a £200 penalty. You still submit a tax return after the year ends, you have to send your quarterly updates before you can, and late returns earn points too.

When is a spreadsheet the wrong answer?

Sometimes the honest answer is to stop using it. If more than one person edits it, if nobody can explain how the summary is built, or if you already pay for accounting software that does Making Tax Digital out of the box and you are keeping a spreadsheet alongside it out of habit, you are maintaining two sets of records for one set of obligations. In that case, move fully onto the software and retire the sheet.

The same goes if your records are on paper. Your digital records have to cover the whole tax year from its first day, and building a compliant spreadsheet from nothing is more work than starting in software built for it.

If you are not sure whether you are in scope at all, work out your qualifying income first using the GOV.UK guidance. Everything else follows from that number.

Want the spreadsheet checked before April?

Tell us how the sheet works today, where the data comes from and who touches it. We will tell you straight whether it can be linked up to meet the rule or whether you are better off moving to software, and what either route takes. Time to talk yet?