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MTD Bridging Software vs. Excel: Which Is Better For Your 2026 Tax Filing?

  • Jun 25
  • 6 min read

If you’re a sole trader or a landlord in the UK, you’ve probably heard the rumblings about Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA). While it’s been delayed a few times, the 2026 deadline is now firmly on the horizon.

From April 2026, the way you report your income to HMRC is changing forever. No more once-a-year panic in January; instead, you’ll be moving to a system of digital record-keeping and quarterly updates.

The big question for many is: “Do I have to buy expensive new software, or can I keep using my trusty spreadsheets?”

The answer is a bit of both. You can keep your spreadsheets, but they’ll need a "bridge" to talk to HMRC. In this guide, we’re breaking down the MTD bridging software vs. Excel debate to help you decide which path is right for your business or property portfolio.

What is MTD for ITSA (and Does it Affect You?)

Before we dive into the software, let’s quickly recap the rules. HMRC is phasing in MTD for ITSA based on your "qualifying income" (your total gross income from self-employment and property).

  • From 6 April 2026: You’re in scope if your combined gross income is over £50,000.

  • From 6 April 2027: The threshold drops to over £30,000.

If you fall into these brackets, you must keep digital records and use MTD-compatible software to send quarterly summaries of your income and expenses to HMRC. This is where the choice between bridging software and dedicated accounting platforms comes in.

Option 1: The Spreadsheet Approach (Excel + Bridging Software)

For many sole traders and landlords, Excel is the "old reliable" of financial management. It’s flexible, familiar, and most importantly, it doesn't come with a monthly subscription fee.

Under MTD rules, Excel on its own is not enough. You cannot simply email a spreadsheet to HMRC or type the numbers into a web portal. To stay compliant, you must use mtd bridging software excel links.

How It Works

You continue to record your daily transactions in an Excel workbook. At the end of each quarter, you use a piece of "bridging software" that digitally pulls the totals from your spreadsheet and submits them to HMRC’s API.

The Pros

  • Familiarity: There’s no new bookkeeping system to learn. If you know how to sum a column in Excel, you’re halfway there.

  • Cost-Effective: Bridging software is often significantly cheaper than full-blown accounting packages. Some tools are even available for a small annual fee rather than a monthly subscription.

  • Customisation: You can build your spreadsheet exactly how you like it, adding tabs for different properties or business expenses that suit your specific workflow.

The Cons

  • The "Digital Link" Requirement: HMRC is very strict about "digital links." You cannot copy and paste a total from Excel into your bridging tool. The data must flow automatically (usually via a linked cell or a file upload). If you break the link, you’re technically non-compliant.

  • Manual Effort: Unlike cloud software, Excel doesn't have "bank feeds." You’ll still be manually typing in every receipt and bank transaction, which increases the risk of human error.

  • No Real-Time Insights: Excel is a static record. It won’t tell you how much tax you owe in real-time or highlight where you’re overspending unless you’re an Excel wizard who has built complex dashboards.

A comparison between traditional spreadsheets and modern cloud accounting dashboards.

Option 2: Full MTD-Compatible Accounting Software

If the thought of managing "digital links" in a spreadsheet gives you a headache, the alternative is to move to dedicated cloud accounting software like Xero, QuickBooks, or FreeAgent.

How It Works

These platforms are built specifically for MTD. You connect your business bank account, and transactions flow into the software automatically. You "categorise" them with a click, and the software handles the quarterly MTD submissions directly: no "bridge" required.

The Pros

  • Automation: Bank feeds save hours of data entry. The software can even "remember" that your monthly payment to "Shell" is a fuel expense.

  • Accuracy: Because the data comes directly from your bank, the chance of typos or missing transactions is much lower.

  • Tax Estimates: Most cloud platforms give you a running estimate of your tax bill. No more January surprises!

  • Collaboration: Your accountant can log in remotely to check your figures, make adjustments, and ensure your quarterly updates are spot on. If you need to find an accountant UK wide who specializes in these platforms, it’s easier than ever.

The Cons

  • Subscription Costs: You’ll be looking at a monthly fee, which can range from £10 to £40+ depending on the features you need.

  • Learning Curve: If you’ve never used accounting software, there is a bit of a "getting to know you" phase.

  • Overkill: If you are a landlord with a single property and three expenses a month, a full Xero subscription might feel like using a sledgehammer to crack a nut.

Which is Better for Landlords?

Landlords often have simpler accounting needs than active businesses but face unique challenges under MTD. If you have multiple properties, you must keep separate digital records for each property business.

The Excel Route: Works well if you have one or two properties and a very simple expense structure. It keeps costs low and allows you to use the same spreadsheet you’ve used for years.

The Software Route: Becomes much more attractive if you have a larger portfolio. Software can help you track "rent arrears" and automatically calculate the "finance cost restriction" (the rules on mortgage interest relief) which can be tricky to model in Excel.

A landlord managing property finances on a tablet, highlighting the need for digital record keeping.

Which is Better for Sole Traders?

For sole traders, the decision usually comes down to volume and growth.

  • Use Excel + Bridging if: You have a low volume of transactions, you’re tech-savvy enough to manage spreadsheet formulas, and you want to keep overheads to an absolute minimum.

  • Use Cloud Software if: You have dozens of transactions a month, you want to send professional invoices to clients, or you want to see a clear Profit & Loss report at the touch of a button.

Regardless of which path you choose, having professional oversight is vital. Many sole traders find that the cost of a self-assessment accountant pays for itself in tax savings and peace of mind.

The Hidden Complexity: The Final Declaration

It’s important to remember that MTD isn't just about those four quarterly updates. At the end of the year, you still need to make "end-of-period adjustments" (like capital allowances or private-use proportions) and submit a Final Declaration.

This is where the Excel approach can get complicated. While bridging software can submit the numbers, it won't help you calculate those complex year-end adjustments. A dedicated accounting package: or better yet, a qualified accountant: will ensure these are handled correctly so you don't overpay HMRC.

How to Prepare for 2026 Today

2026 might feel like a long way off, but the 2024/25 tax year is the one HMRC will use to see if you meet the £50,000 threshold. Here is a quick checklist to get you started:

  1. Check Your Income: Look at your gross turnover for the current tax year. If it’s over £50k, you are in the first wave.

  2. Clean Up Your Records: If you're staying with Excel, start organizing your columns now. Separate your personal and business spending: HMRC will not accept messy "mixed" bank statements under MTD.

  3. Test the Tech: If you're curious about cloud software, many offer 30-day free trials. Or, look into bookkeeping services that include software as part of the package.

  4. Get Professional Advice: Don't wait until March 2026 to speak to an expert. An accountant can help you set up your digital links now so that the transition is seamless.

An accountant and small business owner discussing MTD strategy.

Final Thoughts: The Choice is Yours

There is no "one size fits all" answer to the MTD bridging software vs. Excel debate.

If you love your spreadsheets and want to save on monthly fees, the bridging route is a perfectly valid, HMRC-compliant choice. However, if you want to spend less time on data entry and more time growing your business or managing your properties, the automation of cloud software is hard to beat.

The most important thing is to not ignore it. MTD is coming, and being prepared is the best way to ensure your business stays profitable and compliant.

Ready to find the perfect accounting partner to help you navigate MTD 2026?

At Accountant Search, we match SME owners and landlords with trusted, local accountants who understand the latest HMRC rules. Whether you need help setting up bridging software or want someone to take the whole bookkeeping burden off your plate, we can help.

 
 
 

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