Can You Use Spreadsheets for MTD? What HMRC Accepts

The Short Answer: Yes, Spreadsheets Can Work for MTD

If you have been putting off Making Tax Digital because you assumed you would need to buy expensive accounting software, you can relax slightly. HMRC does not require you to use a full accounting platform. For many sole traders and landlords, a well-structured spreadsheet combined with bridging software is a perfectly valid approach - and it costs significantly less than most people expect.

But there is a catch. A spreadsheet alone is not enough. You cannot email a spreadsheet directly to HMRC and call it done. The spreadsheet handles your record-keeping; you still need a way to submit your figures digitally. This guide explains exactly what HMRC requires, how to structure a spreadsheet that will hold up under scrutiny, and when a spreadsheet setup stops being practical.

What MTD Actually Requires From Your Records

Before deciding whether a spreadsheet works for you, it helps to understand what MTD is actually asking for. If you want a fuller explanation, our plain-English guide to what MTD requires covers this in detail.

In short, HMRC requires you to:

• Keep a digital record of your income and expenses for each quarter
• Submit a quarterly update to HMRC through HMRC-recognised software (not a spreadsheet directly)
• Complete a final declaration at the end of the tax year to confirm your total figures

The key phrase is "digital record." HMRC's rules specify that your records must be kept in a digital format. A spreadsheet qualifies. A paper notebook does not. A Word document with typed-in figures technically does not meet the spirit of the rules either, even if it is saved on a computer.

What HMRC does not require is that you use any particular piece of software to maintain those records, as long as the software you use to submit (the bridging software) can pull the correct totals from your spreadsheet and send them.

What Does "Bridging Software" Mean?

Bridging software is the piece of technology that sits between your spreadsheet and HMRC. It reads your figures and sends them to HMRC in the correct format. That is its entire job. You do not need it to do your bookkeeping, generate invoices, or run payroll - it just bridges the gap between your records and the government's systems.

AffordableMTD is a bridging software. So are several other HMRC-recognised tools. If you want a fuller explanation of what bridging software is and why it exists, see our guide to MTD bridging software.

The practical implication is this: you keep your records in a spreadsheet the way you always have. At the end of each quarter, you export or upload your figures to the bridging software, which submits your quarterly update to HMRC. That is a legitimate, HMRC-compliant workflow.

What HMRC Accepts in a Spreadsheet

HMRC does not publish a specific spreadsheet template that you must follow. What it does specify is the information your records must contain. For each transaction, your records should capture:

• The date of the income or expense
• The amount
• A description of what it was
• The category it belongs to (more on categories below)

For income, you need to record what came in, when, and from whom (or at least what it was for). For expenses, you need enough detail to justify the claim if HMRC ever asks. "Miscellaneous" is not a useful description. "Printer ink cartridges for home office" is.

HMRC also expects you to be able to produce an audit trail - meaning you should be able to show how each figure in your quarterly update connects back to an individual transaction in your records. A good spreadsheet does this automatically if it is structured properly.

For more on what records HMRC expects you to be able to produce, our evidence guide for sole traders goes through this in detail.

How to Structure Your Spreadsheet for MTD

The structure of your spreadsheet matters more than which application you use. Whether you prefer Microsoft Excel, Google Sheets, or LibreOffice Calc is entirely up to you. What matters is what is inside it.

Use One Row Per Transaction

Each income payment or expense should have its own row. Do not combine multiple transactions into one line ("various expenses - £340"). If you are ever subject to an HMRC compliance check, you will need to show individual transactions.

Use Separate Columns for Each Piece of Information

A basic layout might look like this:

• Column A: Date
• Column B: Description
• Column C: Amount (excluding VAT if you are VAT-registered)
• Column D: Category
• Column E: Receipt reference or note

The category column is particularly important. HMRC's quarterly update form groups expenses into specific categories - things like office costs, travel, stock or materials, and so on. Your spreadsheet categories should match these groupings, so that when you come to submit your quarterly update, you can pull the right total for each category without having to go back through every line.

Our guide to what to include in your MTD quarterly update lists the standard categories you need to be aware of.

Separate Income and Expenses

Keep income on one tab and expenses on another, or clearly separate them within a single tab. Do not mix incoming money with outgoing money in the same column - it creates confusion and makes it harder to produce quarterly totals quickly.

Use Formulas to Total Each Category

At the top or bottom of your spreadsheet, use SUMIF formulas (or equivalent) to automatically total each expense category. This means that when you add a new transaction row, your totals update automatically. Manual addition is error-prone and time-consuming.

Keep a Separate Tab for Each Quarter

Some people prefer to run a single sheet for the whole year. That is fine, as long as you can filter or separate the data by quarter. It is often easier to have a separate tab for each quarter (Q1: April to June, Q2: July to September, Q3: October to December, Q4: January to March), so that at submission time you have a clean set of figures ready to upload.

Landlords: Keep Property Income Separate

If you receive rental income alongside self-employment income, these must be reported separately in MTD. Do not mix them in the same set of columns. Use a separate tab for property income and expenses. This matters for both record-keeping and submission purposes. Our guide to mixed income and MTD explains how to handle this.

Keeping Receipts and Evidence Alongside Your Spreadsheet

Your spreadsheet is a summary of your transactions. It is not a substitute for keeping the original evidence - receipts, invoices, bank statements, and contracts.

HMRC can ask for this supporting evidence if it opens a compliance check. If your spreadsheet shows £800 in travel expenses but you cannot produce any receipts, you are in a difficult position. The spreadsheet entry alone will not be enough.

A practical approach is to keep a folder (either physical or digital) organised by quarter. For each transaction in your spreadsheet, you should have a corresponding receipt or record you can point to. Some people photograph receipts and name the file to match the date and description in their spreadsheet. That is all it takes.

See our DIY guide to what proof HMRC needs for MTD expenses for a more detailed breakdown of what counts as acceptable evidence for different types of costs.

When a Spreadsheet Is Enough

A spreadsheet setup is well-suited to:

• Sole traders with relatively straightforward income - for example, one type of service, invoiced to a handful of clients
• Landlords with one or two rental properties and simple expenses
• People who already manage their finances in a spreadsheet and are comfortable with it
• Anyone who wants full visibility of their own numbers without relying on automation
• Anyone keeping costs low and happy to spend a small amount of time each month on their records

The spreadsheet approach works best when your transactions are relatively few in number and clearly categorised. If you have 20-30 transactions per month across a single type of income, a spreadsheet is entirely manageable.

When You Might Need to Upgrade

A spreadsheet starts to strain if:

• You have hundreds of transactions per month across multiple income streams
• You need to handle stock, invoicing, or payroll as part of your business
• You struggle to keep on top of categorisation and things regularly get missed
• You are VAT-registered and need to track input and output VAT separately
• You want your software to automatically pull transactions from your bank account

None of these scenarios mean you absolutely cannot use a spreadsheet - but they do suggest that a more automated system might save you time and reduce errors. If you are unsure which type of software suits your situation, our guide to choosing MTD software by income type is worth reading.

That said, bridging software like AffordableMTD makes even a basic spreadsheet approach fully MTD-compliant. You do not need a full accounting platform unless your circumstances genuinely require it.

What an HMRC Enquiry Would Actually Look For

If HMRC ever opens a compliance check on your tax affairs (which is relatively rare, but does happen), the things it would want to see are:

• A clear record of income received, with dates
• A clear record of expenses claimed, with dates and descriptions
• Supporting evidence (receipts, invoices, bank statements) for those transactions
• Consistency between your records and what you submitted in your quarterly updates and final declaration

A well-structured spreadsheet with a corresponding folder of receipts satisfies all of these requirements. There is nothing inherently suspicious about using a spreadsheet - it is a legitimate and widely used method.

What creates problems is vagueness - categories left blank, descriptions like "misc," amounts that do not match any receipt, or totals that cannot be traced back to individual transactions. None of those problems are caused by using a spreadsheet. They are caused by using it carelessly.

Our guide to HMRC compliance checks after MTD filing covers what to expect if HMRC does get in touch.

How Long to Keep Your Spreadsheet Records

HMRC requires you to keep your records for at least five years after the 31 January submission deadline for the relevant tax year. For example, records for the 2026-27 tax year must be kept until at least 31 January 2033.

This applies to both your spreadsheet and the underlying receipts and invoices. Do not delete old files just because you have filed. Back up your spreadsheet to cloud storage so that you are not relying on a single device. Our guide on how long to keep MTD records has the full detail on retention rules.

A Simple Starting Point

If you want to get started today, here is the minimum viable spreadsheet structure for a sole trader:

1. Create a tab called "Income" with columns for: Date, Client or source, Description, Amount
2. Create a tab called "Expenses" with columns for: Date, Supplier, Description, Category, Amount
3. Create a summary tab that totals each expense category using SUMIF formulas
4. At the end of each quarter, copy or export the summary figures into your bridging software to submit your quarterly update

That is it. You do not need a complex template. You need something consistent that you will actually use every month.

If you are also setting up your wider record-keeping system for the first time, our guide to setting up a record-keeping system for MTD is a good companion read.

Putting It Together

Using a spreadsheet for MTD record-keeping is a practical, legitimate choice for the majority of sole traders and landlords. The rules do not require expensive software - they require digital records kept in a consistent format, supported by evidence, and submitted to HMRC through recognised bridging software. A well-structured spreadsheet, paired with a straightforward bridging tool, meets all of those requirements. The key is to keep it organised from day one rather than trying to reconstruct three months of records the night before a submission deadline.