Can you use Excel for MTD IT? What HMRC actually allows

If you're a sole trader or landlord who relies on Excel spreadsheets, you've probably heard about Making Tax Digital for Income Tax (MTD IT) coming in April 2026. The big question everyone's asking: Can I still use Excel? The answer is yes, you can — but only in combination with MTD IT-compatible software. Understanding what HMRC actually allows will help you make the right choice for your business.

HMRC's official position on spreadsheets under MTD IT

HMRC permits spreadsheets like Excel for MTD IT, but Excel on its own cannot submit information directly to HMRC. Spreadsheets lack the Application Programming Interface (API) connection required to communicate with HMRC's systems.

According to HMRC's official MTD IT guidance, you can use software that connects to your existing records, such as those held in spreadsheets through bridging software. The guidance explicitly states: "if you use spreadsheets to record income and expenses, bridging software can connect to them and make your submissions to HMRC."

This creates two viable options:

  1. Basic Excel Bridging Software – Keep your spreadsheets and use bridging software to submit to HMRC
  2. Excel + Complete MTD Bridging Software – Import your Excel data into comprehensive MTD software (like TaxNav)

HMRC expects all data to move electronically through approved "digital links" from your spreadsheet right through to submission. This means you can't copy and paste figures or type them in manually. Manual re-entry of data from spreadsheets into HMRC systems is not accepted.

‍

The compliance requirements for MTD Income Tax

From April 2026, businesses earning over £50,000 income from self-employment or property must:

  • Maintain digital records of all income and expenses
  • Submit quarterly updates to HMRC (within one month of each quarter end)
  • File a year-end tax return through MTD IT-compatible software
  • Maintain digital links throughout the entire process

The traditional method of manually entering figures into HMRC's online portal will be discontinued for those mandated into MTD IT. This represents a fundamental change in how self-employed individuals and landlords manage their tax obligations.

The phased implementation schedule:

  • April 2026: Qualifying income over £50,000
  • April 2027: Qualifying income over £30,000
  • April 2028: Qualifying income over £20,000

All dates and thresholds are confirmed in HMRC's Making Tax Digital for Income Tax.

Bridging software: current status and long-term viability

Bridging software remains an HMRC-approved solution for MTD IT compliance.

The HMRC guidance page lists bridging software as one of two main types of MTD IT-compatible software, describing it as "software that connects to your records" and confirming it "might be right for you if you want to keep using your current software and adapt your record keeping for Making Tax Digital for Income Tax."

All approved software, including bridging options, appears on HMRC's official recognised software list.

However, basic bridging software provides only the minimum functionality required for compliance. It does not include the additional features found in comprehensive MTD software.

Limitations of basic Excel-based systems for MTD IT

Spreadsheet systems combined with bridging software, whilst legally compliant, have inherent limitations:

Limitations and missing functionality:

  • No automatic validation before submission
  • No deadline notification system
  • Manual calculations without built-in checks:‍
  • No automatic expense categorisation
  • Limited capability for handling multiple income sources
  • Manual categorisation of all transactions
  • Separate management of quarterly data sets
  • Complete responsibility for submission preparation and timing

Our core compliance features include:


Excel integration capability: Upon registration, users receive access to TaxNav-prepared Excel templates designed specifically for MTD IT compliance, making the transition even smoother for spreadsheet users.

TaxNav also provides a simple sheet to add to your existing software, so you can continue using your existing spreadsheet and data.

‍HMRC recognition status: TaxNav is listed on HMRC's TaxNav page, confirming full compliance with all MTD IT technical requirements.

Browser-based architecture: No installation required. TaxNav is accessible from any device with an internet connection, eliminating IT infrastructure requirements.

Automated compliance management: TaxNav handles digital record-keeping, quarterly submission preparation, deadline tracking, and year-end returns with automated digital link maintenance.

Enhanced data security: Includes encryption, two-factor authentication, and GDPR-compliant data handling.

Validation systems: Pre-submission error checking, automatic calculation verification, and alerts for incomplete information.

Tax planning functionality: Identifies potentially overlooked allowable expenses and deductions, with built-in guidance on capital allowances and other tax relief mechanisms.

Efficiency tools: Auto-categorisation to reduce administrative time. Estimated tax views enable you to view how your tax is calculated.

TaxNav represents a category of software that provides comprehensive MTD IT compliance whilst remaining accessible to businesses currently using spreadsheet-based systems.

Preparation timeline for MTD IT implementation

For businesses earning over £50,000 from self-employment or property, preparation should begin well before the April 2026 mandatory start date.

Not long now before the mandate:

  • Calculate qualifying income (combined gross income from self-employment and property)
  • Assess current record-keeping systems against MTD IT requirements
  • Consider voluntary registration for the MTD IT pilot programme Join the Pilot →

3 months before mandate:

  • Select and implement MTD IT-compatible software
  • Transfer historical tax year data into the new system
  • Establish regular data entry procedures
  • Configure deadline reminders

1 month before mandate:

  • Complete software registration with HMRC
  • Establish software-to-HMRC account linkage
  • Verify digital link functionality
  • Prepare initial data set

Exemption eligibility: Certain individuals may qualify for exemptions based on age, disability, religious reasons, or geographical location. Full details are available in HMRC's exemptions guidance.

Excel compatibility and MTD IT strategy

Excel remains compatible with MTD IT when used with the appropriate software. HMRC permits spreadsheets provided they connect to HMRC systems through digital links. Bridging software remains an approved solution.

However, compliance alone may not represent the optimal approach. Whilst basic bridging software meets legal requirements, it provides minimal functionality beyond basic submission capability. TaxNav’s comprehensive MTD IT software offers additional features, including error prevention, tax optimisation, and administrative efficiency – all of which can reduce both compliance costs and tax liability.

For individuals evaluating their MTD IT strategy, the key considerations are:

  • Meeting HMRC's technical requirements
  • Automated compliance
  • Reducing administrative burden
  • Identifying legitimate tax savings

With mandatory compliance beginning in April 2026, Self-Assessment taxpayers should evaluate their options and implement appropriate systems with adequate time for testing and adjustment.

Frequently asked questions

Q: Can I continue using my Excel spreadsheets?
A: Yes, provided you use MTD-compatible software (bridging software or comprehensive solutions like TaxNav) to submit to HMRC. Excel alone lacks the required API connectivity.

Q: When does MTD IT become mandatory for my business?
A: Mandatory start dates depend on qualifying income:

  • £50,000+: April 2026
  • £30,000-£50,000: April 2027
  • £20,000-£30,000: April 2028 (expected)

Q: Are physical receipts still required under MTD IT?
A: Yes. Digital record-keeping does not eliminate the requirement to retain original receipts. Digital storage is optional.

Q: What are the penalties for missed quarterly submissions?
A: From April 2026, you won’t be penalised for late or incorrect quarterly MTD IT updates in your first year, but you must still submit all four using HMRC-recognised software. This is because you cannot file your 2026/27 (annual declaration) tax return without them. That year-end return is still fully subject to HMRC penalties if it’s late (ie after 31 Jan 2028).  To avoid a hefty workload in January 2028, it's wise to use the whole of the 2026/27 year to build your MTD IT familiarity and compliance.

Q: Can an accountant or agent handle MTD IT compliance?
A: Yes. Authorised agents can manage MTD submissions on behalf of clients. The taxpayer retains ultimate responsibility for data accuracy and remains liable for any errors or omissions.

Get started with TaxNav today

Making Tax Digital for Income Tax is approaching fast. If you want to utilise your current or new Excel spreadsheet whilst ensuring full compliance and accessing professional tax optimisation features, TaxNav offers a practical solution.

  • Import your existing Excel data seamlessly
  • Automate quarterly submissions and deadline tracking
  • Identify tax deductions you might be missing
  • Keep you compliant without the complexity

Join the Pilot →

‍

‍