Can I Use Excel for Making Tax Digital?

What Is Making Tax Digital?

MTD will eventually require all businesses to keep digital records via compatible HMRC-approved software and then submit their figures every quarter.

This is to create a ‘trusted and modern’ tax system that will bring figures closer to real time, as well as:

• Making it easier for both individuals and businesses to get their taxes right and avoid making errors that could lead to fines.
• Making it possible for people to integrate tax management with a range of business processes via software.
• Contributing to wider productivity gains for businesses by encouraging digitalisation.
• Helping to reduce the amount of tax lost to avoidable errors.

There’s been an ongoing phased rollout of MTD since 2019, with VAT-registered businesses being the first to test out the system.

MTD for ITSA is the next step.

The year that this becomes mandatory for individuals depends on earnings, so if you are self-employed or a landlord, you will be affected from:

• 6th April 2026, if you have an annual business or property income of more than £50,000
• April 2027, if you have an annual business or property income of more than £30,000
• April 2028, if you have an annual business or property income of more than £20,000

What Are My Making Tax Digital Responsibilities?

• Keep digital records of your income and expenses using HMRC-compatible software.
• Submit quarterly updates to HMRC on: 7th August, 7th November, 7th February and 7th May. These are like progress snapshots of your records that will give you an estimated tax bill as you go. These can be corrected later if needed and do not trigger payments.
• Complete a final end-of-year declaration – you’ll do this after your fourth quarterly update. This replaces the traditional self assessment return and is where everything is checked, corrected and finalised.

Can I Use Excel in Making Tax Digital?

Yes, for MTD you can still use spreadsheets like Excel; however, due to HMRC’s MTD requirements, such as digital records, digital links and electronic submissions via compatible software, using Excel alone is not enough.

It’s possible to store your income and expenses figures in a structured format through Excel, but the data links must be able to flow between systems without manual rekeying.

This is where you’d need bridging software to act as the connector between Excel and HMRC; taking spreadsheet data, converting it into the correct format and then submitting it to HMRC.

Risks of Using Excel

Many sole traders and landlords might prefer to use Excel as it’s a low-cost, simple and easy-to-use system that we’re all familiar with.

And while it works well for some sole traders and landlords with few properties, there are some risks:

• Compliance – manual edits can break digital links.
• Scalability issues – multiple income streams can get messy quickly, and it can be difficult to maintain consistency.
• Errors – Excel does not have a built-in validation, and it’s easy to overwrite formulas.
• Lack of automation – there are no bank feeds, and manual data entry will add to the administrative burden.

Why We Use FreeAgent for Making Tax Digital

While Excel is allowed for MTD, it is limited and will affect compliance when used on its own.

Software like FreeAgent removes the need for it entirely and provides everything you need to successfully meet your MTD obligations, such as built-in compliance, automation and accuracy.

At Dolan Accountancy, we can help you to set up compliant digital bookkeeping through FreeAgent, as well as:

• Manage your quarterly submissions
• Keep your records accurate and up to date
• Ensure you stay fully compliant and stress-free.

Our MTD package includes everything you need and is just £25 +VAT per month.

If you’re an existing client, we charge an additional £10 + VAT per month to take care of your MTD needs.

If you have any further questions, our team of experts are available to answer any queries, so give us a call on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com. Alternatively, contact us via live chat.