For years a well-built spreadsheet was a perfectly good way to run the books of a small business. Making Tax Digital is changing that. As MTD extends across VAT and, from April 2026, income tax for larger sole traders and landlords, the expectation is digital records kept in compatible software with updates filed directly to HMRC. For most owner-managed businesses that means a move to cloud accounting, and the real question is how to do it without losing the history and the control a spreadsheet gave you.
What MTD actually requires
MTD is not simply about filing online; it is about keeping your records digitally and having the data flow into the return without being retyped. HMRC's overview of Making Tax Digital sets out the requirement for digital record-keeping and digital links between your records and your filing. A spreadsheet on its own is not compliant unless it is connected to HMRC through bridging software, and even then it tends to be a stopgap rather than a comfortable long-term answer. Before you change anything, confirm whether and when the rules actually bite for you, which is the subject of our guide to the £50,000 MTD threshold.
Why the cloud usually beats a bridged spreadsheet
You can keep a spreadsheet and bolt bridging software onto it, but most businesses find that solves the filing box while leaving the real problems, manual entry, broken formulas and no audit trail, untouched. Cloud accounting replaces the re-keying with bank feeds, keeps a proper audit trail, and gives you a live view of your position rather than a month-end reconstruction. The trade-off is a monthly cost and a short learning curve, which is why the choice of platform matters; our comparison of the main MTD software options weighs them up for a small business.
How to move across cleanly
A clean migration is mostly about sequencing. Pick a sensible cut-over date, usually the start of a VAT quarter or a financial year, so you are not splitting a period across two systems. Set up the chart of accounts to match how you actually report, enter accurate opening balances from your last finalised accounts, and connect the bank feeds. Then run the first period carefully, checking the figures reconcile to the bank and to your old spreadsheet before you rely on the new system alone. Keep the spreadsheet as a read-only record of the history; you carry forward balances rather than importing years of old data.
- Choose a cut-over date at the start of a VAT quarter or accounting year.
- Build the chart of accounts around how you report, not the software default.
- Enter opening balances from your last finalised accounts, not a mid-year guess.
- Connect bank feeds so transactions flow in rather than being typed.
- Run one full period in parallel and reconcile before switching the spreadsheet off.
Get the setup right once
The cost of a rushed migration is months of messy data and a year-end clean-up that wipes out the time the software was meant to save. The cost of a careful one is a single focused setup. The ICAEW's guidance on Making Tax Digital is a useful reference on getting the records right, and an accountant who sets up cloud systems regularly can handle the chart of accounts, opening balances and bank feeds with you so the first period is clean. Tell us how your business keeps its records now through the form on this page and we will map out the move.