Both are valid for Making Tax Digital — here's how to decide which fits your business, with real pros, cons and rough costs.
| Pros | Cons |
|---|---|
| Familiar if you already use Excel or Google Sheets | You build and maintain the structure yourself — more room for error |
| Free or low-cost (bridging tools often have a modest annual fee) | No automatic bank feeds — you enter transactions manually |
| Full control over layout and categorisation | Bridging software is a separate purchase/subscription on top of the spreadsheet |
| Works well for simple, low-transaction-volume businesses | Harder to scale if your business grows or gets more complex |
| Pros | Cons |
|---|---|
| Bank feeds auto-import transactions, cutting manual entry | Monthly subscription cost, typically £10–£30/month |
| Built-in MTD submission — no separate bridging tool needed | Learning curve if you're not used to accounting software |
| Scales well as transaction volume grows | Can feel like overkill for very simple, low-income businesses |
| Often includes invoicing, expense scanning, and reporting | Switching providers later can mean re-entering historical data |
If you have fewer than roughly 10–15 transactions a month and are comfortable with spreadsheets, a spreadsheet plus a low-cost bridging tool is often the cheapest, simplest route. If you're above that volume, have multiple income streams, or just want less manual admin, dedicated software tends to pay for itself in time saved. See real current options on our Best Accounting Software UK comparison.
Whichever route you choose, the habit that matters most is recording income and expenses as they happen rather than reconstructing them later. Our free Expense Tracker is a good way to build that habit today, even before MTD applies to you, and gives you a clean digital record to migrate into whatever software you eventually choose.
Sources: GOV.UK — find compatible software. This page is general guidance, not personalised tax advice.
Not in a prescribed format, but it needs to hold digital records of income and expenses that your bridging software can read and submit to HMRC without manual re-typing of the underlying transactions.
Some basic bridging tools are free or low-cost for straightforward submissions; more feature-rich ones charge an annual or monthly fee. Check GOV.UK's list of recognised software providers for current options.
Yes — there's no rule against changing your record-keeping method mid-year, though you'll want to make sure your historical figures for that year carry over accurately.
Not necessarily — many dedicated accounting packages bundle invoicing with expense tracking and MTD submission, though you can also use free invoicing tools alongside a simpler MTD setup.