If you are getting ready for Making Tax Digital, it is easy to feel stuck between 2 choices. Do you keep your spreadsheets and use bridging software, or do you move over to full cloud accounting?
The honest answer is that both can work. HMRC accepts different types of MTD-compatible software, including bridging products that connect spreadsheets to HMRC, and broader accounting software that keeps your records digitally and handles submissions from within the system.
MTD for Income Tax is being introduced in phases from 6 April 2026 for sole traders and landlords with qualifying income over £50,000, from 6 April 2027 for those over £30,000, and from 6 April 2028 for those over £20,000.
So the real question is not whether 1 option is right and the other is wrong. It is which option makes more sense for the way you already run your business, and what will help you stay compliant without making life harder than it needs to be.
What bridging software means for MTD
Bridging software is designed for businesses that still want to work from spreadsheets or other existing records. It connects those records to HMRC so you can send the required updates digitally without moving everything into a full bookkeeping platform. HMRC specifically says bridging software can be suitable if you want to keep using your current records and adapt them for MTD.
That makes bridging software attractive if your spreadsheet process is already tidy. If you keep accurate digital records, update them regularly, and know exactly where your figures come from, bridging software can be a straightforward route into compliance.
It can also be a sensible option if you want to keep costs and disruption down in the short term. You are not changing your whole finance system at once. You are simply creating a compliant link between the records you already keep and HMRC.
What cloud accounting means for MTD
Cloud accounting takes a wider approach. Instead of just helping you submit figures, it usually becomes the place where you keep your bookkeeping records, raise invoices, track expenses, and review how the business is performing.
That matters because MTD is not only about sending numbers to HMRC. It is also about keeping digital records properly. A cloud accounting system can help you do that day to day, rather than leaving most of the work until quarter end or year end. HMRC’s guidance says the software you choose must support digital record keeping and MTD submissions, whether directly or through connected tools.
For many businesses, that is where cloud accounting starts to make more sense. You are not just buying a filing tool. You are improving the way your records are kept throughout the year.
When bridging software may be the better fit
Bridging software can make sense if your setup is already simple and disciplined.
It may suit you if:
- You already keep clean spreadsheets
- You have a relatively low volume of transactions
- You do not need complex reporting
- You mainly want a compliant way to submit figures
- You are not ready to change your full bookkeeping process
If you are a landlord with a manageable portfolio, or a sole trader with straightforward records, bridging software may do exactly what you need. It lets you continue using familiar spreadsheets while meeting HMRC’s digital submission rules.
But there is a catch. Bridging software only works well when the records underneath it are good. If your spreadsheet is full of manual adjustments, old formulas, duplicated tabs, or figures that only get updated at the last minute, the software will not fix that. It will only sit on top of the same weak process.
When cloud accounting may be the better fit
Cloud accounting often makes more sense when you want more than basic compliance.
It may suit you if:
- You want live visibility over your figures
- You raise invoices regularly
- You need to track expenses throughout the month
- You are already VAT-registered
- You want less manual data handling
- You want better support from your accountant during the year
That last point matters more than many businesses realise. If you and your accountant are both working from the same live records, it becomes much easier to spot problems early, review performance, and avoid last-minute surprises.
This can be especially useful if you already rely on support with bookkeeping services, VAT returns, company accounts, or payroll services.
The compliance question is only part of the decision
A lot of businesses look at MTD and ask, “What is the cheapest way to comply?” That is understandable. But the better question is often, “What will give me the least hassle over the next year?”
Bridging software is usually the lighter-touch option. Cloud accounting is usually the stronger long-term option.
If your records are already in very good shape, bridging software may be enough. HMRC’s MTD for VAT guidance also makes clear that where data moves between systems, digital links matter. In practice, that means businesses using spreadsheets and bridging software need to make sure their process is still properly connected and not built around copying and pasting figures in the wrong places.
If your current process depends on memory, manual fixes, or rushed quarter-end work, cloud accounting may save you far more time than it costs.
Why VAT-registered businesses often lean towards cloud accounting
If your business is already VAT-registered, the case for cloud accounting can become stronger. The VAT registration threshold increased from £85,000 to £90,000 from 1 April 2024, and once you are registered you already need to think carefully about digital records and compliant submissions.
That does not mean bridging software cannot work for VAT. It can. But if you are filing regularly, reconciling transactions often, and trying to keep your records up to date all year, a proper cloud system can give you a cleaner process.
For some businesses, that extra visibility is the real benefit. You are not waiting until the end of the quarter to understand what is going on. You can see how the business is performing as you go.
A practical way to choose between the 2
If you are deciding between bridging software and cloud accounting, keep it simple.
Choose bridging software if your records are already strong, you are comfortable using spreadsheets, and you mainly want a compliant way to submit your MTD figures.
Choose cloud accounting if you want better bookkeeping habits, more visibility over cash flow and performance, and a system that supports you beyond the submission itself.
There is also nothing wrong with taking this in stages. Some businesses start with bridging software to become compliant, then move to cloud accounting once they are ready to improve the wider process.
That can be a sensible route if you want to spread the change rather than do everything at once.
Getting the right support matters
The best answer for MTD depends on how your records are kept now, not just on what software sounds good in theory.
If you are a sole trader, you may want to look at support around sole trader accounting. If you run a company, limited company accountants may be more relevant. If you already work in QuickBooks, QuickBooks accountants can help you use the software more effectively. You can also explore who we help, learn more about us, or visit our contact page to talk things through.
FAQs
Is bridging software accepted for MTD?
Yes. HMRC says bridging software can be used where you want to keep records in spreadsheets or other tools and connect them to HMRC for MTD submissions.
Is cloud accounting compulsory for MTD?
No. You need MTD-compatible software, but that does not always mean a full cloud accounting package. Bridging software can still be suitable in the right circumstances.
Is bridging software cheaper than cloud accounting?
It is often cheaper at the start because you are keeping your existing spreadsheet process. But if that process creates a lot of manual work, cloud accounting may offer better value over time by reducing errors and admin.
Who needs to prepare for MTD for Income Tax first?
Sole traders and landlords with qualifying income over £50,000 need to prepare first, because mandatory MTD for Income Tax starts for them from 6 April 2026. The next phases begin from 6 April 2027 for those over £30,000 and from 6 April 2028 for those over £20,000.
Can you stay on spreadsheets for MTD?
Yes, in some cases you can continue using spreadsheets if they work with compatible software such as bridging software and your digital records meet HMRC’s requirements.
Final thought
For some businesses, bridging software is a practical and perfectly sensible answer. For others, it only delays a move they will eventually need to make anyway.
If you want the lightest change and your spreadsheets are already under control, bridging software may be enough. If you want better visibility, fewer manual processes, and cleaner records throughout the year, cloud accounting is usually the better long-term choice.
If you want help deciding which route fits your business, get in touch with Asmat Accountants. You can choose a setup that works for MTD, works for HMRC, and just as importantly, works for you.
