MTD bridging software: What accountants need to know

Published 22 October 2025

Table of contents

• MTD bridging software explained
• Digital links in practice
• Using software for MTD compliance
• Bridging software limitations
• How Xero helps with more than just MTD compliance
• FAQs on bridging software

Key takeaways

• MTD bridging software connects client spreadsheets to HMRC systems, providing a transitional compliance option
• While suitable as a temporary solution for MTD for VAT, bridging solutions are likely to present significant challenges for upcoming MTD for Income Tax requirements
• Cloud accounting platforms like Xero offer comprehensive compliance plus practice growth opportunities
• Strategic software recommendations can transform compliance conversations into advisory relationships

MTD bridging software explained

MTD bridging software connects your clients' existing spreadsheets to HMRC's systems, allowing those reluctant to change their processes to maintain compliance with Making Tax Digital requirements. It creates the mandatory digital links between client records and HMRC, eliminating prohibited manual data entry.

While adequate for current MTD for VAT requirements, bridging software presents significant limitations for the upcoming MTD for Income Tax (MTD for IT) regime beginning April 2026. The quarterly reporting requirements will make spreadsheet-based approaches increasingly cumbersome and time-intensive for both your practice and clients.

Digital links in practice

Digital links are the automated connections that transfer data between systems without manual intervention. For bridging software users, this typically means configuring Excel spreadsheets to connect with the bridging tool, which then securely transmits VAT figures to HMRC.

These links eliminate copy-paste operations and manual data entry, which are non-compliant under MTD regulations. For clients using bridging solutions, you'll need to ensure their spreadsheet structures remain compatible with their chosen bridging tool.

Using software for MTD compliance

You can guide clients toward MTD compliance through two main paths: bridging software for those reluctant to change their current processes, or comprehensive cloud accounting platforms like Xero that deliver both compliance and growth opportunities for your client and practice.

MTD bridging software functions as a transitional tool for clients who aren't ready to move away from spreadsheets. They extract final figures from existing records and submit them to HMRC, meeting the minimum compliance requirements for MTD for VAT.

Cloud accounting platforms like Xero offer end-to-end compliance with robust practice management capabilities. They handle the complete compliance journey – from digital record-keeping to submission – while providing you with oversight tools, client collaboration features, and automation that transforms your practice efficiency. This technology shift enables you to evolve your client relationships from compliance processing to strategic business advisory.

Bridging software limitations

When evaluating bridging solutions for your clients, consider these limitations:

• They address only the submission aspect of MTD, not the full spectrum of digital record-keeping requirements
• Clients must maintain carefully structured spreadsheets and perform manual data manipulation, increasing the risk of errors
• Practice management capabilities are minimal, with limited or no deadline tracking, error prevention, or client collaboration tools
• Additional solutions will be needed for core business functions like invoicing, expense management, and financial reporting

While bridging software may appear cost-effective initially, it often creates inefficiencies that limit your ability to scale advisory services. Full cloud accounting software provide the automation and insights that allow you to shift from compliance processing to higher-value advisory work – creating new revenue streams and deeper client relationships.

If clients insist on bridging software for MTD compliance, direct them to the HMRC-approved providers list.

How Xero helps with more than just MTD compliance

While bridging software satisfies basic MTD for VAT compliance, it misses the opportunity to transform both your clients' businesses and your practice through automation, insights and efficiency that MTD software can provide. Xero is more than just a compliance tool, allowing you to deliver significantly more value to clients.

Xero accounting software creates a complete accounting and MTD-compliant solution with powerful advantages that benefit both your practice operations and your clients' business performance:

• Automate routine compliance tasks, streamline client collaboration, and gain visibility across your entire client base through a single platform
• Manage client relationships, service delivery, and compliance workflows within one integrated platform, eliminating the fragmentation of multiple solutions
• Stay ahead of evolving MTD requirements with automatic updates and features specifically designed for both MTD for VAT and the more complex MTD for Income Tax requirements
• With tools like Hubdoc, transform document processing from a manual burden to an automated workflow, with receipt capture, data extraction, and secure digital storage
• Leverage Syft Analytics to deliver data-driven insights that demonstrate your value beyond compliance, with customisable dashboards and real-time performance metrics
• Transition from time-intensive compliance processing to scalable advisory services that create recurring revenue and stronger client relationships

With Xero, you can position your practice at the forefront of the accounting profession's evolution – moving beyond basic compliance to become a strategic advisor with technology that supports both your clients' success and your practice growth.

FAQs on bridging software

Below are some common questions accountants and bookkeepers ask about bridging software for MTD compliance.

Is bridging software still viable for MTD for VAT?

Yes, HMRC continues to support bridging software as a compliance option for MTD for VAT. For clients resistant to changing their processes, it provides a minimal-disruption approach to meeting current requirements. However, as an accountant or bookkeeper, consider whether this short-term solution aligns with your practice's long-term advisory strategy.

Will bridging software work for MTD for Income Tax?

While technically possible, bridging software will likely create significant inefficiencies for MTD for Income Tax compliance. The quarterly reporting requirements beginning April 2026 will make spreadsheet-based approaches increasingly burdensome. Cloud accounting platforms provide a more sustainable solution that supports both compliance and practice growth as requirements evolve.

How exactly does bridging software work?

Bridging software extracts data from formatted spreadsheets and transmits it to HMRC through their API. It creates the required digital links between client records and tax systems, but requires careful spreadsheet maintenance and lacks the automation and business intelligence features of comprehensive accounting platforms.