A closer look at MTD bridging software

Published Thursday 18 September 2025

Table of contents

• What is Making Tax Digital bridging software?
• How to use software for MTD compliance
• The pitfalls of bridging software
• Making the right choice for your business
• FAQs on MTD bridging software

Key takeaways

• MTD bridging software connects spreadsheets to HMRC for VAT submissions, but it’s more of a short-term fix than a long-term solution. Full accounting software can manage submissions and digital records seamlessly.
• Bridging software won’t cover the expanded Making Tax Digital for Income Tax (MTD for IT) rules coming in 2026, which require digital record-keeping and quarterly updates. Accounting platforms are already built to handle these changes.
• Relying on bridging tools often means manual uploads and formatting of spreadsheets, which adds time and risk of errors. Cloud accounting software automates tasks like invoicing, reconciliation, and reminders to make compliance easier.
• While bridging software may seem cost-effective at first, it lacks wider features for managing business finances. Cloud accounting solutions provide real-time insights, automation, and compliance updates that support growth over the long term.

What is Making Tax Digital bridging software?

Making Tax Digital (MTD) bridging software is a digital tool that connects your existing spreadsheets to HMRC's tax system. It allows you to keep using spreadsheets for record-keeping while meeting Making Tax Digital compliance requirements, which have applied since April 2022 for all VAT-registered traders and will be required for sole traders and landlords starting April 2026.

Under MTD rules, data can no longer be entered manually. Bridging software solves this by creating automatic digital links between spreadsheets and HMRC's systems. This means data transfers electronically without manual input.

Bridging software helps you stay compliant with Making Tax Digital for VAT if you want to keep using spreadsheets instead of switching to full accounting software. While bridging software works for VAT submissions, it may not be sufficient for upcoming MTD for Income Tax (MTD for IT) requirements, which will demand more comprehensive digital record-keeping and quarterly updates.

What are 'digital links' and how do they work?

Digital links are electronic connections that automatically transfer data between different software systems. Under MTD rules, these links ensure your financial data flows seamlessly from your records to HMRC without manual copying or retyping.

For example, a digital link connects your Excel spreadsheet directly to your bridging software, which then sends your VAT figures to HMRC automatically.

How to use software for MTD compliance

For Making Tax Digital, you can choose between two main types of software: bridging software, or accounting software that works with MTD, such as Xero.

Bridging software acts as a connector, taking the final figures from your spreadsheet and sending them to HMRC. It's an interim solution for businesses who need to comply with MTD regulations, but don't have full cloud-based software in place.

Cloud-based accounting solutions, like Xero, handle your submissions seamlessly while offering comprehensive business tools. They maintain digital records, create proper digital links, and submit your returns directly to HMRC – all while giving you real-time financial insights and automating everyday tasks like invoicing and bank reconciliation.

The pitfalls of bridging software

While bridging software may seem cost-effective at first, it can add extra steps to your process over time. Here are some things to keep in mind:

• Bridging software only handles submissions, not full MTD requirements like digital record-keeping or complete data linking.
• You'll need to upload, download and manipulate spreadsheet data to be formatted correctly, which can be time consuming and lead to manual errors.
• Most bridging software does not include features like deadline reminders, error checking, or maintenance notifications.
• You’ll need other solutions for tasks like invoice creation, bank reconciliation, and financial reporting. Full accounting software combines these features to save you time and give you better business insights.

The bottom line: For most small businesses, cloud accounting software offers better long-term value and more features to help you run your business.

If you choose bridging software, be sure to check the list of HMRC-recognised providers.

Making the right choice for your business

Bridging software solves the immediate problem of MTD submission from a spreadsheet. But it doesn't offer the wider benefits that can help you run your business more efficiently. Full accounting software automates tasks, gives you real-time financial insights, and helps with invoicing, expenses, and cash flow.

Choose the tool that fits your long-term goals. Xero’s cloud accounting software minimises your administrative workload, and gives you access to up-to-date financial data. Plus:

• Increased automation: Leave the admin tasks to Xero’s automated features, and save time on your to-do list. Data flows into Xero automatically, reconciliation predictions help you match transactions, and invoice reminders encourage timely payments – without you lifting a finger
• Fewer processes to maintain: Do more of your business admin on Xero, and do away with costly additional software. You can manage your customers, bill for work, prepare tax returns, and collaborate with your advisor all from within Xero
• Be ready for new legislation: Xero has automatic updates that help you keep compliant with new legislation. Xero accounting software is MTD-compliant, with the tools and features to support you with MTD for VAT and MTD for IT rules
• Easy document captures: With apps like Hubdoc, you can snap photos of receipts with your smartphone and upload them directly to Xero. Transaction information is automatically extracted and a copy is saved in Xero – so you don’t need to hang onto paper receipts
• Focus on your business: Xero’s automation features and easy-to-use software make light work of financial admin. You gain hours back that could be used elsewhere – training your staff, increasing your sales, or taking some time off

Try Xero for free and get more than just MTD compliance – enjoy automated invoicing, real-time financial insights, and streamlined business processes that save you valuable time and reduce administrative headaches.

FAQs on MTD bridging software

Can you still use bridging software for VAT?

Yes, you can still use bridging software for VAT. HMRC continues to support bridging software as a valid MTD compliance option for businesses not ready to switch to full accounting software. However, using bridging software for MTD for IT is likely to be more complex, given the increased reporting requirements.

How long can you use bridging software for MTD?

There is no deadline for using bridging software for MTD. However, with Making Tax Digital for Income Tax starting from April 2026, the UK tax system is moving towards full digital record-keeping. Using bridging software for Income Tax will be more complex. Cloud-based accounting software can help you stay compliant and save time as requirements change.

How does MTD bridging software work?

Bridging software collects information from your spreadsheets and submits it to HMRC for tax purposes. It creates a digital link so you can submit VAT returns and comply with digital linking rules.