How to Prepare Your Business for Making Tax Digital

Team Nomi

Jun 23, 2025
5 minutes read

Making Tax Digital (MTD) is a new government rule that changes how businesses and landlords manage their taxes. From April 2026, many small business owners and landlords with income over £50,000 will need to keep their tax records digitally and send updates to HMRC online every few months. This change is meant to make taxes easier, more accurate, and faster to handle. 

So that, to get ready, businesses will need to use special software, keep good digital records, and submit their tax information regularly. We will explain simple steps to help your business prepare for Making Tax Digital, so you can follow the new rules without any trouble.

What is Making Tax Digital?

Making Tax Digital is a government initiative to modernise the UK’s tax system. It requires taxpayers to keep digital records and submit tax information online using compatible software.

The scheme started in April 2019 for VAT-registered businesses, making digital VAT returns compulsory. By moving away from paper records, Making Tax Digital aims to make tax administration more efficient, reduce errors, and simplify the tax process for everyone involved.

Changes Under MTD for ITSA

Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) is set to begin in April 2026, affecting self-employed individuals and landlords with qualifying income:

• • Quarterly Digital Submissions: Businesses and landlords will send quarterly updates to HMRC detailing their income and expenses.
  • Digital Record-keeping: You must keep your financial records digitally using software compatible with HMRC’s MTD system.
  • End of Period Statement (EOPS): At the end of the tax year, you will submit a final declaration summarising your income and expenses.

These changes mean that tax reporting becomes more frequent and integrated with digital accounting systems, helping to reduce errors and improve cash flow management.

Steps to Preparing Your Business for MTD

Preparing for MTD involves several practical steps to ensure your business is compliant and ready for the new digital tax system.

Assess Your Current Record-Keeping

Start by reviewing how you currently keep your financial records. Are you using paper records, spreadsheets, or accounting software? Identify what will need to change to meet MTD requirements, which mandate digital record-keeping that can integrate with HMRC’s systems.

Choose the Right MTD-Compatible Software

You must use software recognised by HMRC for MTD compliance. This could be accounting software with built-in MTD functionality or bridging software that connects your existing records to HMRC digitally. When selecting software, consider:

• • Be simple to understand and navigate
  • Cost and support options
  • Compatibility with your existing accounting processes

Many providers offer free trials or demos, which can help you find the best fit for your business needs.

Digitise Your Financial Records

If you currently keep paper records, start converting these into digital formats. Upload receipts, invoices, and other documents into your chosen software regularly. Keeping accurate and up-to-date digital records is essential for smooth quarterly submissions.

Set Up a Quarterly Tax Update Routine

Create a schedule to review and update your financial data every quarter. This routine will help you avoid last-minute rushes and ensure your submissions to HMRC are timely and accurate. Familiarise yourself with the deadlines for quarterly updates and the information required.

Register for MTD with HMRC

Before you start submitting digital updates, you need to register for MTD through the Government Gateway online service. Make sure your tax affairs are up to date before registering. You will need details such as your National Insurance number, business start date, and accounting method.

Making Tax Digital represents a significant change in how businesses and landlords manage their tax affairs. By understanding the requirements, choosing the right software, digitising your records, and setting up regular routines, your business can comply with MTD confidently and efficiently.

Benefits of Preparing Early for MTD

Starting your MTD preparations well before the deadlines offers several benefits:

• • Digital record-keeping and quarterly updates reduce the time needed for year-end tax preparation.
  • Automated calculations and software integration minimise mistakes in tax submissions.
  • Real-time data helps you understand your tax position and manage cash flow better.
  • Early preparation allows you to troubleshoot and adapt without the pressure of deadlines.
  • Some businesses can voluntarily join MTD early to benefit from the new system ahead of time.

Getting ready early means you can take advantage of HMRC’s current grace period before penalties for not following the rules start to apply.

If you are an accountant or a small business owner looking to comply with Making Tax Digital (MTD), Nomi is a reliable software choice to consider. Nomi is HMRC-approved and designed specifically to simplify digital record-keeping and tax submissions. It also keeps you updated with real-time changes in tax rules to ensure ongoing compliance. Book a free demo and 30-day free trial to see how the software can help. Whether you are managing VAT returns or preparing for MTD for Income Tax, Nomi provides the support and features you need to stay compliant and stress-free.

Note: This article is for informational purposes only and does not constitute financial or legal advice.