How to prepare for Making Tax Digital: A step-by-step guide

The shift to Making Tax Digital (MTD) isn’t just a compliance requirement, it’s an opportunity for individuals, businesses and landlords to modernise how they manage tax.

By moving to digital record-keeping and submissions, you’ll reduce errors, save time, and gain clearer insights into your finances. But it all starts with preparation.

In this guide, we’ll walk you through practical steps to get ready for MTD, so you can stay compliant and make the most of the benefits.

Here’s a step-by-step guide to help you get ready:

Step 1: Understand What Making Tax Digital means for you

Making Tax Digital currently applies to VAT-registered businesses, but from April 2026 it will apply to Income Tax Self-Assessment (ITSA).

The first step is gaining clarity on if the upcoming changes will affect you; this allows you to prepare for these changes ahead of the deadline.

Ask yourself:

• Are you VAT registered?
• Will you be affected by the upcoming ITSA changes?

If you are unsure, we are here to help. Contact one of our Making Tax Digital champions to confirm your circumstances.

Step 2: Review your current record-keeping

Making Tax Digital requires digital record-keeping through approved software, such as Xero. If you are currently using paper-based filing systems or manually updating spreadsheets, now is the right time to make the digital shift.

Step 3: Choose Making Tax Digital compatible software

HMRC requires submissions to be made through approved software.

If you are unsure which software to opt for, it is time to do some research.

What to look for:

• MTD-compatible solutions listed on HMRC’s website.
• Features that suit your business size and complexity. Popular options include cloud-based platforms that integrate seamlessly with your existing systems.

Step 4: Link your systems digitally

If you are currently using multiple systems or tools, for example: spreadsheets and an accounting software, these will need to be digitally linked as data can no longer be copied and pasted.

Setting up the correct digital connections will ensure your data flows seamlessly.

Step 5: Train your team

It is possible your staff will play a vital role in ensuring ongoing compliance when it comes to Making Tax Digital, ensure they are well equipped on the how to’s of:

• Maintaining digital records.
• Using the chosen software.

Step 6: Test your process

Ahead of the Making Tax Digital deadline, it is good practice to test your processes before your first submission. This will allow you to identify any issues that may arise with enough time to troubleshoot.

What to look for:

• Check that your records transfer correctly.
• Confirm your software connects to HMRC without issues.

Step 7: Stay updated

Making Tax Digital is evolving. It is wise to keep up to date on any changes that will affect you alongside any changes to deadlines.

Keep an eye out for:

• HMRC updates.
• Deadlines for ITSA and Corporation Tax.

Being proactive will save you time and stress.

Why act now?

Early preparations will provide you peace of mind knowing your tax processes are streamlined with the added benefit of a better insight into your finances.