Making Tax Digital: How to Prepare for MTD with Xero
Introduction
HMRC’s Making Tax Digital (MTD) programme is changing how businesses manage their taxes. While it may sound daunting, the aim is simple: make tax reporting more accurate, more efficient, and easier to manage.
If you’re wondering how to prepare, the good news is that software like Xero makes the transition smoother. MTD is not just about staying compliant, it’s also a chance to streamline how you manage your finances day to day.
What is making tax digital?
MTD is HMRC’s plan to phase out paper records and move everything online. It means moving away from paper returns and spreadsheets and instead keeping records digitally and submitting them directly to HMRC quarterly through approved software.
It means fewer surprises, less last-minute stress, and a clearer picture of your tax position throughout the year
The key change is you keep records digitally through HMRC approved software & instead of doing one yearly self assessment, you’ll send updates every three months, plus a final year-end statement. This gives you real-time visibility of where you stand.
Who does it apply to?
The MTD rules are being phased in:
VAT: Businesses registered for VAT with taxable turnover above £85,000 have already had to comply. Since April 2022, all VAT-registered businesses must now follow MTD rules.
Income Tax (MTD for ITSA): From April 2026, self-employed people and landlords with income over £50,000 will need to follow MTD. From April 2027, the threshold reduces to £30,000.
Corporation Tax: This is still in planning stages, with HMRC expected to confirm timelines later.
What do you need to do?
If we already look after your bookkeeping, we’ll take care of your MTD submissions for you. All we ask is that you provide your records regularly, so we can keep everything in Xero up to date and file your quarterly returns smoothly.
If you’re not yet using digital software, now is the time to get started. The team at OutsourceCloud can guide you through:
- Choosing the right software for your needs.
- Setting up digital bookkeeping.
- Planning for the transition to quarterly updates.
Remember, switching early means you’ll have more time to adjust before MTD for Income Tax comes into effect.
Additionally if the admin is to much for you to stay on top of, With Xero you have the option to upgrade to our bookkeeping service, we can ensure:
- Your records are accurate and always up to date.
- You stay compliant when quarterly submissions become mandatory. Nothing for you to do.
- You get reliable, real-time financial insights to help with planning and cash flow.
Why Preparing Early Helps
The new MTD rules might feel like extra admin, but they can actually make life easier. By submitting quarterly, you’ll avoid year-end surprises and get a clearer view of your business performance throughout the year. Starting now gives you time to settle into the process without last-minute stress.
Help for Business Owners
The OutsourceCloud team can:
Keep your bookkeeping accurate and timely in Xero.
Support you with quarterly MTD submissions.
Help you move from spreadsheets or other software onto Xero, so you’re fully MTD-ready.
Final thoughts
Making Tax Digital is all about keeping on top of your numbers. With the right systems in place and a trusted team to handle the details, it doesn’t need to be complicated.
If you’d like to chat about how we can manage your bookkeeping in Xero and keep you MTD-ready, just get in touch with the team.
Disclaimer: This article is provided for general information only and does not constitute financial or tax advice. Making Tax Digital requirements can vary depending on your circumstances. Please do not take action based on this information without speaking to a qualified advisor. OutsourceCloud cannot accept responsibility for any loss arising from reliance on the information in this article. For tailored advice, please get in touch with us directly.
The information provided in this article is accurate as of Sept , 2025. Tax laws and regulations are subject to change. It is the responsibility of the reader to ensure that they are referencing the most current information
