MTD Checklist for Small Businesses: How Zempler Bank Simplifies Making Tax Digital Compliance

A checklist to get your business ready for Making Tax Digital

Making Tax Digital (MTD) is the government’s initiative to modernise tax admin and a legal requirement for VAT-registered businesses in the UK. In 2026, HMRC is making changes to MTD, which means more businesses will need to comply with it.

If you’re a sole trader or small business owner, that might feel like one more thing on an already busy plate. But getting it right doesn’t have to be complicated or expensive.

This article lays out the core steps you need to take to prepare for MTD, avoid common mistakes and stay compliant. Think of it as a starting point rather than a comprehensive manual. For anything complex or specific to your situation, it's always worth speaking to a qualified tax advisor.

1. Check whether MTD applies to your business

Since April 2022, all VAT-registered businesses have had to comply with MTD for VAT, regardless of their turnover. That means they’re legally required to:

• Keep digital VAT records
• Submit VAT returns through MTD-compatible software

Not yet VAT registered? Then you might not need to comply right now. But with updates to MTD being rolled out to Income Tax Self Assessment (ITSA) over the next few years, you might be required to use MTD in the near future.

The scheduled changes for MTD for ITSA

📌 For full, up-to-date guidance, go to the official HMRC MTD pages
📌 For a quick overview, check out our guide to MTD eligibility

2. Choose MTD-compatible software or bridging tools

To submit VAT returns under MTD, you must use software that can talk directly to HMRC.

There are two common routes:

• Accounting software – Platforms like Xero, FreeAgent and QuickBooks are MTD-compliant and often include helpful features like invoicing and expense tracking.
• Bridging software – If you use spreadsheets for your VAT records, bridging software allows you to connect them to HMRC’s systems without needing to switch tools.

Remember: only use software recognised by HMRC. You can check the full list of approved tools on GOV.UK.

3. Digitise all your VAT records

Under MTD, you must keep digital records for each individual transaction – not just summaries or totals.
This includes:

• Your business name and contact details
• VAT registration number
• Details of sales and purchases
• VAT charged or reclaimed
• Any VAT adjustments or corrections

Whether you use software or spreadsheets, these records must be complete and stored digitally. Manual records or copy-and-pasting between systems won’t cut it anymore.

With Zempler Bank’s digital receipt capture feature, you can save yourself the hassle and headache of managing physical receipts by capturing them digitally in your Zempler Bank business account.

4. Set up digital links between tools

A digital link means your data moves between systems electronically – no retyping or copy and pasting. For example, if you keep VAT records in a spreadsheet and file your return through another system, those systems must now connect via bridging software or similar.

There are some exceptions. For instance, manual adjustments (like partial exemptions or capital goods scheme tweaks) can be made outside the digital system. But the final return must still be submitted via a digital link.

If in doubt, speak to a tax adviser or your software provider to confirm that your setup is compliant.

5. Know your VAT return deadlines

MTD doesn't change the date your VAT is due and missing deadlines can lead to penalties.

You usually need to:

• Submit your VAT return every quarter
• Pay the VAT you owe within one month and seven days of the end of each VAT period

You can check your exact VAT due dates in your HMRC online account. Using software that alerts you to upcoming deadlines is a great way to stay on track.

6. Avoid the most common pitfalls

Even experienced business owners can get tripped up by MTD.

These are the issues we hear about most often from HMRC, accountants and small business communities:

• Assuming all cloud software is compliant – It isn’t. Always check the HMRC-approved list.
• Leaving it too late – Last-minute switches are stressful and more prone to errors.
• Incomplete digital records – Every transaction matters, not just summaries and totals
• Manual cut-and-paste between systems – This breaks digital link rules.
• Missing a return – Even one late return can trigger penalties.

The best defence? Plan early, test your setup and ask for help if something doesn’t feel right.

7. Keep an eye on upcoming changes

MTD for Income Tax Self Assessment (ITSA) is on the horizon, and it’s going to affect how sole traders and landlords manage their tax starting from April 2026.

Unlike annual self assessment, MTD for ITSA will require quarterly updates as well as an end-of-year final declaration. That means more frequent reporting and likely some changes to how you manage your books.

The thresholds and deadlines are already confirmed for 2027, with £20,000+ earners set to join the scheme in 2028. But details could shift. For the latest updates, visit HMRC’s Making Tax Digital hub.

How Zempler helps simplify MTD compliance

Zempler isn’t just another business bank. We’ve designed it to make your tax admin easier from the start as well.

With Zempler’s MTD-friendly business bank account, you can:

✅ Submit VAT returns directly to HMRC from within your account.

✅ Avoid separate subscriptions for different services, with everything you need included in eligible account plans.

✅ Stay in control with real-time notifications, cash flow tools and clear records that make filing your VAT smoother.

Explore Zempler’s MTD-ready accounts and see how simple it can be to stay compliant without the faff of using lots of different tools and services.

Final thoughts

Getting your business ready for MTD might seem like a hassle, but it doesn’t have to be. A few simple steps today can save hours of admin (and unnecessary potential penalties) tomorrow.

Remember: this checklist is a starting point. Individual circumstances can vary, so if you’re unsure about anything – especially when it comes to tax rules – it’s always wise to speak to a qualified accountant or tax professional.

And if you’re looking for a business bank that’s built to make compliance simpler? Zempler Bank might be worth a look.

Please note, the content in this article is not guidance from Zempler Bank and was created in whole or in part using GenAI. It may contain errors or inaccuracies and should not be relied upon as a substitute for professional advice. Zempler Bank makes no representations or warranties of any kind, explicit or implied with respect to the contents of this article. Without limitation, Zempler Bank specifically excludes and disclaims all express or implied warranties and conditions to the extent permitted by law, and any action taken using such content is strictly at the user’s risk.