Throughout his twenties, he worked as a professional actor, using the stage name David Holdaway. He played small roles at various theaters, including the West Yorkshire Playhouse and, for a three year period, at the Royal National Theatre.
As a screenwriter, he adapted his first novel for the film Starter for 10 and contributed scripts to the third series of Cold Feet. For the latter he was nominated for a BAFTA Television Craft award for Best New Writer. He created the original series I Saw You and Rescue Me. Rescue Me lasted for only one six-episode series before being cancelled. Nicholls had written four episodes for the second series before being told of the cancellation. His anger over this lead to him taking a break from screenwriting to concentrate on writing Starter for Ten. He co-wrote the screenplay for Simpatico, and authored the adaptation of Much Ado About Nothing for the BBC's 2005 ShakespeaRe-Told season. More recently, he wrote the screenplay of the film And When Did You Last See Your Father?, an adaptation of the memoir by Blake Morrison.
In 2005 he wrote Aftersun for the Old Vic's 24-Hour Play festival. The 10-minute play starred James Nesbitt, Saffron Burrows, Catherine Tate and Gael Garcia Bernal. Nicholls developed Aftersun into a one-off comedy for BBC One. It starred Peter Capaldi and Sarah Parish and was broadcast in 2006.
He has penned an adaptation of Tess of the D'Urbervilles for the BBC which will air in 2008. He is now working on an adaptation of Far From the Madding Crowd for BBC Films.