ARE TAXI DRIVERS READY? Clock ticking on new HMRC Making Tax Digital obligations arriving in months
- Perry Richardson
- 1 hour ago
- 3 min read
HMRC’s Making Tax Digital regime is set to bring a significant shift for taxi and private hire drivers from April 2026, with quarterly reporting and stricter digital record keeping due to become mandatory for many self-employed professionals in the trade.
The changes form part of the Government’s long-running programme to modernise tax administration, but industry groups have warned that sole traders who rely on paper logs or ad-hoc spreadsheets will need to adapt well in advance to remain compliant.
Under the current timetable, individuals with annual trading turnover above £50,000 will be the first cohort required to move onto Making Tax Digital for Income Tax Self Assessment. Those earning more than £30,000 are expected to follow in 2027. The threshold will capture a sizeable proportion of full-time drivers, particularly those working in major cities where fares and operating hours typically generate higher gross income. Self-employed drivers with lower turnover fall outside the initial phase, but HMRC has indicated that further expansion remains in place once the framework beds in.
Drivers will need to maintain their business records in HMRC-compatible digital software and submit four quarterly updates each tax year, a year-end finalisation and an end-of-period statement. The intention is to reduce errors caused by manual calculations, but it also introduces routine reporting obligations that many smaller operators have not previously encountered. The volume of submissions and the requirement to use approved software has become the principal concern raised by drivers since the timetable was confirmed.
HMRC’s expanded digital reporting rules will require thousands of drivers to overhaul record keeping and tax submission processes next year
The operational effect on the taxi and PHV sector is expected to be material. The industry has long relied on more manual ledger books and simple spreadsheet systems. Making Tax Digital requires every fare, expense and adjustment to be captured digitally at source. This will mean that cash fares, card transactions and platform-based earnings from operators such as Uber, Bolt or Freenow must all feed into a compliant digital workflow. Drivers using multiple dispatch platforms may face additional complexity if their income is reported in different formats, requiring careful reconciliation to avoid inconsistencies across quarterly submissions.
Preparation is viewed as essential because taxi and PHV drivers typically operate extended or irregular hours, leaving little time for administrative trial and error once the rules come into force. Industry advisers recommend selecting software early, migrating records during quieter operating periods and undertaking basic training to understand the workflow. Providers across the accountancy sector have already launched low-cost MTD-ready packages geared towards sole traders, although the choice varies by region and drivers must ensure any product is listed as compatible with HMRC systems.
Quarterly updates will not require tax to be paid at the point of submission, but they will give HMRC a near-real-time view of a driver’s profit position. Accountants expect this to reduce the scope for year-end surprises but note that more accurate projections may prompt some drivers to set aside funds more proactively throughout the year. For operators working close to the taxable threshold for VAT, digital record keeping may also highlight trends that require earlier strategic decisions on vehicle investment or working hours.
Training and support remain areas of uncertainty. Several local authorities and trade bodies have indicated they may offer workshops or online guidance, but details are limited. Some driver groups argue that awareness remains low across the workforce, despite the first implementation date being less than five months away. Without a targeted communication effort, they say, drivers risk delaying software adoption until the filing demands become acute. Others note that many in the sector already use digital dispatch platforms and card payment systems, meaning the shift to digital bookkeeping may be manageable with the right preparation.
It is also worth noting that Making Tax Digital requires drivers to keep digital copies of their records for at least five years, creating fresh obligations around device security and software reliability.
Drivers are being advised to review their average annual income to confirm whether they fall within the April 2026 threshold and research suitable digital bookkeeping software before the mandate comes into force. Trialling a system for several months can expose practical issues, such as how to categorise vehicle maintenance or deal with mixed-use mileage, well before quarterly reporting becomes compulsory.
The next twelve months are expected to be transitional as the industry adjusts. While some drivers remain cautious about the administrative burden, others see potential operational benefits if digital records offers clearer insight.
The Making Tax Digital rollout represents one of the most significant regulatory changes for self-employed drivers in years. With mandatory reporting set to begin in 2026 for a substantial portion of the workforce, preparation is becoming a strategic necessity rather than an optional upgrade.
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