ARE YOU READY? Taxi drivers and sole traders face first August deadline under new HMRC Making Tax Digital rules
- Perry Richardson
- 5 days ago
- 2 min read
Taxi drivers and other self-employed workers are being urged to take immediate action to comply with new Making Tax Digital (MTD) rules, with the first mandatory quarterly update deadline set for 7 August.
The changes, introduced by HM Revenue & Customs, require sole traders and landlords earning more than £50,000 annually in revenue to maintain digital records and submit income updates every three months using compatible software.
For many in the taxi and private hire sector, the shift represents a significant change in how they account for their earnings. Drivers who previously filed a single annual Self Assessment tax return must now move to quarterly reporting, fundamentally altering how income and expenses are tracked and submitted.
The first reporting period covers earnings from 6 April to 5 July, with submissions due by 7 August. Further updates will follow in November, February and May, alongside a final end-of-year tax return.
Self-employed workers must act now to meet Making Tax Digital requirements ahead of first quarterly submission on 7 August.
To comply, drivers must first confirm whether they fall within the scope of MTD. Eligibility is based on total gross income from self-employment and property, not profit. Those exceeding the £50,000 threshold in the 2024-25 tax year are required to join the scheme from April 2026.
Once confirmed, the next step is to sign up for MTD and select compatible software. HMRC does not provide its own system, meaning users must choose from a range of third-party products, including free and paid options. These tools are used to keep digital records and submit quarterly updates directly to HMRC.
The transition is likely to introduce additional costs, with some estimates suggesting drivers may pay monthly subscription fees for compliant software.
Drivers must also ensure their records are kept digitally throughout the year. This includes logging income, expenses and transaction dates in near real-time, rather than relying on end-of-year calculations.
Despite the scale of the change, HMRC has confirmed there will be no financial penalties for missing quarterly update deadlines during the 2026-27 tax year. However, late submissions in future years will fall under a points-based penalty system.
The tax authority has stressed that responsibility for compliance sits with the individual. Even if a taxpayer has not received direct communication, they are still required to check whether they meet the criteria and prepare accordingly.
For the taxi and private hire industry, where many drivers operate as sole traders, the coming months are expected to test readiness across the sector. Industry groups have previously warned that those relying on paper records or basic bookkeeping methods may face the steepest adjustment as the August deadline approaches.
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