COUNTDOWN BEGINS: Are taxi and private hire drivers ready for HMRC’s new Making Tax Digital rules in 2026?
- Perry Richardson
- 6 hours ago
- 4 min read
The countdown has begun. From April 2026, thousands of self-employed taxi and private hire drivers across the UK will be expected to change the way they keep tax records and report income to HMRC. The new rules, introduced under the Government’s Making Tax Digital (MTD) programme, mark a significant shift in how sole traders in the industry manage their financial reporting.
Many drivers may not yet be aware of the details. However, with less than 9 months until the mandatory start date for some cabbies, questions are already mounting. Who will be affected first? What will drivers be required to do? And perhaps most pressing for many, will there be added costs?
What is Making Tax Digital?
Making Tax Digital is HMRC’s long-term strategy to transform the UK tax system through digital technology. The goal is to reduce errors, make record-keeping more efficient and bring tax administration in line with modern business practices.
Under MTD for Income Tax Self Assessment (MTD for ITSA), self-employed individuals and landlords earning more than £50,000 per year in total gross income will need to comply from April 2026. Those earning over £30,000 will be brought in from April 2027.
This means that from 6 April 2026, self-employed taxi drivers and private hire operators with yearly takings above the £50,000 threshold will be required to maintain digital financial records and submit quarterly updates to HMRC, rather than the current annual Self Assessment return. The move is designed to give both taxpayers and HMRC a more real-time view of business income.
Who is first affected?
Drivers operating as sole traders who earn over £50,000 annually will be the first to come under the new rules. That includes many full-time black cab drivers and private hire drivers in larger cities.
Part-time drivers earning below the £50,000 threshold in 2026 will continue to file tax returns using the existing Self Assessment process until they cross the income level or until 2027 if they exceed £30,000.
Drivers operating as limited companies are not included in MTD for ITSA at this stage. However, MTD for Corporation Tax is expected to follow in future years.
What platforms will be required?
To comply with MTD for ITSA, drivers will need to use HMRC-approved software to keep digital records and send updates. A basic spreadsheet will no longer be sufficient on its own unless it is connected to compatible bridging software.
HMRC has published a list of approved MTD software providers. Popular accounting tools such as QuickBooks, Xero and FreeAgent are already MTD-compliant. Some options offer packages tailored to sole traders, with simplified interfaces and mobile access.
The new requirements include sending quarterly updates every three months, a final end-of-year statement, and a separate annual declaration confirming business income and expenses. This is designed to replace the traditional tax return with a more continuous form of reporting.
Will there be added cost for cabbies?
Costs are likely to rise for most drivers. While some software options offer free or low-cost plans, many charge a monthly fee. Prices vary widely depending on features, but drivers can expect to pay anywhere from £10 to £30 per month for compliant software. That can add up to several hundred pounds a year.
There may also be costs for training or support, especially for drivers who are unfamiliar with digital tools or accounting software. Some within the trade have warned that the new rules will place a burden on self-employed workers who are already managing high running costs and economic uncertainty.
HMRC has said it will not offer its own free software but is encouraging low-cost options to emerge through the market. Drivers already using accountants may see fees change depending on how much work is required to comply with MTD rules.
What should drivers do now?
Although the rules will not apply until 2026, drivers in scope are being advised to start preparing. This could mean reviewing current income levels, speaking with an accountant, and trialling digital tools before the rules become mandatory.
HMRC is running a voluntary pilot scheme which allows eligible individuals to start using MTD systems ahead of the deadline. Participation is currently limited and not all software providers are taking part, but it does provide an early opportunity for drivers to get used to the new requirements.
Local authorities, unions and driver organisations may also begin issuing guidance over the coming months to help members transition to the new system.
With less than 9 months until the rules begin coming into effect, pressure is likely to build. Many drivers may need to update or change how they manage their tax affairs. For some, it will mean adapting to unfamiliar technology and additional admin.
While the aim of Making Tax Digital is to modernise the system and cut down on errors, the shift presents clear practical challenges. Whether the industry will be fully prepared by April 2026 remains uncertain.
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