How new HMRC Making Tax Digital rules will impact taxi drivers turning over £30,000-£50,000 in fares from 2027
- Perry Richardson
- 3 minutes ago
- 2 min read
Thousands of taxi drivers taking between £30,000 and £50,000 a year in fares will need to change the way they report income and expenses to HMRC under new rules starting from April 2027.
The move comes as part of the government’s Making Tax Digital for Income Tax (MTD ITSA) programme. It applies to self-employed individuals and landlords with a combined gross income over a certain threshold. For taxi drivers who work as sole traders and earn above £30,000 from fares and related self-employment income, the changes will require a shift to digital accounting and quarterly submissions.
Drivers with qualifying income above £50,000 must start following the rules from April 2026. Those earning between £30,001 and £50,000 will have an extra year, with a start date of April 2027.
Qualifying income is defined as the total self-employed and property income received before any deductions for expenses or tax. This means drivers must look at the full amount earned through their taxi work, not just profits. Income from PAYE jobs, dividends, or company earnings is not counted when assessing whether a driver needs to comply.
Once in scope, drivers must use software that links with HMRC’s Making Tax Digital system. This software will be needed to keep digital business records, submit updates every three months, and file a final declaration by 31 January after the end of the tax year.
The Government’s aim is to increase accuracy and reduce tax return errors, but the changes mean extra admin for self-employed drivers. Paper records will no longer be enough, and spreadsheets alone will not be compliant unless linked to approved software.
There is some flexibility built in. If a driver’s qualifying income drops below £30,000 for three tax years in a row, they will be able to opt out of the system. The Government has also indicated that those earning between £20,001 and £30,000 will be brought into MTD ITSA from April 2028, with further details to follow.
Drivers and other self-employed workers are being advised to start preparing early, especially if they currently rely on manual bookkeeping. Choosing suitable software, getting used to quarterly updates, and understanding digital record keeping will all be necessary in the lead up to 2027.
Accountants acting on behalf of drivers will be able to manage the digital process, but drivers remain responsible for making sure their records and returns meet HMRC requirements. Failure to comply could lead to penalties.
