DAYS AWAY: Making Tax Digital deadline nears as taxi drivers prepare for MAJOR HMRC tax reporting changes
- Perry Richardson
- Apr 3
- 2 min read
Taxi drivers and other self-employed workers are being urged to prepare now for the introduction of Making Tax Digital (MTD) for Income Tax, with the first phase of the scheme set to become mandatory from 6 April 2026.
The changes will initially affect self-employed taxi and private hire drivers turning over more than £50,000 annually before expenses, requiring them to move from a single yearly tax return to a system of digital record keeping and quarterly submissions to HMRC. Industry accountants warn that those failing to comply risk financial penalties under a new points-based enforcement regime.
According to Vatax Accounting, MTD represents “a new way of recording the trader accounts income and expenditure to be reported to HMRC on a quarterly basis rather than once a year”, adding that “it is becoming a legal requirement and noncompliance will result in fines levied by HMRC”.
Under the new system, drivers will need to submit updates every three months, alongside a final end-of-year declaration. The administrative burden will vary depending on how records are currently maintained, with those relying on paper records expected to face the biggest adjustment. Drivers will need to adopt compatible accounting software or work with a bookkeeper or agent to ensure submissions meet HMRC requirements.
Quarterly reporting rules set to begin from April 2026 for higher-earning self-employed drivers
Dan Tomlinson, Exchequer Secretary to the Treasury, said: “Making Tax Digital for Income Tax is the biggest modernisation of the tax system for a generation.
“Under the current system, records are completed up to 21 months after transactions take place, increasing the risk of avoidable errors. Around £6 billion is lost each year where Self Assessment business customers do not pay the correct tax. Keeping digital, up-to-date records reduces error, protecting revenue to fund vital public sector plans including reducing NHS backlogs and giving children the best start in life.”
He added that the system would help taxpayers manage their finances more effectively throughout the year, stating: “It will also help customers stay on top of their finances throughout the year, reducing last-minute pressure and making the annual Self Assessment process quicker and easier to complete. Free software options are available to support those in scope.”
However, concerns remain within the taxi trade around readiness and awareness, particularly as the rollout will expand rapidly. From April 2027, the threshold drops to £30,000, followed by £20,000 from April 2028, bringing a far larger proportion of drivers into scope.
Vatax Accounting advises that even drivers below the initial threshold should act now. Establishing digital record-keeping systems early, either through accounting software or by appointing an agent, will help ease the transition as the rules tighten over the coming years.
Failure to comply with MTD requirements will see HMRC apply a penalty points system. Once a driver accumulates two points, fines begin at £200 and increase with continued non-compliance, making early preparation critical for those looking to avoid unnecessary costs and disruption to their business operations.
For an industry already facing rising operational pressures, including fuel costs and regulatory changes, the introduction of MTD adds another layer of compliance that drivers will need to manage as part of their day-to-day business.
