MAKING TAX DIGITAL MYTHS BUSTED: Do taxi drivers need extra accounting skills to undertake new HMRC rules?
- Perry Richardson
- 1 day ago
- 2 min read
Making Tax Digital for Income Tax (MTD IT) has become very real for many self-employed taxi and private hire drivers, bringing new record-keeping and reporting requirements that are prompting concerns over the amount of accounting knowledge needed.
Since April 2026, MTD IT has applied to qualifying self-employed people and landlords with gross income above £50,000. The threshold is scheduled to fall to £30,000 from April 2027 and £20,000 from April 2028, bringing substantially more drivers into the system over the next two tax years.
One of the biggest misconceptions surrounding the change is that drivers will effectively need to become accountants to comply and gain a complex understanding for the new tax recording system. In practice, the central requirement is to maintain appropriate records digitally and use compatible software to send the required information to HM Revenue and Customs (HMRC).
Drivers who currently rely on paper records will therefore face the biggest change. Their business income and expense records will need to move into an acceptable digital format, which could include a spreadsheet used alongside compatible software. Those already maintaining digital records may require fewer changes to their existing bookkeeping arrangements.
For drivers within MTD IT, quarterly updates provide HMRC with summaries of income and expenses recorded during the tax year. This means drivers will need to keep their records reasonably up to date rather than leaving the bulk of their bookkeeping until the annual tax deadline approaches.
The quarterly requirement does not, however, mean drivers must produce four full tax returns each year. The updates are based on the digital records being maintained, with the year-end process used to finalise the taxpayer’s position.
Taxi and private hire drivers will also need to complete the required year-end process after the tax year has finished. This is where information is finalised and other relevant income or adjustments can be dealt with before the taxpayer’s final Income Tax position is established.
Software providers are positioning their products around reducing the administrative burden created by the new regime. TaxNav, for example, offers HMRC-recognised software that allows users to enter records directly or work with figures maintained through an existing spreadsheet.
For cabbies, the impact therefore centres less on learning professional accountancy and more on changing the frequency and format of record keeping. Those accustomed to gathering receipts and calculating expenses once a year may need to establish a more regular bookkeeping routine.
The falling thresholds also mean MTD IT will become relevant to a much larger section of the taxi and private hire workforce. Drivers below the current £50,000 threshold should therefore check whether their qualifying gross income will bring them within the £30,000 threshold from April 2027 or the £20,000 threshold planned for April 2028.
The key distinction is that MTD IT changes how records are maintained and information is reported to HMRC. It does not require taxi and private hire drivers to acquire professional accounting qualifications or personally master complex accounting procedures.
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