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Making Tax Digital warning: Does HMRC really get to see EVERY fare and receipt from taxi drivers?
Making Tax Digital is bringing much more frequent reporting into the working lives of self-employed taxi and private hire drivers, but exactly what HM Revenue and Customs will need to see has become a source of confusion.
One concern is that the new system effectively gives HMRC a live view of every journey completed, every fare collected and every business purchase made by a driver.
That is not how the quarterly reporting system operates.
TaxNav, which recently addressed a series of Making Tax Digital misconceptions for TaxiPoint, highlighted the issue, explaining that while qualifying drivers need to keep digital records of individual transactions, the information sent to HMRC through quarterly updates is considerably more condensed.
Making Tax Digital for Income Tax represents a major change in how many self-employed workers maintain their tax records.
The regime became mandatory from April 2026 for qualifying sole traders and landlords with annual gross income from self-employment and property above £50,000. The threshold falls to more than £30,000 from April 2027 before dropping to more than £20,000 from April 2028.
That timetable is expected to bring substantially more taxi and private hire drivers within the digital reporting regime over the next two years.
For those affected, HMRC requires digital records to be maintained using compatible software. For a taxi driver, those records could potentially encompass a large number of transactions during a working year.
A busy driver may complete thousands of individual journeys. Income might arrive through card payments, cash fares, app platforms, account work and other booking channels. On the expenditure side there could be fuel or charging costs, insurance, vehicle repairs, cleaning, licensing costs, platform commissions and other allowable business expenses.
However, Making Tax Digital does not mean each and every line of those individual records are transmitted to HMRC every quarter.
HMRC says compatible software uses the driver’s digital records to create totals for each relevant income and expense category. Those totals form the basis of the quarterly update.
HMRC’s own guidance makes an important distinction, stating that it will receive the summaries rather than the individual fare-by-fare blow of records behind them.
The requirement to retain those records nevertheless remains important.
Digital record keeping sits at the centre of MTD IT. Qualifying drivers cannot simply calculate a quarterly income figure from paper records at the end of each reporting period and enter the total into software purely for submission purposes.
Instead, the underlying business transactions need to form part of the driver’s digital records. Many drivers detail daily income figures rather than each individual fare collected.
Drivers still need evidence capable of supporting the figures they report. HMRC can conduct compliance checks and request records where appropriate, meaning the fact that individual transactions are not included within the routine quarterly submission does not remove the obligation to maintain adequate records.
Under the standard quarterly reporting periods, qualifying taxpayers submit cumulative information covering the tax year to date. The first period runs from 6 April to 5 July, followed by updates covering the year to 5 October, 5 January and 5 April.
Those submissions give HMRC a progressively updated picture of the business without turning each quarterly deadline into a full tax return.
Nor does every quarterly figure necessarily need to contain all the accounting and tax adjustments that eventually determine the driver’s final liability.
As TaxNav explained in its wider examination of the MTD rules, certain adjustments can be dealt with as part of the year-end process.
This is particularly relevant to taxi drivers because vehicles can represent one of the largest financial investments made within the business. Capital allowances and other tax treatments associated with vehicles can materially affect the eventual tax calculation.
