POINTS MEAN PENALTIES: What happens if taxi drivers miss the new Making Tax Digital deadlines?
- Perry Richardson
- Oct 7
- 2 min read
The introduction of Making Tax Digital (MTD) for Income Tax is a major change to how self-employed workers, including taxi drivers, must keep records and submit tax returns. From April 2026, drivers with annual revenue above £50,000 must begin using MTD-compatible software to report their income. Those with revenue between £30,000 and £50,000 will follow in April 2027.
Missing the deadlines or failing to comply with the requirements could have serious consequences. HMRC has made clear that the same penalties which already apply to late submissions and late payments will extend to MTD.
If a driver fails to send their quarterly updates on time, the new points-based penalty system will come into play. Under this system, each late submission earns a penalty point. When a driver reaches a certain threshold, a fixed fine of £200 will be issued. The threshold depends on how often updates are required. For most taxi drivers, this means four updates a year plus a final declaration, so the threshold will be four points.
Points remain active for up to two years, so repeat failures will quickly lead to fines. Submitting late once or twice may not trigger a financial penalty immediately, but consistently missing deadlines will.
In addition to update penalties, late payment of tax under MTD rules will also attract charges. If tax is not paid within 15 days of the due date, interest will be applied. If it remains unpaid after 30 days, further penalties will begin to build. The longer the payment is delayed, the higher the cost.
Taxi drivers who fail to use approved digital software altogether will also face compliance issues. Paper records and manual spreadsheets will not meet HMRC’s requirements once MTD is in force. Drivers could find themselves unable to submit a valid return without recognised software, which in turn will lead to missed deadlines and financial penalties.
There are limited exemptions available, such as for those who cannot use digital tools due to disability or lack of internet access. However, these will only apply in exceptional cases and must be applied for directly through HMRC.
For most drivers, the key to avoiding penalties will be preparation. Choosing and learning to use suitable software well ahead of April 2026 will ensure quarterly updates can be filed on time. Many software packages also offer features such as automatic reminders and direct links to business bank accounts, making it easier to stay compliant.
Ultimately, taxi drivers should not wait until the last moment. Getting familiar with MTD software now, setting up digital records, and practising quarterly submissions before they become mandatory will help avoid penalties and keep finances in order.
