Making Tax Digital for Taxi Drivers: 2026 Deadlines, Digital Requirements, Penalties and Practical Guidance
Everything self-employed taxi and private hire drivers need to know about the MTD transition
For thousands of self-employed taxi drivers and private hire operators, the era of the “shoebox full of receipts” is coming to an end. From April 2026, Making Tax Digital for Income Tax (MTD ITSA) becomes mandatory for drivers with annual gross income over £50,000 . This is the most significant change to the Self Assessment regime since its introduction in 1997 , and it will fundamentally change how you record and report your income and expenses to HMRC.
Key Dates and Thresholds at a Glance
MTD for Income Tax is being rolled out in phases based on your total gross income from self-employment (including taxi driving, app-based work, delivery work) and property income . HMRC is using your 2024/25 Self Assessment to determine when you must join .
| Income Threshold | Mandatory From | Drivers Affected |
|---|---|---|
| Over £50,000 | 6 April 2026 | Approximately 780,000 self-employed individuals and landlords enter first wave |
| £30,001 – £50,000 | 6 April 2027 | Further 970,000 join as threshold lowers |
| £20,001 – £30,000 | 6 April 2028 | Wider expansion to include lower-earning drivers |
- Taxi, chauffeur and private hire fares – including cash, card, and app-based jobs (Uber, Bolt, Freenow)
- Delivery and courier work
- Other self-employment income
- Property income (if you also rent out property)
HMRC began dispatching letters to affected taxi drivers and self-employed workers from May 2025 . If you earn over £50,000, you should have received notification. If you’re unsure, check your 2024/25 Self Assessment figures now .
What MTD Means for Taxi Drivers
Under MTD, the traditional once-a-year Self Assessment tax return is replaced by a system of digital record-keeping and quarterly updates . Handwritten logbooks, scraps of paper in the glove compartment, and spreadsheets that don’t connect to HMRC will no longer be sufficient .
1. Digital Records
Keep records of all income and expenses digitally using MTD-compatible software
2. Quarterly Updates
Send four summaries to HMRC each year (within 1 month of quarter end)
3. Final Declaration
Submit end-of-year statement by 31 January (replaces Self Assessment)
Digital Requirements: What You Must Record
You don’t need to upload every single receipt, but you must keep accurate digital records that can produce totals for submission to HMRC . Your digital records should capture:
| Income to Record | Expenses to Track |
|---|---|
|
|
You can continue using simplified mileage rates if preferred: 45p per mile for the first 10,000 business miles, then 25p per mile thereafter . Your software should track both methods so you can choose the most tax-efficient option .
Quarterly Update Deadlines
The tax year is split into four quarters, each requiring a submission within one month of the quarter end . Mark these dates in your calendar:
| Quarter | Period Covered | Submission Deadline |
|---|---|---|
| Quarter 1 | 6 April – 5 July | 7 August |
| Quarter 2 | 6 July – 5 October | 7 November |
| Quarter 3 | 6 October – 5 January | 7 February |
| Quarter 4 | 6 January – 5 April | 7 May |
If you have a quiet quarter with little or no income, you still need to submit an update . Good digital records make this straightforward.
At the end of the tax year, after all four quarterly updates are submitted, you must file an End of Period Statement (final declaration) by 31 January following the tax year end . This replaces the traditional Self Assessment return and confirms your final tax position.
Penalties: The Points-Based System
MTD introduces a new penalty regime. Missing deadlines isn’t just about a single fine – it’s a points system that rewards consistent compliance but penalises repeat offenders .
1 Late Submission Penalties
Each late quarterly update or late final declaration earns you one penalty point . When you reach the threshold (typically 4 points for drivers filing four updates plus a final declaration), you receive a £200 fixed penalty .
- Points remain active for two years
- Repeat failures lead to multiple £200 fines
- Points expire after 24 months of good compliance
2 Late Payment Penalties
Payment deadlines remain the same (31 January and 31 July). Late payments attract:
- Interest if not paid within 15 days of due date
- Further penalties if unpaid after 30 days, escalating over time
3 Software Non-Compliance
Failure to use HMRC-approved software will leave you unable to submit valid returns . This leads to missed deadlines and automatic penalties. There is a specific one-off fine for those who fail to use compatible software .
Penalty Example:
A driver misses three quarterly updates in a year: each earns 1 point = 3 points (no fine yet).
They then miss the final declaration: 4th point → threshold reached → £200 fine issued immediately .
Soft-Landing Period (2026/27)
HMRC recognises that adapting to MTD takes time. For taxi drivers joining in April 2026, no late submission penalties for quarterly updates will apply in the 2026/27 tax year . However:
- You must still submit all four updates before filing your final declaration
- Late final declarations ARE still subject to penalties
- Late payments ARE still subject to interest and penalties
This grace period gives you time to adjust, but it’s not a holiday from compliance. Use it to build good habits .
Choosing MTD-Compatible Software
HMRC will not provide free software . You must choose an approved package. Look for features that work for drivers on the move .
| Software Type | Description | Best For |
|---|---|---|
| Full MTD Software (Xero, QuickBooks, FreeAgent, Sage) | Complete accounting with bank feeds, receipt scanning, invoicing | Drivers wanting all-in-one solution |
| Taxi-Specific Apps (TaxNav, Altery, RentalBux) | Specialist tools with app-based fare tracking, mileage logs, expense capture | Drivers wanting tailored industry features |
| Bridging Software | Connects your existing spreadsheets to HMRC’s API | Drivers who prefer spreadsheets but need compliance |
Essential Features for Taxi Drivers
- Mobile app – record fares and expenses immediately, scan receipts at the pump
- Bank feeds – automatic transaction import from business account
- Mileage tracking – automated logs for simplified expenses
- Receipt scanner – OCR technology to extract data from photos
- Quarterly reminders – alerts before deadlines
- Tax estimate – shows your potential liability as you go
“I’m liking the simplicity… well suited to other cabbies, particularly as some may not be too savvy with accounting.” – TaxNav user
Practical Guidance: Step-by-Step Preparation
Now – March 2026
✓ Check 2024/25 income
✓ Research software options
✓ Sign up for free trials
April – May 2026
✓ Register for MTD
✓ Set up software
✓ Begin digital records from day one
July 2026
✓ First quarterly update due (if started April)
January 2027
✓ Final declaration deadline
Detailed Preparation Checklist
1 Check Your Income
Review your 2024/25 Self Assessment figures. If your gross income (before expenses) exceeds £50,000, you’re in the first wave . If you’re close to £30,000, you’ll join in 2027 – but early preparation still helps .
2 Choose Your Software Early
Don’t wait until April 2026. Sign up for free trials now and test different options. Ensure your accountant (if you have one) is comfortable with your choice . Many software providers offer free use for the remainder of 2025/26 to help you practise .
3 Set Up Digital Records Now
Start recording income and expenses digitally from today. Even if you’re not yet mandated, this builds the habit. Use receipt-scanning apps to photograph every fuel receipt immediately .
4 Link Your Bank Account
Set up a dedicated business bank account if you haven’t already. Connect it to your MTD software for automatic transaction feeds . This prevents the blurring of personal and business spending – a common HMRC audit trigger .
5 Consider Joining the HMRC Pilot
You can join HMRC’s MTD pilot programme now to get familiar with the system before it becomes compulsory. This gives you access to dedicated HMRC support .
6 Talk to Your Accountant
If you use an accountant, ensure they have the right authorisations and are comfortable with your chosen software. They can provide multi-user access and monitor your records throughout the year .
Common Mistakes to Avoid
- Assuming MTD only affects VAT-registered drivers – It applies to all self-employed drivers above the income thresholds
- Treating quarterly updates as optional – They’re mandatory, even in quiet periods
- Relying on incomplete cash logs – Every fare, including cash, must be recorded
- Failing to separate personal and business vehicle use – This distorts your figures and invites HMRC queries
- Ignoring app commissions and platform fees – These are legitimate expenses but must be tracked
- Entering data haphazardly – Consistency is key to accurate reporting
- Leaving everything until January – The whole point of MTD is to spread the workload
Exemptions: Who Doesn’t Need to Comply?
Limited exemptions apply, but only in exceptional circumstances :
- Digital exclusion – if you cannot use digital tools due to disability, age, remoteness, or religious beliefs
- Insolvency – while proceedings are active
Exemptions must be applied for directly through HMRC – they are not automatic .
The Benefits: Why MTD Helps Your Business
While compliance is mandatory, MTD brings real advantages for taxi drivers:
- No more January stress – Quarterly updates mean the year-end is just a confirmation
- Real-time profit visibility – See exactly what you’re earning after costs, month by month
- Better cash flow management – Track estimated tax bills and set money aside gradually
- Accurate expense capture – No more lost receipts or missed deductions
- Professional image – Branded invoices for corporate clients, faster payment
- Data-driven decisions – Analyse which shifts, areas, or contracts are most profitable
A driver using MTD software discovers their Saturday night airport runs, after accounting for fuel, commission, and wear and tear, are actually less profitable than weekday corporate work. They adjust their hours and increase net profit by 15% – all because the data was visible in real time .
MTD and VAT-Registered Drivers
If you’re already VAT-registered (turnover over £90,000 or voluntarily registered), you should already be using MTD for VAT. The new Income Tax requirements will integrate with your existing digital records – your software should handle both .
What HMRC and Officials Say
James Murray MP, Exchequer Secretary to the Treasury:
“MTD for Income Tax is an essential part of our plan to transform the UK’s tax system into one that supports economic growth. By modernising how people manage their tax, we’re helping businesses work more efficiently and productively while ensuring everyone pays their fair share.”
Craig Ogilvie, HMRC’s Director of Making Tax Digital:
“MTD for Income Tax is the most significant change to the Self Assessment regime since its introduction in 1997. It will make it easier for self-employed people and landlords to stay on top of their tax affairs.”
Conclusion: Your Roadmap to 2026
Making Tax Digital represents a fundamental shift for taxi drivers, but it doesn’t have to be difficult. With accurate digital records, the right software, and timely submissions, you can stay compliant while gaining valuable insight into your business finances .
The key is to start now. Check your income figures, research software options, and begin building digital habits before the April 2026 deadline. The soft-landing period gives you some breathing room, but the drivers who prepare early will find the transition smoothest .
Need Help Getting MTD-Ready?
Our specialist team understands the unique challenges taxi drivers face with MTD compliance. We can help you choose the right software, set up your digital records, and manage quarterly submissions so you can focus on the road ahead.
Book Your MTD Consultation Today
