Making Tax Digital: what it means for taxi drivers, and when it applies to you

Making Tax Digital for Income Tax - MTD IT for short - is one of the biggest changes to Self Assessment in years, and it’s arriving in stages rather than all at once. Here’s who it affects, and when it’ll be your turn.

Who’s affected, and when

Whether MTD IT applies to you depends on your qualifying income - broadly, your gross turnover from self-employment and property, before expenses - as declared on an earlier tax return. HMRC has confirmed a phased rollout:

• £50,000 or more (based on your 2024/25 return) - mandated from 6 April 2026
• £30,000 or more (based on your 2025/26 return) - mandated from 6 April 2027
• £20,000 or more (based on your 2026/27 return) - mandated from 6 April 2028

That’s turnover, not profit - so it catches more drivers than you might first assume. A driver bringing in £50,000 a year in fares, even after a full year of fuel, repairs, and licence costs, is still over the first threshold on turnover alone.

What actually changes

Instead of one Self Assessment return a year, you’ll need to:

• Keep your business records digitally, in MTD-compatible software
• Send quarterly updates to HMRC - cumulative income and expense summaries, not individual receipts - due on 7 August, 7 November, 7 February, and 7 May, even if a quarter was quiet
• Submit a final declaration at year end, confirming your figures and your tax calculation, still due by the familiar 31 January

The old idea of a separate “End of Period Statement” has been dropped from current HMRC guidance - the final declaration now covers that step. If it’s your first year being brought into MTD IT, you’ll still need to file one ordinary Self Assessment return for the year just before you join.

The penalties work differently too

MTD IT comes with a new points-based penalty system, replacing the old flat fines for anyone mandated into it. Miss a quarterly update, and you pick up a point; hit 4 points (or 2, if you file annually rather than quarterly) and a £200 fine kicks in, with another £200 for each further miss after that. Late payment penalties are tiered by how many days late you are, plus interest throughout. HMRC has also confirmed a “soft landing” for the first year: no penalty at all for missing a quarterly update specifically during the 2026/27 tax year, while everyone adjusts to the new routine.

One thing we’re not taking a guess on

Whether income already covered by the £1,000 trading allowance counts towards your qualifying income threshold isn’t something HMRC has published a clear, direct answer to yet. Rather than print a guess, we check this properly, case by case, for every client it could affect.

If digital record-keeping isn’t your thing

The good news is this is exactly the sort of change that’s far less stressful with someone doing it for you. Making Tax Digital tax returns are included in our Silver and Gold plans, so if you’re approaching £50,000 in turnover, it’s worth finding out now - not in March 2026 - whether this applies to you and what your software options look like. Ring Michael on 07799 414972 for a free chat about where you stand.