Making Tax Digital for Taxi Drivers — What You Need to Know

If you drive a taxi or work as a private hire driver and you're self-employed, Making Tax Digital for Income Tax is going to affect you. From April 2026, sole traders earning over £50,000 must keep digital records and submit quarterly updates to HMRC. The threshold drops to £30,000 in 2027 and £20,000 in 2028.

Here's what it means in practice and how to handle it without spending money on software you don't need.

Does MTD apply to me?

If you're self-employed (not employed by a taxi company) and your gross income is over £50,000, yes — from April 2026. If you earn between £30,000 and £50,000, you'll be brought in from April 2027. Between £20,000 and £50,000, from April 2028.

An important detail: HMRC uses your total turnover, not your profit. If you take £55,000 in fares but spend £20,000 on fuel, insurance, and vehicle costs, your profit is £35,000 — but your gross income is £55,000, so you're in scope from April 2026.

If you're an employee of a taxi firm and they handle your tax, MTD doesn't apply to you directly. It's for self-employed sole traders only.

Already VAT registered? If you're registered for VAT, you're likely already using MTD-compatible software for your VAT returns. That software may also handle MTD for Income Tax — check with your provider. Flonancial is bridging software designed for sole traders who aren't already using accounting software, so if you're already set up for MTD for VAT, you may not need it.

What changes?

Instead of doing everything in one go at the end of the tax year, you'll need to send summary figures to HMRC four times a year. Each quarterly update includes three numbers: your total income, your total expenses, and any other business income.

This does not mean you pay tax quarterly. You still pay your tax bill annually through Self Assessment. The quarterly updates are a reporting requirement — you're telling HMRC how the year is going, not settling up.

What records do I need to keep?

You need to keep digital records of every transaction — the date, the amount, and what it was for. If you already track your fares, fuel, insurance, vehicle costs, and other expenses in a spreadsheet, that counts as a digital record. A notebook on its own doesn't.

The practical challenge for taxi drivers is that income comes from multiple sources — street hails, app bookings (Uber, Bolt, Free Now), radio circuit work, and private bookings. All of these combine into your total income and all need recording.

A good habit is to record your fares at the end of each shift or day, rather than trying to reconstruct a week or month from memory. Even a simple spreadsheet with the date, total fares, and how they were paid is enough.

Common expenses for taxi drivers

• Fuel or electric charging
• Vehicle insurance (business use portion)
• Vehicle maintenance, servicing, repairs, and MOT
• Road tax
• Licence and badge renewal fees
• Vehicle lease or hire payments
• Phone and data costs (business use portion)
• Platform or booking app fees
• Card reader fees
• Car wash and valeting
• AA/RAC or breakdown cover
• Sat-nav or dashcam equipment
• Capital allowances on your vehicle (up to 100% first-year allowance for new vehicles, typically 18% annually otherwise)
• Parking fees (not fines)

If you use your vehicle for both personal and business driving, you can either claim actual costs split by business mileage percentage, or use HMRC's simplified expenses: 45p per mile for the first 10,000 business miles, then 25p per mile after that.

What about cash fares?

All income needs to be recorded, regardless of how you're paid. Card payments, app payments, and cash fares all count toward your total income. The important thing is that your spreadsheet includes everything so the figures you submit to HMRC are accurate.

A practical tip: deposit cash fares into your business bank account regularly. This creates a paper trail and makes it much easier to reconcile your records at the end of each quarter.

Do I need accounting software?

No. HMRC requires compatible software to submit your quarterly updates, but that doesn't mean you need a full accounting package costing £15–£35 a month. If you keep your records in a spreadsheet, all you need is bridging software to send your totals to HMRC. Bridging software is a legitimate, HMRC-recognised category — it's not a workaround or a shortcut. It's listed on HMRC's own Software Choices page as a valid option.

Flonancial is free bridging software that does exactly this. Upload your spreadsheet, pick the cells with your income and expense totals, and submit. No monthly fees, no learning a new system.

Tips for keeping on top of it

• Record daily, not weekly — after a 12-hour shift the last thing you want to do is admin, but logging your fares takes two minutes. Leaving it a week makes it ten times harder.
• Keep fuel receipts — thermal paper receipts fade over time. Take a photo or log the amount in your spreadsheet on the same day.
• Separate business and personal — a dedicated business bank account isn't legally required, but it makes life dramatically easier when it comes to totalling up each quarter.
• Don't panic about mistakes — if you submit a quarterly update and realise the figures were wrong, you can correct them. Your next submission automatically reflects the updated cumulative figures.

When are the deadlines?

For the 2026/27 tax year, the quarterly update deadlines are:

• Quarter 1 (6 April – 5 July) — due 7 August 2026
• Quarter 2 (6 July – 5 October) — due 7 November 2026
• Quarter 3 (6 October – 5 January) — due 7 February 2027
• Quarter 4 (6 January – 5 April) — due 7 May 2027

HMRC has confirmed a soft landing for the first year — no penalties for late quarterly updates in 2026/27. After that, four late submissions within 24 months triggers a £200 fine, with £200 for each additional late one. So the first year is your chance to get the habit established without pressure.

Getting started

If you already keep a spreadsheet of your fares and expenses, you're most of the way there. If you don't, download the free Flonancial spreadsheet template — it's ready to go with income and expense columns and a Flo tab that auto-calculates your totals. Create a free Flonancial account, connect to HMRC once, and you can submit your quarterly updates in minutes.