In a major shift in UK tax administration, Making Tax Digital (MTD) is now on the doorstep for many self-employed taxpayers, including private hire drivers and eventually operators. This reform represents one of the biggest changes to the way income tax is reported in decades — replacing the annual Self-Assessment return with more frequent digital reporting and obligatory use of digital software.

Being aware of when MTD takes effect, how it will impact your businesses, and what steps you need to take now, will be vital for a smooth transition and to avoid fines.

What Is Making Tax Digital?

Making Tax Digital (MTD) is a government initiative designed to modernise our tax system.

It intends to make tax reporting more accurate and efficient. (basically, so they know where you are and what you are doing!)

It replaces much of the old paper-based or one-off annual tax return with a system where digital records are kept throughout the year, and information is submitted to HMRC quarterly via software.

MTD already applies to VAT-registered businesses, where digital submissions have been compulsory since April 2019.

The next major phase extends these digital requirements to tax returns under £50k affecting many self-employed individuals for the first time.

When Is MTD for Income Tax Being Introduced?

The phased rollout for MTD for Income Tax Self-Assessment (often called MTD for ITSA) is as follows:

• 6 April 2026 – Mandatory for self-employed individuals and landlords with total income (from self-employment and property) over £50,000. (GOV.UK)
•  6 April 2027 – Threshold drops to £30,000. (GOV.UK)
• 6 April 2028 – Threshold further drops to £20,000. (GOV.UK)

For private hire drivers — the 2026 date is the first real deadline!

In real terms, this means that from 6 April 2026, affected drivers must start keeping digital records and sending quarterly updates to HMRC using MTD-compatible software.

A final declaration, similar to a Self-Assessment tax return, will then be made at the end of each tax year.

How MTD Will Change Tax Reporting for YOU

Quarterly Reporting, Not Annual Only

Under the old Self-Assessment system, self-employed individuals prepare and submit one annual tax return. But under MTD:

• You or your accountant will send four quarterly updates reporting income and expenses to HMRC.
• After the year ends, we would submit a final declaration that reconciles those quarterly figures with any other income or reliefs.

This means you’ll be reporting more regularly, rather than leaving your record-keeping and tax computations until January each year.

Compulsory Digital Records and Software

The cornerstone of MTD is digital record-keeping. You will no longer be able to manage your tax affairs using pen and paper, or spreadsheets, the old driver sheet is OUT.

Instead, you must:

Use HMRC-approved MTD software or tools that can connect to HMRC’s digital systems.
Create and maintain digital records of all income and allowable expenses.
Submit those records regularly throughout the year.

This change has major implications for private hire drivers who might currently manage your books by hand. Bank statements and receipts can no longer just be saved in boxes or spreadsheets. Making the switch to digital will require planning but also brings you benefits of clear working and good sight of your own finances.

What It Means for Private Hire Operators and Drivers

1. More Frequent Compliance

The move from annual to quarterly reporting means that tax compliance becomes a regular discipline rather than a year-end task.

This will involve:

• Updating records soon after transactions occur.
• Reconciling income from different platforms and account customers (e.g., Uber, Bolt, Free Now, Lyft, Blacklane etc.
• Getting your bookkeeper or accountant to organise your expenses in a digital format.

JUST REMEMBER   Quarterly reporting makes budgeting for tax bills easier because the software gives earlier insight into your expected tax bill.

2. Improved Record-Keeping

Keeping digital records daily or weekly rather than annually reduces mistakes and helps you keep on top of:

• Fuel costs
• Vehicle maintenance
• Insurance and licensing fees
• Toll and congestion charges
• Other allowable business costs

Better records can also make your tax position more efficient and defendable in case of HMRC queries.

3. Potential Costs

There may be software costs and potentially some extra accountant fees to help with the transition and ongoing submissions. This is an investment in your tax compliance — but if managed properly, the benefits in accuracy and planning often outweigh the cost.

How to Prepare: A Practical Checklist

Here’s a practical preparation plan for private hire drivers and operators:

Get Clear on Thresholds

Work out whether your combined income from self-employment and (if relevant) property income will place you above the threshold for 2026. If your income is close to the £50,000 mark, prepare now.

Choose Digital Accounting Software

Select MTD-compatible software that fits your business needs — ideally one that connects to your bank account and pre-sorts your transactions. Such as …

• Xero
• QuickBooks
• FreeAgent
• Other certified MTD tools

If you’re unsure which is right for you, your accountant should help you choose and set it up.

Get it Done..

Even if it’s not yet compulsory for you, start entering your income and expenses digitally. Early adoption gives you time to learn the system before deadlines bite.

Set a Regular Review Schedule

Rather than making updates once a quarter when due, consider daily, weekly or fortnightly entry of receipts and invoices. This spreads the workload and reduces mistakes.

 Understand What Expenses You Can Claim

Talk to your accountant. Make sure you know which business expenses are allowable and how to record them within your software. Vehicle expenses are often a key part of private hire tax relief, so recording them properly throughout the year is essential.

 Work With your Accountant

Accountants provide value far beyond filing tax returns — especially with MTD. Many practices are already helping clients prepare and maintain digital records and will ensure your quarterly submissions are accurate and timely.

Final Thoughts

Making Tax Digital for Income Tax represents a significant transformation in how the tax system works for self-employed individuals, including private hire drivers and operators. While the move to quarterly digital reporting and mandatory software might seem daunting, it’s also an opportunity.

By modernising your record-keeping and engaging with your tax affairs throughout the year, you gain stronger financial insight, reduce year-end stress, and stay compliant with HMRC’s evolving requirements.

If you’re unsure where to begin, the safest first step is to speak with an accountant who understands MTD and can help tailor a plan that fits your business.

This change isn’t just about compliance — it’s about taking control of your business.