MAKING TAX DIGITAL: How prepared are taxi drivers for digital and quarterly tax returns?
Taxi drivers and other self-employed individuals will have more time to prepare for Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA), following a government announcement delivered just before Christmas.
Understanding that self-employed individuals are currently facing a challenging economic environment, and the transition to MTD for ITSA represents a significant change to taxpayers and HMRC for how self- employment income is reported, the Government is giving a longer period to prepare for MTD. The mandatory use of software is therefore being phased in from April 2026, rather than April 2024.
From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software. Those with an income of between £30,000 and £50,000 will need to do this from April 2027. Most customers will be able to join voluntarily beforehand meaning they can eliminate common errors and save time managing their tax affairs.
The Government has also announced a review into the needs of smaller businesses, and particularly those under the £30,000 income threshold. The review will consider how MTD for ITSA can be shaped to meet the needs of these smaller businesses and the best way for them to fulfil their Income Tax obligations. It will also inform the approach for any further roll out of MTD for ITSA after April 2027.
Eazitax’s Gary Jacobs spoke to TaxiPoint last year to explain the impact MTD will have on the taxi industry. Jacobs said: “We will inevitably have to accept Digital Record Keeping. However, the big hill to climb will be that there will have to be quarterly digital returns to HMRC. The scary bit in that is the word ‘quarterly’.
“That’s right we won’t be panicking about your tax returns and accounts once a year, but every three months!
“This means that we must find a way for you to get your stuff to us every three months and either you must produce it from software, or we must digitise it for you!
“How does this affect the taxi trade? Well, no more than any other business. EXCEPT no more driver sheets or weekly books by hand. Remember your accountant must be able to produce a tax return every three months so dropping off a shoebox of receipts and printing out your bank statements will be a very expensive way of dealing with that. Your accountants’ fees could double or worse.”
How prepared are taxi drivers?
Honestly... not very! Historically taxi drivers have shown they can adapt to technology and regulatory changes quickly, but very few have gone down the road of recording their tax digitally on a regular basis so far.
The latest delay gives even more opportunity for accountants and HMRC to get across the severity of changes that are forthcoming.
Quarterly accounts require drivers to be a little more organised and up to date with their accounts. There will be a lot of scratching of heads come April 2026, so best to get ahead of the game now.
