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MAKING TAX DIGITAL: WHAT PRIVATE HIRE OPERATORS AND DRIVERS NEED TO KNOW
Article by Gary Jacobs CEO Eazitax 020 8529 2600
www.eazitax.co.uk
Making Tax Digital (MTD) is now on the doorstep for many self-employed taxpayers, including PH drivers and eventually operators. This reform is one of the biggest changes to income tax reporting 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?
MTD intends to make tax reporting more accurate and efficient (basically, so they know where you are and what you are doing!) It replaces 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 £50,000 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- assess- ment (often called MTD for ITSA) is as follows:
l 6 April 2026 – mandatory for self-employed and landlords with total income (from self-employment and property) over £50k
l 6 April 2027 – threshold drops to £30k l 6 April 2028 – threshold further drops to £20k For PH 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.
26 How MTD will change tax reporting for YOU
Quarterly reporting, not annual only Under the old self-assessment system, self-employed prepare and submit one annual tax return. Under MTD: l You or your accountant will send four quarterly updates reporting income and expenses to HMRC
l After the year ends, a final declaration is submitted that reconciles those quarterly figures with any other income or reliefs
Compulsory digital records and software
The cornerstone of MTD is digital record-keeping not pen/paper, or spreadsheets, the old driver sheet is OUT. Instead, you must:
l Use HMRC-approved MTD software or tools that connect to HMRC’s digital systems
l Create and maintain digital records of all income and allowable expenses
l Submit those records regularly throughout the year.
This change has major implications for PH drivers who might currently manage their 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 PH operators and drivers
1. More frequent compliance Quarterly reporting means tax compliance becomes a regular discipline rather than a year-end task involving: l Updating records soon after transactions occur l Reconciling income from different platforms and account customers e.g. Uber, Bolt, Free Now, etc.
l Getting your bookkeeper or accountant to organise your expenses in a digital format
REMEMBER: Quarterly reporting enables the software to give an earlier insight into your expected tax bill.
2. Improved record-keeping
Keeping digital records daily/weekly rather than annually reduces mistakes and keeps you on top of: l Fuel costs
l Insurance & licensing fees
l Vehicle maintenance l Toll & congestion charges l Other allowable business costs Better records can also help in case of HMRC queries.
FEBRUARY 2026 PHTM
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