Making Tax Digital and Self Assessment for private hire drivers

Most London private hire drivers are self-employed, so they already file a Self Assessment tax return. Making Tax Digital for Income Tax, often shortened to MTD, changes how that return is prepared and when information goes to HMRC. This guide explains in plain English who it affects, what you will have to do, and which driving costs HMRC lets you claim. It is general information from official sources, not tax advice. For your own situation, talk to an accountant or HMRC.

Who has to use it, and when

GOV.UK says you need to use MTD for Income Tax if you are a sole trader or landlord registered for Self Assessment, you get self-employment or property income, and your qualifying income is above the threshold for that year. The start dates are staged:

Your tax return for	Qualifying income over	You start on
2024 to 2025	50,000 pounds	6 April 2026
2025 to 2026	30,000 pounds	6 April 2027
2026 to 2027	20,000 pounds	6 April 2028

Qualifying income is the total turnover from self-employment and property before expenses. For a driver, GOV.UK's wording points to what you take in, not what you keep. Wages from a PAYE job, pensions and dividends do not count. We could not find HMRC wording that says how app commission or operator deductions are treated in that turnover figure, so check that with HMRC or an accountant if you are near a threshold.

HMRC says it checks your return each year and writes to you if you must start. It also says that not receiving a letter does not remove your responsibility to check. GOV.UK's step-by-step page says that from September 2026 HMRC will start signing up people its records show were over the 50,000 pound line, if they have not already signed up. HMRC also offers an online tool to check if and when you need to start, and says some people are exempt, for example if they are digitally excluded. Exempt people still file a normal return.

What changes and what stays the same

You still file one tax return a year and pay your bill by 31 January after the tax year ends. What is new is the way you get there:

• Compatible software. HMRC does not provide it. You can use an all-in-one product, or keep your records in a spreadsheet and use bridging software that links to it.
• Digital records. Each record needs the amount, the date and the category, using the same categories as Self Assessment.
• Quarterly updates. Totals of income and expenses sent every three months. They are summaries, not tax returns, and HMRC does not see individual receipts.
• Your return. Submitted through the software at the end, once you have added any other income.

Quarterly updates in practice

If your accounting period matches the tax year (6 April to 5 April), the standard update deadlines are:

Update covers	Send by
6 April to 5 July	7 August
6 April to 5 October	7 November
6 April to 5 January	7 February
6 April to 5 April	7 May

Each update runs from the start of the tax year to the end of that period, so you can correct earlier mistakes in the next one. You must send an update even if you had no income or costs in the period. GOV.UK says HMRC will not apply late-submission penalty points for quarterly updates in the 2026 to 2027 tax year, but you must still send them before you can submit your return, and points still apply to late returns. After that, repeated lateness can lead to a financial penalty. After each update you can see an estimate of your tax bill, which helps if you set money aside with our tax set-aside calculator.

Records to keep

You must still keep the original paperwork behind your figures, such as bank statements and invoices. HMRC says to keep self-employment records for at least five years after the 31 January submission deadline for that tax year. For a driver, useful records include your operator's earnings statements, fuel and charging receipts, insurance, servicing, parking and licence costs, and a mileage log. Our record-keeping guide covers the paperwork that TfL expects you to carry, which is a different list from your tax records. If you use a spreadsheet, GOV.UK says that once a record has been sent in an update you must not move it by copy and paste between software, so use proper digital links.

Mileage or actual costs

You can claim your vehicle costs in one of two ways. Simplified expenses use a flat rate per business mile instead of the real costs of buying and running the car. For the 2026 to 2027 tax year GOV.UK gives 55p a mile for the first 10,000 miles and 25p after that, up from 45p before 6 April 2026. Its example: 11,000 miles is 5,500 pounds plus 250 pounds, or 5,750 pounds. Rules to know:

• You cannot use flat rates for a vehicle you have already claimed capital allowances on, or put through as an expense when working out profit.
• Once you use flat rates for a vehicle you must keep doing so while you use it for your business.
• Parking and other travel costs can be claimed on top.
• GOV.UK excludes vehicles designed for commercial use, such as black cabs. Its page does not mention private hire cars either way, so confirm with HMRC if you are unsure.

The other route is claiming actual costs. Compare both with the tax set-aside calculator, which uses the current rates, and see what your car really costs with the cost per mile tool.

What HMRC allows, and what it does not

GOV.UK's list of car, van and travel expenses you can claim includes vehicle insurance, repairs and servicing, fuel, parking, hire charges, vehicle tax, licence fees and breakdown cover. You can only claim the business share of anything you also use privately. It says you cannot claim:

• Non-business driving or travel costs.
• Fines or penalty charges, which would include a penalty charge notice.
• Travel between home and work.

GOV.UK also says you cannot claim expenses if you use the 1,000 pound trading allowance instead. It does not say how its categories apply to specific private hire items, such as TfL licence fees, the Congestion Charge or the ULEZ charge, so ask HMRC or an accountant before you claim them, and note that the home-to-work rule matters for drivers who start from home.

Dates to remember

The 2025 to 2026 tax return is due online by 31 January 2027, with the bill due the same day. Payments on account fall on 31 January and 31 July. Our calculator shows the current dates with their source. If you think MTD will apply to you from April 2027, use 2026 to 2027 to try software and learn the routine, since HMRC will use your 2025 to 2026 return to decide.

Related guides and tools

Use the tax set-aside calculator to estimate what to put aside each week, the running-cost comparison to compare vehicle types, and the fares and receipts and record-keeping guides. If you are choosing a car, read the vehicle rules guide too. This page is information only and is not tax advice.