There are more than 360,000 taxi, private hire and Uber drivers in the UK alone and, for tax purposes, the majority of these are considered self-employed. That means they need to keep records and produce accounts and register with HMRC for self-assessment.
Here we offer a quick guide to accounting and bookkeeping for taxi and Uber drivers, what you can claim for in the way of deductions and how to file your taxes on time.
What expenses can a taxi driver claim?
There are several expenses that a taxi driver can claim for. As these affect overall profits, deducting these from your final tax submission is essential if you don’t want to pay too much to HMRC.
If your car is also used for personal use, for example as a family car, you need to take this into account when you are making claims for expenses. You cannot, for example, claim mileage or fuel costs if you are taking the family on an outing or using your car for any personal purpose.
As a self-employed taxi driver, it’s important to monitor your expenses carefully and keep receipts for your business. Expenses can include:
- Fuel costs, whether for petrol, diesel or an electric vehicle.
- Maintenance, servicing, MOT and repairs to your vehicle.
- Cost for road tax.
- Washing or cleaning your taxi.
- Licence and registration or membership fees relating to your business.
- Vehicle insurance and AA or other breakdown membership.
- Fees for radio or smartphone used in the business.
- Interest on any loan for your vehicle.
- The cost of running a home office, if applicable.
- Parking and other road fees such as tolls.
- Advertising your business.
- Vehicle insurance
Anything that is used in the operation of your business that you pay for can be written off as an expense, including, for example, a first aid kit or modifications made to your taxi in any way.
How do taxi drivers file taxes?
Taxi and Uber drivers need to register as self-employed through HMRC. This is relatively easy to do and can be completed online through the government portal. You’ll need some straightforward information such as your name and address, date of birth, National Insurance Number and a few details about your self-employment.
The process takes about ten to fifteen minutes to complete online. Once this is done, HMRC will process your registration and then send you a unique taxpayer reference or UTR which you will need to keep safe along with your log-in details.
Each tax year starts on the 6th of April and ends on the following 5th of April. You must submit your tax self-assessment and pay the amount due by 31st January following the end of a tax year. For example, if you have a return from 6th April 2021 to 5th April 2022, you will need to submit your assessment by 31st January 2023.
Keeping accounts for Uber drivers and other taxi drivers is important as it ensures that, when you come to fill in your tax returns you have all the information available. Working with an experienced accountant, like the team at VW Taxation, ensures that your self-assessment is always carried out on time and you don’t end up paying more tax than you should.
Are taxi drivers considered independent contractors?
Someone can only be considered an independent contractor if they have full control over how they work and the way they operate. The rules on contractors have been tightened up recently and generally apply to individuals or businesses who provide their services for a specified amount of time and to different customers.
Taxi drivers, like Uber drivers, are generally classified as workers, employees or self-employed depending on who they operate with. A taxi driver, for example, may work exclusively for a particular cab company which puts them at odds with the rules of identifying as an independent contractor.
Can taxi drivers claim capital allowance?
You can claim a capital allowance which you can offset against your tax return if you buy assets for your business. Cars do not qualify for Annual Investment Allowance (AIA) which allow you to deduct the full amount in the same tax year.
Instead, you can use the Writing Down Allowance which lets you deduct a percentage of your purchase price each year. In the case of a taxi cab, this would be 18%. Traditional hackney carriages such as London black cabs, however, are eligible for the full AIA.
Can taxi drivers claim mileage UK?
Taxi drivers and Uber drivers can claim mileage expenses in two different ways. The first is the simplified version and means you get a set amount for each mile that you travel. In reality, this means that you can claim 45 pence per mile for the first 10,000 per mile travelled and 25 pence per mile after that. The downside is that you can’t claim capital allowance and once you’ve decided on this approach you can’t then change. The upside is that it is relatively easy to do and doesn’t take much time.
The other, more complicated approach, is to list all your expenses individually. Accounting software has made this much easier in recent times and it can often mean you can claim more in the way of expenses. The downside is the time and effort that this involves in keeping a wide range of records and then transferring these for your tax return.
Accounts for Uber drivers
A recent decision in the Supreme Court said that Uber drivers were not, in fact, self-employed but should be considered workers who are entitled to things like holiday pay and the minimum wage from the company. This has caused a little confusion concerning keeping accounts for Uber drivers.
In truth, the ruling was on employment status and the term ‘worker’ is a halfway house between being traditional employed and self-employed. The tax status of Uber drivers remains the same – they are classed as self-employed like many taxi drivers and therefore need to complete a self-assessment and submit it to HMRC each year.
Why choose VW Taxation?
Accounting and bookkeeping for taxi drivers can be very time-consuming and getting that all-important tax return right and in on time so that you only pay what is due or don’t incur a fine is important. Working with a qualified accountant can deliver a lot of benefits and is now more affordable for small businesses and sole traders than ever before including taxi drivers.
If you are a taxi or Uber driver and need help with your accounts, contact the team at VW Taxation today.