Tax Advice for Self Employed Deliveroo Riders

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Tax Advice for Deliveroo Riders

Deliveroo requires all their riders to be self employed, despite recent controversy.  If self employment is new to you, it may be difficult to know where to start and what it all means.

Here I show you how to get started as self employed and unravel some of the confusion around taxes and get you prepped for doing your first tax return.

tax advice for self employed deliveroo riders

What is Self Employment

Self employment means that you work for yourself rather than for someone else. This means you:

  • Are responsible for finding your own work, Deliveroo are not obligated to guarantee you with work;
  • Decide when you want to accept or decline a job;
  • Need to have your own method of transport, mobile phone and kit to make deliveries;
  • Will not receive sick pay or holiday pay, so you will go without earnings during these times;
  • Need to register as self employed, work out your own taxes and send a tax return to HMRC.

Being self employed doesn’t restrict you to just working for Deliveroo.  It means you can take on work elsewhere or even hold down a full time job while working for Deliveroo on the side.

Useful Reading:Being Employed and Self Employed, Types of Business Insurance and How to Get Online Quotes


What Taxes Do You Pay

You will need to pay Income Tax and 2 types of National Insurance (Class 2 and Class 4) on Deliveroo Earnings.

Earnings means your Deliveroo Income less expenses and other allowances you are entitled to.

There is often a misunderstanding amongst self employed Deliveroo Riders that their earnings are tax free so they can work without any tax obligations.  

This is not true.

Deliveroo Riders must register with HMRC and declare their earnings.  Earnings may be tax free because you earn below the personal allowance, however you still need to declare everything to HMRC using a self assessment tax return.

There is one exception however.  

You only need to register and pay tax on your Deliveroo income if you earn more than £1,000 in a tax year (6 April to 5 April).  If you make less than £1,000 from Deliveroo then it’s tax free. Useful if you wanted to just test out Deliveroo or just earn a small amount on the side.  This is called the HMRC Trading Allowance.

Useful Reading: What is a Personal Allowance, Tax and National Insurance When You’re Self Employed


How to Register as Self Employed

If you make more than £1,000 from Deliveroo or you intend to build up a steady self employment income,  with Deliveroo a regular part of that then you should register with HMRC.

Remember a tax year runs from 6 April to 5 April.  And when it comes to taxes get used to thinking of everything in this way.  It is on this you need to work out your earnings and taxes for HMRC.

When to Register

Officially you should register by 5th October in the second tax year of being a Deliveroo Rider.

So if you became a Deliveroo Rider on 1 April 2018 then you would need to register as self employed by 5th October 2018.

How to Register

You can register as Self Employed online.  It’s fairly easy to do yourself and I’ve put together a video guide here.

Useful Reading: How to Register as Self Employed Video Tutorial


What Are Expenses

One of the perks of being self employed is that you get to set off costs against your income.  This reduces the amount of tax you have to pay.

There are rules set out by HMRC which expenses you can claim for (allowable expenses) and those you can’t (disallowable expenses).

Allowable Expenses

In the main anything you need to pay for in relation to working as a Deliveroo Rider will be allowable or “tax deductible”.  

Here are some common examples of allowable expenses for self employed Deliveroo Riders:

  • Deliveroo commissions and service charges;
  • Parking charges (fines are not allowed);
  • Bike maintenance such as brake pads, tyre replacement;
  • Kit, thermal bags;
  • Mobile phone, phone holder & data allowance;
  • Insurance;
  • Accountants fees;
  • Bank charges for a business bank account.

There may be expenses you pay for that you use personally, like your mobile phone.  In these cases you can only claim a portion as an allowable expense.

So if you use your mobile phone for 60% work and 40% personal, then you take 60% of the total costs to put against your taxes.

Disallowable Expenses

After years of people pushing the boundaries and claiming for some questionable expenses, HMRC have a growing list of expenses that are disallowable.

Here are some common examples of disallowable expenses for Self Employed Deliveroo Riders:

  • Parking fines and penalties;
  • Lunch, unless in special circumstances;

Useful Reading: Allowable Expenses, Disallowable Expenses, Claiming Business Travel


What Records Should You Keep

Everything!

Once you are self employed you need receipts to support all the expenses you want to claim You’ll also need to keep reports to document any income you receive from your customers however they pay you – cash, card or bank transfer for example.

While Bookkeeping is an unavoidable part of being self employed.  You can take away some of the pain of doing it by:

  1. Open up a separate bank account for yourself and set this to send/receive all your business payments. 
  2. Set up a cloud accounting software which is the quickest way to manage your bookkeeping, store your receipts and file your tax return.

I use Freeagent which is a great little cloud accounting software and app that let’s me:

  • Link my business bank account so I don’t have manually enter payments;
  • Store copies of invoices (you’re legally required to store your receipts for 6 years by HMRC);
  • Photograph receipts and make expense claims;
  • Raise and track my invoices automatically;
  • See how much tax I owe in real time;
  • File my tax return directly to HMRC;

If you do not plan to hire an accountant then Freeagent will make managing your taxes much easier.

Read my in depth review of Freeagent HERE and how I use it to manage my business finances. 

You’ll also get a free 30 day trial – no credit card required so you can walk away if you don’t like it.  But I think you’ll love it as much as I do!

Useful Reading: Bookkeeping When You’re Self Employed, How to Organise Business Receipts


What is a Self Assessment Tax Return Form

A Tax Return is a form you need to complete online once a year by 31 January each year. The penalties for missing this deadline start at £100.

A tax return contains:

  • Your personal details;
  • A summary of all your income not just Deliveroo (like bank interest, employment income and rental income);
  • Details of allowable expenses you wish to claim against your taxes;
  • A tax calculation;
  • How much tax you need to pay.

One tax return form covers a tax year.  A tax year runs from 6 April to 5 April.  So a tax return for 2017/2018 covers earnings during 6 April 2017 to 5 April 2018 and needs to be filed by 31 January 2019.

You’ll need to pay tax due by this date too, as well making a contribution of 50% towards your next years tax bill.  This is called a Payment on Account.

You’ll need to make a payment on account if:

  • Your tax bill is over £1,000
  • You pay less than 80% of the tax they owe through the payroll system

There are proposed changes to the reporting system called Making Tax Digital.  This will abolish the current system of reporting once a year and replace it with quarterly reporting and tax payments.  This change currently on hold but will be enforced at some point.

Useful Reading: Self Assessment Tax Return Form, Making Tax Digital, Payments on Account.


How to Fill Out Your Tax Return

To get started with filling your tax return you will need any paperwork which reflects your earnings including:

  • Personal Information
    • Your Government Gateway Login and Password
    • National Insurance Number
    • Partners Information if you want to claim Marriage Allowance
  • Income
    • P45 or P60 issued covering employment income and tax deducted
    • P11d Benefit in Kind Forms
    • Dividend, savings and interest certificates
    • Pensions
    • Rental income and expenses
    • Self employment income and expenses

How To Submit Your Self Assessment Tax Return

You need to submit your self assessment tax returns online, except for in really exceptional circumstances.  

The form can be found by logging into your Government Gateway Account to complete your self assessment tax return online. You set this up when you registered for self employment.  Once logged in you can choose the option to “Complete Your Self Assessment Return”.

Complete the Right Sections

You need to complete the first part of the tax return form with your personal details.  This includes a series of questions which help ‘Tailor Your Return’. By doing this the right sections will be provided for you to fill in.  For Self Employed Deliveroo Riders you’ll need to make sure you fill out the Self Employment section to declare your business income.

If you have a full time job you’ll need to enter your earnings and any tax deducted by your employer in the “Employment Section”.

Useful Reading: How to Prepare to File Your Own Tax Return


Your Key Actions to Become a Self Employed Deliveroo Rider:

  1. Register as Self Employed
  2. Open a business bank account
  3. Set up a cloud accounting software like Freeagent
  4. Set aside money for taxes each month at your highest tax rate.

Head over to the Business Hub for more advice. It’s full of templates and guides to help you manage your finances when you’re self employed. And don’t forget to find me on Facebook.

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Anita
I'm a Chartered Accountant turned Blogger and I built this site to help self employed business owners grow profitable businesses by making the intimidating aspects of business and tax easy to understand with ‘How to’ Articles, Guides and Courses. Take a look around and you'll find all essential information you need to know to go self employed, launch a new venture and run a profitable business.