I’ve updated this guide on 6 November 2020
In this tax guide for self-employed Uber Drivers, I’ll share some of my knowledge not just about HMRC registration but also VAT, tax deductions and returns, as well as where you can find additional information to read to help build your knowledge.
How to Register as a Self-Employed Uber Driver
The quickest and easiest way to register to work for yourself with HMRC is to apply to be self-employed. You’ll need to do this once your income (not profit) goes over £1,000 during a tax year (6th April to 5th April). You’ll need to make sure you’ve registered by the 5th October following the end of the tax year you went over the £1,000 threshold.
Even if you are currently not making much money from Uber, but have crossed the £1,000 income threshold you must still register with HMRC and complete a tax return. Although this may feel onerous, completing a tax return means you can record all your expenses to create a tax loss. This can then be used against any money you make in the future and save you tax at this point.
There are other business structures out there including:
- Limited Company
These may offer you better tax-savings depending on your earnings and protection from creditors, but they often carry more reporting responsibilities meaning you need to engage an accountant.
How to Calculate Your Tax
The amount of tax and national insurance you’ll pay will depend on how much money is left over after deducting your Uber expenses, tax allowances and reliefs.
Income tax starts at 20% on all your income (not just from Uber) over £12,500 and 40% over £50,000. Class 2 national insurance is paid as a set weekly amount when your earnings go over £6,475 and Class 4 is worked out as 9% on your earnings over £9,501.
When you fill in your tax return online, HMRC will automatically calculate how much tax you owe for you based on the information you enter.
Tax Deductions for Uber Drivers
Claiming for allowable business expenses is the easiest way to reduce your uber taxes when you’re self-employed. Typically most of the things that you pay for as a driver will be tax-deductible, for example:
- Car purchase (see below)
- Car lease (see below)
- Uber fees and deductions
- Any costs incurred as part of the Uber application process
- Tolls and Parking charges
- Mobile phone & data
- Car cleaning and valeting
- Vehicle and public liability insurance
- Tolls and parking charges (but not fines)
- Water & treats you provide to your riders
- Accountants fees
- Bank charges for a business bank account
There may some expenses you pay for that you use personally and for work, like your mobile phone. In these cases, you can only claim a portion as a business expense. So say you use your mobile phone for 60% work and 40% personal, then can claim 60% of the total bills to put against your taxes.
Whilst most things you pay for as part of being an Uber driver are tax write-offs, there are some things you may pay for that you cannot deduct against your taxes. This includes things like:
- Fines and penalties eg: parking fines
- HMRC interest and penalties
- Training and courses for new skills
- Food, except in certain circumstances
- Personal expenses
Claiming for Your Car Against Your Uber Taxes
Claim a Mileage Allowance for using Your Personal Car
If you are using your own car for Uber then you can choose to claim an amount for the number of miles you drive your passengers. You’ll need to record the number of miles you do, keeping a detailed log of where you have travelled and then claim the set amount by HMRC, currently 45p for the first 10,000 miles of driving and 25p thereafter. If you choose to use this method then you cannot claim for the cost of your car, servicing and insurance.
The Quickbooks Self-Employed is useful because the app records your mileage, tracking you as you drive around simplifying claiming your mileage and your taxes.
Buy a Car
If you choose to buy a vehicle for work, then you are entitled to claim for the business portion of the cost against your taxes. Under HMRC rules you cannot claim for the full amount of the car in one tax year. Instead, you’ll need to claim for a portion of the car cost, depending on its emissions using capital allowances at set percentages. For 2020/2021 these capital allowance percentages are:
|Description of car||Capital Allowances Claim||% Claim|
|Second hand, CO2 emissions of 110g/km or less or electric||Main rate||18% writing down allowance
|New and unused, CO2 emissions of 50g/km or less or electric||First year allowance||100% first year allowance|
|New and unused, CO2 emissions between 50g/km and 110g/km||Main rate||18% writing down allowance|
|New or second hand, CO2 emissions above 110g/km||Special rate||8% writing down allowance|
If you opt to use this method for your car, then you also are entitled to claim for fuel, servicing, insurance and repairs on your vehicle as tax deductible expenses.
Lease a Car
When you lease a vehicle you are allowed to claim the monthly cost of the lease against your taxes as well as fuel, servicing, insurance and repairs. Again, you can only claim the business portion of the car lease and expenses.
Tax Returns for Uber Drivers
You’ll need to declare your Uber income under the rules of HMRC self-assessment. You’ll need to submit a tax return online declaring your income and expenses once a year by 31 January, as well as paying tax twice a year by 31 January and 31 July.
Keeping Tax Records
When you’re self-employed you’re legally required to keep records and paperwork that support all your income and expenses and hold onto them for 6 years. That way if HMRC ever asks how you arrived at the figures on your tax return, you’ll be able to show them evidence.
Your records include things like receipts, cash you get paid as well as receipts for any expenses you may wish to claim, along with bank statements.
The simplest ways to keep your records in order and speed up filling in your tax return is to:
- Open a separate bank account so all your payments are in one place and help you budget for your tax bill (take a look at Starling);
- Store your records and paperwork using a secure cloud-based storage system like google drive or Dropbox;
- Set aside time on a regular basis to check all your finances are in order and do your bookkeeping.
Value Added Tax (known as ‘VAT’) is a tax added to the price most goods and services consumers buy. Only businesses with a turnover of £85,000 or more are required to register for VAT. Once VAT registered, a business must charge VAT to its customers and pay this over to HMRC after deducting any VAT they have paid to their suppliers as well as submitting VAT returns, usually quarterly.