Registered as a self-employed uber eats driver? Read this guide to find out how uber taxes work including how your rider earnings are taxed, what expenses you can claim and how tax returns work.
Friendly Disclaimer: Whilst I am an accountant, I’m not your accountant. The information in this article is legally correct but it is for guidance and information purposes only. Everyone’s situation is different and unique so you’ll need to use your own best judgement when applying the advice that I give to your situation. If you are unsure or have a question be sure to contact a qualified professional because mistakes can result in penalties.
Table of contents
- 1. How Taxes Work for Self-Employed Uber Drivers
- 2. What is Self-Assessment?
- 3. What is a Tax Return?
- 4. How Much Tax You Pay On Uber Earnings
- 5. Tax Deductions for Self-Employed Uber Drivers
- 6. How to Register as a Self-Employed Uber Driver
1. How Taxes Work for Self-Employed Uber Drivers
When you choose to sign up for Uber Eats you’re treated as working for yourself rather than being employed by Uber (and getting a payslip). Being self-employed means that you:
- Are responsible for finding your own work, Uber is not obligated to give you work;
- Decide whether you want to accept or decline a job;
- Need to have your own vehicle, mobile phone and equipment;
- Will not receive sick pay or holiday pay;
- Make sure you have the right qualifications to operate;
- Take out your own insurance.
If you have ever received a payslip you’ll notice that deductions for income tax and national insurance are made on your behalf before you get paid.
However, when you’re self-employed you are responsible for working out how much tax and national insurance you owe, paying them over to HMRC in accordance with the rules of self-assessment.
2. What is Self-Assessment?
Self-assessment is the process created by HMRC that allows anyone who receives untaxed income to declare it to the government and pay any tax due.
As a self-employed uber driver, everything you get paid by Uber or anyone else you work for has no tax deducted from it. It’s your responsibility to tell HMRC about it, work out how much tax you owe and pay it over. The way you do this is by registering for self-assessment, get a UTR number and filling in a tax return.
3. What is a Tax Return?
A tax return is a form issued by HMRC (also known as an SA100). It contains lots of different sections and boxes that you need to fill in to declare your uber eats earnings. Once completed, HMRC will then calculate how much tax you owe ready for you to pay them.
You need to fill in your tax return by the 31 January each year summarising all your earnings for the previous tax year. The tax year runs from 6 April to 5 April each year. So a tax return due by 31 January 2023 would contain uber eats earnings between 6 April 2021 to 5 April 2022.
4. How Much Tax You Pay On Uber Earnings
When you’re self-employed you’ll pay income tax, Class 2 and Class 4 national insurance on the profits as a driver. Profit means all your income minus expenses you can claim as a tax deduction.
Income tax starts at 20% on all your income (not just from Uber) over £12,570 and 40% over £50,270. Class 2 National Insurance is paid as a set weekly amount when your uber pay go over £6,725 and Class 4 is worked out as 9% on your earnings over £9,880.
You can read more about self-employed tax in this guide, see examples of how it’s calculated and when you pay it, including if you’re employed and self-employed.
5. Tax Deductions for Self-Employed Uber Drivers
Claiming for allowable business expenses is the easiest way to reduce your tax bill 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)
- Business mileage
- Uber commissions and service charges
- Any costs incurred as part of the Uber application process
- Tolls and Parking charges
- Mobile phone & data
- Car cleaning and valeting
- Vehicle Insurance
- Accountant’s fees
- Bank charges of a business bank account.
There may be some expenses you pay for that you use personally and for work, such as 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.
While most things you pay for as part of being a self-employed 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
5.1 Claiming for a Car on Uber Taxes
If you are using your own car for Uber, then you can choose to claim an amount for the number of miles you drive. You’ll need to record the number of business miles you do, keep a detailed log of where you have travelled and then claim the self-employed mileage allowance per mile.
The rates are currently 45p for the first 10,000 miles of driving and 25p thereafter for cars and 24p for motorbikes. If you choose to use this method then you cannot claim for the cost of your car, servicing and insurance.
If you choose to buy a vehicle for work, then you are entitled to claim the business portion of the cost against your taxes. Under HMRC rules you cannot claim the total 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.
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.
5.2 Claiming for Car Lease Payments on Your Uber Eats Taxes
When you lease a vehicle, you can 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.
6. How to Register as a Self-Employed Uber Driver
The quickest and easiest way to register to work for yourself with HMRC is to register as self-employed. You can choose to do this once your uber income (not profit) goes over £1,000 during a tax year if you like by taking advantage of the £1,000 trading income allowance.
The deadline for registering is the 5th October following the end of the tax year you started working as a driver or your earnings go over the £1,000 limit.
There are other business structures out there including a Limited Company which may offer better tax savings depending on your earnings. Read this guide to find out about the most popular UK business structures.