A Tax Guide for Uber Drivers

Whether you’ve been an Uber driver for a while or are just stepping into it, there’s one disadvantage amongst its many self-employment benefits: tax. 

Unless you’re an accountancy expert, dealing with the complexities of self-employment taxes can be a struggle. But it doesn’t have to be. The key is to understand what income taxes you are responsible for as soon as possible. 

To assist, this simple guide takes you through everything you’ll need to know about paying tax as an Uber driver.

1. BE COMPLIANT WITH HMRC LEGISLATION

The first step is to ensure you’re compliant with what’s legally required when it comes to tax. Otherwise, you may find yourself in trouble with HMRC. A key part is registering for Self Assessment, which you’ll need to complete by the deadline.

You’ll be required to register for Self Assessment by 5th October in your business’ second tax year. So, if you started working as an Uber driver in July 2022, you need to register before 5th October 2023. You’ll also need to get a UTR number before you file your tax return.

For an accurate Self Assessment, you should keep records of everything you’ve earned as an Uber driver – particularly expenses (more on that later).

Make sure you leave yourself plenty of time to complete your Self Assessment, especially if you’re doing so by paper, as the submission deadline is three months earlier than the online submission deadline. Miss it, and you could face heavy penalties. 

The GoSimpleTax app gives reminders of your deadlines and responsibilities throughout the tax year, so you’re up to speed about what’s required and when. Find more information on tax return deadlines here.

2. PAY THE CORRECT TAXES

The taxes you’ll be required to pay depend on how you operate. Choose from being a limited company or sole trader; the majority of UK Uber drivers go for the latter. Sole traders pay tax along with National Insurance. Tax is paid at the same rate as those who are employed, but the National Insurance rates differ.

Both Class 2 and Class 4 National Insurance is paid by the self-employed. As of 2020/21, Class 4 is paid at 9% on profits between £9,501 and £50,000, and at 2% on any profits above £50,000.

3. DEDUCT YOUR BUSINESS EXPENSES

Uber drivers incur expenses – some of which can be deducted to reduce your tax liability, provided they are made solely for business purposes. The main one, of course, is your vehicle. If you also drive it on a personal basis, then you’ll need to split the mileage usage and deduct the distances you’ve travelled for private hire.

A more straightforward way is to claim tax back on your mileage by using simplified expenses – this has a flat rate per mile. There’s various other expenses you can claim too, including any business use of the phone, food or drink provided to passengers, insurance coverage, parking and tolls, Uber’s cut of your earnings, the fee for a private car hire licence, and car cleaning costs.

Our app can both notify you if it believes you could save tax through expenses, and be used to log those expenses themselves. A full account with us will even enable you to take photos of your receipts and upload them directly to our platform. 

4. USE TAX SOFTWARE TO SIMPLIFY THINGS

The best way to ensure you’re being compliant, whilst paying the correct tax and maximising your earnings, is to use commercial tax return software. This works out the tax for you, so the calculations are perfect every time. It’ll also help you prepare for Making Tax Digital, which is now rolling out across the UK.

Using tax software also means you don’t have to wait for the Self Assessment tax return deadline – you can enter your data at any time, and instantly see the amount of tax owed. GoSimpleTax Self Assessment software also provides tax-saving suggestions to help reduce your tax liability.

What’s more, these features are available completely free. You only have to pay for our software when you want to submit your Self Assessment tax return to HMRC. Start your free trial today or, if you have any questions about paying tax as an Uber driver, get in touch and a member of our team will be happy to help.

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.