What allowable expenses can self employed couriers and delivery drivers claim?

There’s been a significant rise in self employed couriers and delivery drivers in recent years. It’s a thriving part of the UK gig economy that continues to attract armies of self employed couriers and delivery drivers, many of whom work for the sector’s biggest names.

If you have a suitable vehicle with an MOT and road tax, insurance and license, there are plenty of opportunities. And although shifts can bring a demanding number of deliveries, some prefer the increased flexibility of self-employment. The can also rely on a regular stream of work, fuelled in no small way by the UK’s unrelenting appetite for online shopping.

But there can be expenses, the big one, of course, being fuel costs. And you must maintain and repair your vehicle and pay other outgoings. Maybe you’re considering becoming a self-employed courier or delivery driver and want to know what you can claim for. You may already be a self-employed courier or delivery driver, but want to be sure that you’re claiming for all allowable expenses. To help you, here’s an overview of allowable expenses you can claim when you’re a self-employed courier or delivery driver.

Some basic facts about tax and self employment

To work as a self-employed courier or delivery driver you must register for Self Assessment, which is how the government/HMRC collects Income Tax. If you earn self-employed income during a tax year (6 April until 5 April), you must register before the following 5 October, if you’re registering for the first time or didn’t file a tax return in the previous tax year.

You must tell HMRC about all taxable income by completing a Self Assessment tax return each year. From this, HMRC works out how much Income Tax and National Insurance contributions you owe (NICs entitle you to state benefits and pension). HMRC lets you claim “allowable expenses” (more below) and tax allowances, which can reduce your tax bill.

You can earn a non-taxable Personal Allowance of £12,570 a year (more if you claim Marriage Allowance or Blind Person’s Allowance; less if you earn £100k-plus).

You pay Class 2 NICs if your annual taxable profits are £6,725 or more and Class 4 NICs if your annual profits are £12,570 or more.

Class 2 NICs are £3.45 a week, while Class 4 NICs are 9% on profits between £12,570 and £50,270 and 2% on profits over £50,270.

Vehicle-related allowable expenses

Vehicle-related allowable expenses you can claim as a self-employed courier or delivery driver can include:

• fuel
• vehicle repair and servicing
• road tax
• MOT costs
• insurance and courier insurance
• breakdown cover
• parking and toll fees
• interest on loans taken out to buy a vehicle
• vehicle purchase, hire or leasing costs

If you use a vehicle for business and personal reasons, you must calculate the split for costs. If you use a panel van only for work and use your own car for personal journeys, it will be easier to work out and claim for all of your van expenses as an allowable business expense.

Need to know! You cannot claim allowable expenses for parking or speeding fines, or work clothes or your daily meal deal. You can claim for mobile phone charges, whether all of them if used exclusively for work or a proportion if used for business and personal calls.

Claiming for fuel and mileage when self employed

To claim for the above actual costs, you’ll need to record all expenses and retain proof (eg invoices for repairs, sales receipts for fuel, etc). Entering these into accounting software regularly will keep things better organised and you’re less likely to miss out anything when claiming allowable expenses.

Alternatively, using the flat-rate mileage allowance scheme offers a simpler solution to claiming for allowable fuel and vehicle costs. You keep a log of all business miles travelled and each year claim a mileage allowance of:

• 45p a business mile travelled in your car or van for the first 10,000 miles and
• 25p a business mile thereafter or
• 24p a mile if you use a motorbike.

Whichever method you choose, you either enter the actual costs or the total mileage allowance cost into your annual Self Assessment tax return and this is taken away from your taxable profits before HMRC calculates your tax bill for that tax year.

Need to know! If you claim mileage allowance, you cannot also claim for insurance, services, road tax, vehicle wear and tear, etc, because mileage allowance covers these too. Work out likely annual mileage before deciding how to claim for vehicle costs.

What about buying a vehicle?

• If you use traditional accounting (ie where you record income and expenses by the date you invoiced or were billed) and buy a car for your business, you can claim this as a capital allowance, so you can deduct some of the value from your profits before you pay tax. The car’s CO2 emissions and date you bought it determine how much capital allowance you can claim.
• If you use cash-basis accounting (ie where you record income and expenses by the date you were paid or paid expenses) and buy a car for your business, you can only claim this as a capital allowance if you’re not using claiming via the mileage allowance scheme.
• The cost of buying van should be claimed as an allowable expense.
• Leasing or hiring a car or van is tax deductable, but if CO2 emissions exceed a certain threshold, you won’t be able to claim all of the hire charges or rental payments.

GoSimpleTax offers you an easier way to complete and file your Self Assessment tax return. For added peace of mind, why not get your Self Assessment tax return checked by one of our experts? It can ensure that your tax return is error-free and that you’re minimising your tax bill by claiming all of your allowable expenses.

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.