A Guide to Tax for Uber Drivers

Whether you’ve been an Uber driver for a while or you’re considering it as a new venture, there’s one disadvantage amongst its many self-employment benefits: tax. Unless you’re an accountancy expert, the likelihood is your tax knowledge will be limited and so dealing with it can be a struggle.

But it doesn’t have to be. The key is to understand tax, and to do so as soon as possible. To assist, we’ll guide you in simple terms through everything you’ll need to know.

Be compliant with 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 2017, you need to register before 5th October 2018. You’ll also need to get a UTR number before you file your tax return.

To accurately complete the Self Assessment, you should keep records of everything within your Uber self-employment, particularly expenses.

Pay the correct taxes

The taxes you’ll be required to pay depend on how you operate – there’s the choice of limited company or sole trader, and the majority of UK Uber drivers choose 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 are paid by the self-employed. Class 4 is paid at 9% on profits between £8,164 and £45,000, whilst any profits above £45,000 are at 2%.

Deduct your business expenses

Uber drivers incur expenses, some of which can be deducted to reduce your tax liability. You can claim those that are used solely for business purposes, and the main one will be your vehicle. If you also use this on a personal basis, then you’ll need to split the mileage usage and remove that which is classed as private.

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 also, including any business use of the phone, food or drink provided to passengers, Uber’s cut of your earnings, the fee for a private car hire licence and car cleaning costs

Use tax software

The best way to ensure you’re being compliant, whilst paying the correct tax and maximising your earnings, is to use tax return software. This works out the tax for you, so you don’t have to worry about incorrect calculations. It’ll also help you prepare for Making Tax Digital, which is due to come into play.

There’ll be no waiting for the Self Assessment tax return deadline to come round – 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.

On top of this, an integration with your UBER Driver app is coming soon to our software, allowing you to sync UBER income and expenses directly to GoSimpleTax to make your tax returns even easier.

You can see the advantages of tax software for yourself by taking a free 14-day trial with GoSimpleTax. If you have any questions about paying tax as an Uber driver, then get in touch and member of our team will be happy to help.


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