A Tax Guide 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, dealing with the complexities of…

10 Minute Read

Updated: 22 Apr 2020

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, 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, and to do so as soon as possible. To assist, we’ll guide you in simple terms 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 2018, you need to register before 5th October 2019. 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.

Make sure you leave yourself plenty of time to complete your Self Assessment, especially if you’re doing by paper, as the online submission deadline is three months later than paper submission deadline, and there can be hefty penalties for missing it. 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 – there’s the choice of a 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 is 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%.

3. 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, insurance coverage, parking and tolls, Uber’s cut of your earnings, the fee for a private car hire licence and car cleaning costs.

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 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.

You can see the advantages of tax software for yourself by starting 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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