Do I pay tax as an Uber driver?

If you are an Uber driver or considering becoming one, then you need to fully understand your position on paying tax.

Uber drivers have considerations that others don’t. As you are not an employee of Uber, you are classed as self employed, so you are responsible for submitting a tax return each tax year, claiming tax reliefs to minimise your tax bill and paying your own tax.

This blog will explain everything you need to know about how self employment affects your income tax, dealing with expenses and claiming tax relief.

Understanding your tax obligations as an Uber Driver

Uber drivers are classed as self employed and this means that you have to register for self assessment and file a self assessment tax return each year to HMRC.

Tax is usually deducted automatically from wages and pensions for employees, but for people that are self employed (as Uber drivers are), then your income from your Uber driving must be reported on a tax return, along with any income you earn from other sources.

You must report your earnings on a tax return if you earn more than £1,000 in a tax year.

Do I need to pay income tax as an Uber driver?

The answer to this will usually be yes. Every self employed person has a tax free trading allowance of £1,000. However, if you earn more than £1,000 per tax year from self employment, you will need to register for self assessment with HMRC, report your income on a tax return, deduct expenses and pay any tax that you owe.

What business structure should I be as an Uber driver?

Most uber drivers find that operating as a sole trader is the easiest way to work, because it’s cheaper and easier than running a limited company.

Sole traders have less reporting and compliance responsibility than a limited company, so for this blog, we will work on the basis that you are operating a sole trader.

You can read more about being a sole trader or a limited company here.

Read our full sole trader guide here.

Read our limited company guide here.

Reporting your income to HMRC

You’ll be required to register for self assessment by 5th October in your business’ second tax year. For example, if you started working as an Uber driver in August 2023, you will need to register with HMRC before 5th October 2024. (see below more details on registering with HMRC)

You need to keep records of all your business expenses incurred whilst working (see more details below about expenses).

Keep records of everything, especially if you have other work or jobs or are working for multiple platforms. You’ll need all of this information to complete your tax return as you’ll be required to declare income from all sources.

Can I file my tax return online if I’m self-employed?

Once registered you have the choice to file your tax return online or on paper – but we’d recommend always doing it online as HMRC will eventually phase out paper tax returns under Making Tax Digital. By opting to file your tax return online, you’ll have an additional 3 months to submit it.

We would always recommend using a qualified accountant such as dns accountants to file your tax return for you. We will ensure the information is accurate and the form is completed in the correct way.

What are the key dates for tax return filing?

The UK tax year for individuals starts April 6th and ends April 5th of the following year. From then, you have until January 31st to complete and file your online tax return for the previous tax year.

Online registration

Registering online is a convenient and efficient way to ensure timely compliance with HMRC requirements. Follow these steps to register online:

Step 1: Create an online account with HMRC

• 1. Visit the HMRC website to register.
• 2. Click on the "Register for self assessment" link to begin the process.
• 3. Provide your personal details, including your name, address, National Insurance number, and contact information.
• 4. Verify your identity by answering security questions or providing relevant documentation.

Step 2: Get your unique taxpayer reference (UTR)

• 1. Once your registration is processed, HMRC will issue you a unique taxpayer reference (UTR) number.
• 2. The UTR is a unique identifier that you will use for all future communications with HMRC regarding your tax affairs.

Step 3: Set up a government gateway account

• 1. Create a Government Gateway account on the HMRC website using your UTR and other personal details.
• 2. This account will serve as your online portal for managing your tax obligations, including filing your tax return.

Step 4: Activate your account

• 1. HMRC will send an activation code to your registered address.
• 2. Log in to your Government Gateway account and enter the activation code to complete the setup process.

For more information on How to register for self assessment click here.

Will Uber report my income to HMRC?

In January 2024 changes were introduced by the UK Government meaning digital platforms like Uber are now required to report income from Uber for each individual driver to HMRC. So, there is no hiding from HMRC! Should you fail to register or submit a tax return, then you will be subject to HMRC penalties, which will be very expensive.

How much tax will I pay as an Uber driver?

Income tax

The standard Personal Allowance is £12,570, which is the amount of income you do not have to pay tax on.

National insurance

Sole traders pay National Insurance. The class of National insurance you pay is based on your profits. You work out your profits by deducting your expenses from your income.

If your profits are £6,725 or more a year

Class 2 contributions are treated as having been paid to protect your National Insurance record. This means you do not have to pay Class 2 contributions.

If your profits are more than £12,570 a year, you must pay Class 4 contributions.

For tax year 2024 to 2025 you’ll pay:

• 6% on profits between £12,570 and £50,270
• 2% on profits over £50,270

If your profits are less than £6,725 a year

You do not have to pay anything, but you can choose to pay voluntary Class 2 contributions.

The Class 2 rate for tax year 2024 to 2025 is £3.45 a week.

Deadlines and due date for paying the tax you owe

The are two main deadlines you need to be aware of for paying the tax you owe, these are:

• Midnight on 31 January for any tax you owe for the previous tax year (a balancing payment) and your first payment on account for the upcoming tax year.
• Midnight 31 July for your second payment on account for the upcoming tax year.

Business expenses and deductions

You will be able to claim expenses incurred in your self employment on your tax return. These expenses are then deductible from your annual income and will reduce your overall tax bill.

What business expenses can I claim as an Uber driver?

Uber drivers will be able to claim car-related expenses including the actual cost of your car as well as other car related expenses such as:

• car cleaning and valeting
• vehicle insurance
• fuel
• maintenance, and repairs
• breakdown cover
• road tax and MOT costs

You can also claim other ride related expenses such as:

• parking fees
• tolls
• congestion charges

Other expenses you can claim are:

• public liability insurance
• costs and commission incurred from Uber
• private car hire license fee
• training costs
• first aid kits and other things required in your car for safety such as extinguishers, torches etc
• phone costs
• accountancy and legal fees

You need to keep accurate records of your expenses such as receipts and invoices in order to claim them on your tax return in case HMRC ask you to provide proof.

Claiming mileage allowance for Uber drivers

If you’re using your personal car for Uber, you can claim an amount for the number of miles you use to drive passengers. You can claim a portion of your car cost based on the amount you paid using a mileage allowance. You will need to keep records of the number of miles and the claim the set amount from HMRC per mile. This allowance rate is currently 45p per mile for the first 10,000 miles and 25p for all mileage above 10,000 miles.

Leasing a car for Uber drivers

If you decide to lease a car, you can claim the monthly lease cost against your tax bill. However, again if you use the car for personal use also, you’ll only be able to claim a proportion of the lease cost based on the business use of the vehicle. If you lease it purely for Uber use and don’t use the car personally, you can claim the full lease cost.

Purchasing a car for Uber drivers

You are entitled to a number of tax reliefs, including capital allowances on cars purchased to be used in your company. Capital allowances let you deduct some or all of the value of an item from your profits before you pay tax.

Capital allowances on cars enable businesses to get a deduction on the cost of purchasing a business vehicle. These deductions are often spread across the period of ownership.

There are two different types of capital allowances that you can choose to claim for a car being used in your business. You can either:

• Use writing down allowances to work out what capital allowance you can claim, or
• Use 100% first year allowance for zero-emissions or electric cars.

Claiming expenses on your self assessment tax return

How do I claim my business expenses on my tax return?

You claim expenses against your income when you complete your tax return online.

Keep records of all your any business expense you incur as proof of your costs.

Add up all your allowable expenses for the tax year and put the total amount on your tax return.

You do not need to send in proof of expenses when you submit your tax return. But you should keep proof and records so you can show them to HMRC if asked.

Summary for Uber drivers

Uber drivers are considered self-employed and therefore need to submit a tax return if your annual earnings are above £1,000 per year.

You can claim business expenses, including vehicle related expenses, ride related expenses and overhead costs to reduce your tax liability.

In order to claim expenses against your tax bill you need to keep accurate records of your income and expenses to provide to HMRC if required.

You need to report and pay any tax owed on time and in line with HMRC deadlines otherwise you will be liable to HMRC penalties.

We recommend you use an accountant such as dns accountants to help you to complete and file your tax return on your behalf to ensure accuracy and save you time. Our sole trader packages are great value and may end up saving you more than you have to pay.

Call us today on 03300 886 686, or you can also e-mail us at enquiry@dnsaccountants.co.uk. for help with all your tax needs.

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