The Uber tax guide

Drivers for Uber are meant to be self- employed. When someone is self-employed, he / she is responsible for notifying HMRC of their chargeability to tax, self- assessing their income, declaring the income as a tax return, making the payment of tax to HMRC and keeping records.

The tax obligation is much more than the Employment income where your taxes and NI are calculated and paid over to HMRC by the employer.

1. Compliance duties

Once you start self-employment, you need to inform HMRC by 05th of October following the tax year when you started your self-employment income. HMRC will then send you the Unique Taxpayer Reference number and self-assessment tax return documents.

You can file your tax return either by post or online. If you send the tax return by post, the deadline for the submission is 31st October following the tax year. HMRC will do the tax calculation for you and send you the statement detailing the tax to pay to the government.

If you are filing online, the deadline for the submission is 31st January following the tax year. You can use HMRC portal to submit the return online or can use any other commercial software to do this. The software will do the calculation for you and generate the tax liability amount.

The deadline to make the payment of tax is 31st January following the tax year. And if the tax liability is more than £ 1,000 and less than 80% of the tax payable is collected by source (like from PAYE), then you will need to make Payment on Accounts (advance tax for the following years).

Payment on Accounts are payable on 31st January in the same tax year and 31st July following the tax year. At the time of finalising the tax return before submission by 31st October (if by post) of 31st January (if online), the Payment on Accounts will be adjusted with the final tax liability.

There are penalties for notifying HMRC on tax chargeability late, submitting the tax return late, payment the tax liabilities late and also incorrect tax returns. So, it’s very important to take this compliance seriously.

Even if your overall tax liability is NIL or less than the penalty charged by HMRC, the penalties are still due. And they are quite large sums (e.g. 5% of tax liability if you fail to make the tax liability payment within a month from the deadline on top of regular interest).

2. Self-employment taxes and expenses deductions

The income subjected to tax is the profit that you make from your trade (driving). You are allowed to deduct any expenses that are wholly and exclusively for the trade. This would be Commissions paid to Uber, any Motor Expenses that you incurred (like Car Insurance, MOT, Servicing, Road Tax), any equipment that you bought, stationary, accountancy fees, Interest on any loan taken for the business, Telephone and printing costs etc. You can also claim Allowances for the Capital Cost of the car.

The tax payable on the profit from Driving for Uber is Income Tax payable at the rate of 20%, 40% or 45%.

You will first deduct the Personal Allowance from your Gross Income (this will include any other incomes that you had for the year along with Uber income, like employment income, interest income etc.) Then the amount is subjected to tax at various rates depending on the thresholds you are in.

You will also need to pay Class 2 NICs and Class 4 NICs for the self-employment income. Class 2 NIC is £3.45/week for 2024/25. Class 4 NIC is payable at 6% on self-employment income between £12,570 and £50,270. Above £50,270 you pay 2% Class 4 NIC.

Both Class 2 and Class 4 NICs are payable through Self-Assessment, so they follow the same deadline as Income tax payment.

The above guide is only meant to provide basic understanding of tax position for self-employment. There are a lot of other factors that could affect your position for compliance, tax liability etc. It’s very important that you get proper guidance from a qualified accountant with sufficient experience.

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