Are you thinking about becoming an Uber driver in the UK and joining a community of over 40,000 drivers? You’re probably wondering how much you can make and, more importantly, how taxes work for Uber drivers in the UK.
In this guide, we’ll cover everything from how to become an Uber driver, the benefits, your tax responsibilities, and what expenses you can deduct.
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Understanding Your Tax Obligations As An Uber Driver
As an Uber driver in the UK, you are considered self-employed for tax purposes. This means you are responsible for reporting your earnings to HMRC through a Self-Assessment tax return.
Your tax bill is based on your profit which is calculated by subtracting allowable business expenses from your total income. You’ll need to file a Self-Assessment return every year to report your self-employed income and expenses.
The amount of tax you owe will depend on your profits which are your total earnings minus any eligible expenses.
What Business Structure Should I Be As An Uber Driver?
Most people looking for an easy and reliable way to work become Uber drivers. They typically operate as sole traders, which is the most common business structure for tax purposes.
Although Uber now classifies its drivers as ‘workers’ who are entitled to some employment protections, for tax purposes, you are still considered self-employed.
For tax purposes, however, you are still considered self-employed and must declare your earnings to HMRC through an annual Self Assessment tax return if you earn over £1,000 in a tax year.
How to Register with the HMRC as an Uber Driver?
The process for registering with HMRC, as an Uber driver is simple. The registration process as a sole trader is free and can be completed online.
Creating a Government Gateway Account
First, create a Government Gateway account. If you don’t already have one, visit the HMRC website to create a user ID and password for HMRC’s online services.
Registering for Self Assessment
After logging in, you have to register yourself as self-employed for Self Assessment. You will need to provide your National Insurance number and personal details. While filling the registration form, describe your work as “Uber Driver” and enter the date when you started.
Receive Your Unique Taxpayer Reference (UTR) Number
Once you submit your registration, HMRC will send a 10-digit UTR number by post, normally within 10 working days. Keep this number safe, as it will be needed to file your annual tax returns.
How Much Tax Will I Pay As An Uber Driver?
While working as an Uber Driver, you are self-employed and are responsible for paying your own income tax and National Insurance Contributions (NICs) on your profits. The exact amount that you will pay depends on how much profit you make after deducting allowable expenses.
If your total earnings from driving Uber are over £1,000 in a tax year (April 6 to April 5), you have to register as a sole trader with HMRC and file a Self-Assessment tax return. You will pay tax on your profits, which are your total earnings minus your allowable business expenses.
Your profits are taxed using the standard UK income tax bands:
0% Personal Allowance: The first £12,570 of the profits are not taxed.
20% Basic Rate: Profits from £12,571 and £50,270 are taxed at a 20% rate.
40% Higher Rate: Profits between £50,271 and £125,140 are taxed at 40% rate.
45% Additional Rate: A 45% tax rate applies on all profits over £125,140.
Allowable Expenses for Uber Drivers
As an Uber Driver, you can claim a wide range of allowable expenses to reduce your taxable income, but you have to choose between either claiming actual vehicle-related costs or the simplified mileage rate.
If a vehicle is used for personal travel, expenses must be split accordingly.
Actual Expenses
There are various actual expenses you can claim, but you must keep detailed records and receipts to claim the business portion of your vehicle costs. This includes:
- Cost of fuel and oil for business-related trips
- Maintenance and repairs such as service costs, tire replacements
- Claiming insurance on a commercial or private-hire vehicle
- Cost of registration and license fees for your vehicle, including any private-hire license fees
Simplified Mileage Rate
You can also claim a flat rate per business mile driven, which can cover your vehicle’s running costs. With this method, you cannot claim individual vehicle costs like fuel, insurance or maintenance.
- In the UK, the rate is typically 45p per mile for the first 10,000 miles and 25p thereafter.
- To claim mileage, you must keep a precise record of all your business mileage.
How to Claim Refund for the Business Expenses?
If you want to claim a tax refund for your business expenses, then it totally depends on your employment status whether you are self-employed or an employee and requires keeping accurate records.
For Self Employed or Sole Traders
If you are self-employed, you can claim your allowable business expenses through the annual Self Assessment tax return. This can be done by deducting your expenses from your total business income to calculate your taxable profit. You can claim them by:
- Keeping accurate records
- Report the expenses on your tax return
- Choosing your accounting method
For Employees
As an employee, you must have paid the necessary business expenses that your employer has not compensated. Then you can claim tax relief directly from HMRC. You can claim it by:
- Using form P87, to claim tax relief for tax expenses up to £2500 for the tax year. This can be done online through the Government Gateway service for faster processing and then printing it to send to HMRC.
- Claiming Self Assessment tax return
- Adjusting tax code to give tax relief.
Will Uber report my income to HMRC?
Uber will report your earnings to HMRC under new UK regulations that came into effect in 2024. The information that Uber reports includes:
- Your name details
- Official address
- Date of birth
- Your National Insurance Number
- Payouts received
- Number of transactions performed
What if I work for more than one company?
If you are working for more than one company, like Uber or Bolt, or you have an additional PAYE job, you must declare all your income sources on your Annual Self Assessment Tax Return. Here is how it works:
- Your total income is combined. HMRC will calculate your total tax liability based on the combined income from all our jobs.
- Your personal allowance will generally be assigned to your main PAYE job, and your employer will deduct tax automatically through payroll.
- All the income from your self-employed work is reported together on your Self-Assessment form. This income is then taxed based on your overall total income, which can push you into a higher tax bracket.
Common Mistakes Uber Drivers Should Avoid
While working as an Uber driver, it’s important to avoid common financial and business mistakes that could affect your earnings and taxes.
Here are some mistakes Uber drivers should avoid:
- Not keeping track of your records properly can make filing your taxes a real headache. Make sure to keep all your receipts and earnings details in order from the start.
- Many Uber drivers miss out on claiming their allowable expenses such as fuel, maintenance and insurance. Make sure you’re claiming everything you’re entitled to.
- You must register with HMRC If you earn over £1,000 from Uber and file a Self-Assessment tax return. Forgetting to do this can lead to fines.
- It’s easy to forget how much tax you’ll owe, especially if you don’t set aside money regularly. Be sure to budget for tax payments so you’re not caught off guard.
- As a self-employed driver, you need to pay National Insurance Contributions. Overlooking these payments can create problems, so don’t ignore them.
Bottom Line
Now that you have a clear understanding of how taxes work for Uber drivers in the UK, you’re ready to take the next step. Whether you choose the actual expenses method or the mileage rate, staying organised will help you manage your taxes efficiently.
Get in touch with our young, clever, and tech-driven professionals if you want to choose the solution to tax burden or accounting problems in the UK for your income. We will ensure to offer the best services.