What Expenses Can I Claim as a Private Hire Taxi Driver?
– Your Complete HMRC Self Assessment Guide
By knowing the private hire taxi driver tax breaks, you can reduce your tax burden and increase your revenue stream. This knowledge will help you navigate the complex tax laws, so you can avoid fines from the HMRC for listing items on your self assessment form that should not be there.
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If you are operating as a limited company rather than a sole trader, there is one mistake I made in my first year that I want to save you from. I did not set up a payroll before the end of the tax year. That meant I could not pay myself a salary through the company, and as a result I could not use my full personal allowance of £12,570 against my income. Instead I ended up with a much smaller effective allowance and a bigger tax bill than I should have had. The fix is simple but the timing is critical — you must set up your payroll and register with HMRC before the end of the tax year on 5 April. If you leave it too late, that allowance is gone for that year and you cannot go back. If you are just starting out as a private hire driver operating through a limited company, speak to an accountant on day one and get your payroll set up immediately.
What operating costs can be listed?
When it comes to operating your business as a private hire taxi driver, the costs to keep things going are extensive. Private hire insurance or PHV monthly insurance expenses must be directly related to the business. Reducing your tax burden and make a good choice when choosing your private hire vehicle will help reduce your cost and increase your profit margins. The following are the most common expenses that can be listed on your self assessment form.
Annual Insurance Premium
Annual premium for the commercial private hire vehicle insurance.
Fuel Costs
The fuel you use to operate the vehicle for paying fares.
Vehicle Cleaning
The charges for cleaning both the interior and exterior of the vehicle.
Periodic Maintenance
Periodic maintenance fees for oil and fluid changes.
Replacement Parts
The money spent on replacing worn parts like brake pads, tires and other parts that will need to be replaced periodically.
Body Damage Repairs
Body damage repair costs when the vehicle is involved in a fender bender.
Two-Way Radio Hire
Radio hire fees for cab communications, provided the cost is separate and distinct from any vehicle hire charges.
Breakdown Cover
RAC or AA annual membership fees, or breakdown cover added to your taxi insurance policy.
What fees can be included?
There are many fees paid to the government for operating your private hire vehicles. All of those fees can be listed as business expenses on your self assessment form, along with fees to private businesses. Whether you hold a standard taxi licence or a PCO licence, the same expense rules apply.
- ✓MOT testing fees.
- ✓Vehicle registration annual fee.
- ✓Parking fees when working.
- ✓Toll fees for using private roads and toll roads.
- ✓Annual road tax.
- ✓RAC annual membership fees.
- ✓Business license fee.
Vehicle Loan Interest
For those that took out a loan for the business like a vehicle loan, the interest being paid on that loan is also tax deductible. This applies whether you financed a standard saloon or a purpose built private hire vehicle.
What business operating costs can be deducted?
Operating a business has many different facets to it. To help keep the finances in order, an accountant is hired. There are also costs to advertise, and many phone calls used to conduct business transactions. The rent for office space can be fully deducted if it is not part of your home residence. For those that operate out of their home, then only a portion of the costs of owning the home or rent can be deducted. All of these are legitimate tax deductions for taxi drivers and private hire drivers alike.
- ✓Accountant or bookkeeping fees
- ✓Advertising and marketing costs (social media, signage, local ads)
- ✓Business phone calls, data and line rental
- ✓Dedicated office rent (outside the home)
- ✓Proportionate home costs if operating from home (rent, utilities, internet)
- ✓Uniform or specialist clothing required for the role
Capital Allowances on Your Vehicle
As a taxi driver you are running your own business, and your vehicle is a major capital asset. Capital allowances let you deduct some or all of its value from your taxable profits, potentially one of the largest single reliefs available to you.
Private Hire Vehicles 18%
Most private hire cars qualify for an 18% per annum capital allowance on the reducing balance, deducted over several years.
Black Cabs 100% AIA
Traditional Hackney Carriages qualify for a 100% Annual Investment Allowance. The full purchase cost can be offset in the year of purchase.
Mileage Rate vs Capital Allowances. You Cannot Use Both
If you use the simplified mileage rate (see Section 05), you cannot also claim capital allowances on the same vehicle. You must choose one method and stick with it for as long as that vehicle is used for business. A qualified accountant can help you work out which is more beneficial.
Mileage Allowance Simplified Expenses
Rather than claiming every individual vehicle cost separately, private hire taxi drivers can use HMRC’s simplified expenses flat-rate mileage scheme. This single per-mile deduction covers fuel, servicing, repairs, insurance and road tax all in one.
What can still be claimed on top of the mileage rate?
If you choose the mileage rate you cannot separately claim fuel, insurance, servicing or repairs for that vehicle. However, you can still claim tolls, congestion charges, parking fees and radio hire on top. These are journey specific costs, not vehicle running costs.
What You Cannot Claim
Understanding what is not allowable is just as important as knowing what you can claim. The following are explicitly excluded by HMRC. If you are unsure whether an expense qualifies, always consult a qualified accountant who specialises in self employed taxi drivers.
Record Keeping and Staying HMRC Compliant
To help keep you organised, it is best to keep very good records of all your expenses. This record and all the receipts should be kept for a minimum of 6 years, just in case the government requests them. It is not advised to attempt to stretch the truth about your business expenses. The government knows the loopholes many tax filers try to use, and place fines on those that attempt to use them. Being honest is the best way to file. If you feel an expense is borderline to the rules, do not list it. Remember, the government has 6 years to audit you.
- ✓Save every receipt, physical or digital, for all deductible expenses
- ✓Keep a mileage log if claiming vehicle usage costs
- ✓Record income from all sources (fares, tips, platform payments)
- ✓Retain bank statements that match your Self Assessment figures
- ✓Use accounting software or a spreadsheet, updated regularly
Be Honest Always
It is not advised to attempt to stretch the truth about your business expenses. The government knows the loopholes many tax filers try to use, and place fines on those that attempt to use them. Being honest is the best way to file. If you feel an expense is borderline to the rules, do not list it. Also make sure your taxi insurance is correctly declared, as any discrepancy between your policy and your actual usage could invalidate your cover.
Self Assessment Key Dates
The UK tax year runs from 6 April to 5 April the following year. Missing deadlines results in an instant £100 penalty, with further charges accruing the longer the delay. Whether you drive a private hire vehicle, a PCO licensed cab or work as an Uber driver, the same Self Assessment rules apply to all self employed drivers.
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