Taxation - For Private Hire and Taxi Drivers

Working closely with you to ensure you pay the minimum tax...

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If you are a self-employed taxi driver you will need to complete a tax return so that you can declare your earnings to HMRC. This article will help to highlight some key things to remember for your tax return and how to save tax.

You should keep records of all earnings and keep an organised record of all fares and tips. There are a number of taxi drivers that end up paying more tax than necessary, either because they haven’t recorded evidence of their costs or they don’t realise what expenses they can claim. All self-employed people are allowed to claim tax allowable expenses;  therefore taxi drivers should try and get into a routine of recording their income and expenses on a daily basis if possible.

If you use your taxi for your own personal use then you need to factor this in when any expenses are claimed.

 

For example, if you calculate that you use your taxi 20% of the time for personal or family use, then you would need to reduce any relevant vehicle running expenses by 20%.

 

Allowable Expenses for Taxi drivers

• Petrol or diesel costs

• The cost of repairs, servicing and running the taxi

• The costs of your annual road tax and your MOT test

• The cost of washing or cleaning your own taxi

• Interest on any bank or personal loans are taken out to purchase your taxi

• Your license and any other registration fees

• The cost of running your office (if you have one) or use of your home

• Vehicle insurance

• AA/RAC membership

• Radio hire

• Accountancy fees

• Advertising

• Phone usage for business use

• Parking & toll fees

 

Capital Allowances can also be claimed for the cost of the vehicle, normally the writing down allowance is 18% per annum. Hackney Carriages (traditional ‘London Black Cab’ type vehicles) are eligible for the 100% first-year Annual Investment Allowance. Other assets used for the taxi business may also be claimed.

 

Please Note: The annual writing down allowance can vary depending on the car’s CO2 emissions as follows:

• over 160g/km allowance at 8% a year

• 160g/km or less allowance at 18% a year

• 110g/km or less qualify for a 100% first-year allowance but they

must be new cars, not second-hand.

You can check a car’s CO2 emissions  at carfueldata.direct.gov.uk/ or from the V5 document

 

An alternative to claiming the vehicle running costs is the HMRC’s Fixed Scale Mileage Rate which is currently 45p per mile for the first 10,000 and 25p thereafter. This includes a depreciation allowance (capital allowance) for the vehicle but does not include interest on any loan to purchases the vehicle. This can be claimed in addition to the mileage allowance.

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