Self-employed taxi driver tax and expenses

How taxi driver tax works

You're taxed on profit, not turnover: total takings minus your allowable business expenses. On that profit you pay Income Tax (after your personal allowance) and Class 4 National Insurance. You report it once a year through Self Assessment, and you keep the records that back up the numbers. Register with HMRC as self-employed if you haven't already.

What you can claim

Allowable expenses are costs "wholly and exclusively" for the business:

• Vehicle running costs — fuel, servicing, MOT, repairs, tyres, cleaning. Or use the simplified mileage method instead (see below) — one or the other, not both.
• Insurance — hire-and-reward / private-hire cover.
• Licensing — driver badge, vehicle licence/plate, and any operator fees.
• Vehicle finance — the interest on a loan, or lease costs, apportioned for private use.
• Phone and data — the business-use share.
• Platform and card fees — commission an app takes, card-machine fees, booking-line costs.
• Accountancy, memberships and workwear where relevant.

Mileage allowance vs actual costs

HMRC's simplified mileage rate is 45p per mile for the first 10,000 business miles in the tax year, then 25p after that. It covers fuel, servicing, insurance and depreciation in one figure, so you can't also claim those separately. For many drivers actual costs work out higher — but mileage is simpler and needs only a mileage log. Pick the method that genuinely reflects your costs and keep it consistent.

Private use

If you use the car privately too, apportion costs by the business-use percentage. A simple, honest split (say 80% business / 20% private) backed by your mileage log is what HMRC expects.

Keeping records

Keep records of income and expenses, plus your mileage log, for at least five years after the 31 January filing deadline for that tax year. Digital records are fine — a photo of each receipt and a running log is enough. Making Tax Digital for Income Tax is being phased in, so keeping clean digital records now saves pain later.

The tax return itself

Self Assessment runs by tax year (6 April to 5 April). File online by the following 31 January and pay any tax due by the same date. If your first bill is over £1,000 you'll also make "payments on account" towards next year — budget for it.

Let the tools do the arithmetic

The admin is the tax, not the tax return. Log each trip and expense as you go and the year-end totals — income, mileage, expenses by category — are just there. Original Drivers tracks income, mileage and expenses and produces an accountant-ready summary you can hand straight over.

*This guide is general information, not tax advice — check HMRC guidance or an accountant for your situation. Rates cited are current for the 2026 tax year.*