Tax for taxi and private hire drivers: what you owe and what you can claim
Reviewed by Rob Webb, practising accountant since 2015 · Last reviewed September 2026 · Figures are for the 2026/27 tax yearReviewed by Rob Webb, practising accountant since 2015 · Last reviewed September 2026 · Figures are for the 2026/27 tax yearDrive a taxi or private hire on your own account? Then you're self-employed and you file a tax return.
How much tax will you pay? Nothing on the first £12,570 of profit, then 20% income tax plus 6% National Insurance. A driver taking £38,000 with £14,600 of costs pays about £2,816 for the year.
Want to check your own costs? See what you can claim as a taxi driver →
If you rent a plate, own your own vehicle, or drive for an app and choose your own hours, you are almost certainly self-employed. That means you are trading in your own name and you are responsible for your own tax. It does not matter whether you drive full time, weekends only, or a few nights around a day job.
You must register with HMRC by 5 October after the end of the tax year in which you started. For a driver who began in the 2026/27 tax year, that deadline is 5 October 2027.
There is one exception worth knowing. The trading allowance gives you £1,000 of gross trading income tax free. If your total takings from driving across the whole tax year are £1,000 or less, and you have no other reason to file, you do not need to register or declare it. Note the word gross — it is measured on takings before you deduct a single penny of fuel. A rise in the self-employment reporting threshold from £1,000 to £3,000 has been announced, but no start date has been confirmed, so £1,000 is still the figure that applies.
If you also have a PAYE job, that does not remove the need to file. You declare the driving separately and your personal allowance is usually already used up by the employment, so the driving profit is taxed from the first pound.
Tax is charged on profit, not on takings. Profit is what is left after your allowable costs. Here is a full year for a driver working mainly evenings and weekends in a private hire vehicle.
| Line | Amount |
|---|---|
| Takings for the year | £38,000 |
| Fuel | £6,400 |
| Hire and reward insurance | £2,900 |
| Licence, plate and badge renewals | £900 |
| Servicing, tyres and repairs | £1,800 |
| Circuit, radio and app fees | £1,700 |
| Vehicle cleaning | £300 |
| Mobile phone (business share) | £240 |
| Accountancy | £360 |
| Total expenses | £14,600 |
| Profit | £23,400 |
| Less personal allowance | £12,570 |
| Taxable profit | £10,830 |
| Income tax at 20% | £2,166.00 |
| Class 4 NI at 6% | £649.80 |
| Total due | £2,815.80 |
That total is payable by 31 January 2028 for the 2026/27 year. HMRC may also ask for payments on account towards the following year, due 31 January and 31 July. Class 2 National Insurance is no longer a compulsory weekly charge — with profit of £23,400 you are above the Small Profits Threshold of £7,105, so your contribution record is protected and treated as paid at nil cost.
This is the single biggest decision a driver makes, and for high-mileage work it is usually worth thousands.
The simplified mileage rate for cars and vans in 2026/27 is 55p per mile for the first 10,000 business miles and 25p a mile after that. It went up from 45p in April 2026. The rate is meant to cover everything about running the vehicle — fuel, insurance, servicing, repairs, road tax.
Take the driver above, doing 22,000 business miles. On the mileage basis: 10,000 miles at 55p is £5,500, plus 12,000 miles at 25p is £3,000, giving £8,500. Their actual vehicle costs were £6,400 fuel plus £2,900 insurance plus £1,800 repairs, which is £11,100. Actual costs win by £2,600, which is typical for taxi work — hire and reward insurance is far more expensive than the ordinary cover the flat rate assumes.
Two things to hold on to. First, once you use the flat rate for a particular vehicle you must stay on it for as long as you have that vehicle, and you cannot also claim capital allowances on it. Choose carefully at the start. Second, plate fees, badge renewal, circuit and app commission are not vehicle running costs, so you claim those on top whichever basis you use.
| What you can claim | What to watch |
|---|---|
| Fuel used on fares and on the way to pick-ups | Only the business share. Home-to-first-job and the school run are private |
| Hire and reward or private hire insurance | Claim in full if the vehicle is business-only; scale it back if the family uses it |
| Taxi licence, driver badge and plate fees | Annual renewals only. The cost of a purchased plate or medallion is capital, not an expense |
| Circuit fees, radio rent and app commission | Claim the gross commission the platform takes, not just what lands in your bank |
| Vehicle rental if you rent from an operator | Weekly rental is fully allowable. Keep the operator's statements |
| Servicing, MOT, tyres, repairs and valeting | Not if you are on the flat mileage rate — that already covers it |
| Card terminal fees and payment processing | Easy to miss because it is netted off before payout |
| Council licensing and DBS checks | The initial application as well as renewals |
| Vehicle tracker, dashcam and phone mount | A dashcam used for passenger safety is a business cost |
| Working from home for admin | Flat rate by hours: £10 a month for 25–50 hours, £18 for 51–100, £26 for 101+. Phone and internet are claimed separately on a business share |
| Bottled water, mints, passenger extras | Small, but allowable if genuinely provided to passengers |
Platform figures. If you drive through an app, the number the app shows you and the number that reaches your bank are not the same, and neither one is your turnover.
Your turnover is the gross fare the passenger paid, before the platform takes its cut. The commission is then a separate expense. Drivers who declare only their net payouts understate turnover and overstate profit margin, and they usually also forget to claim the commission, so the profit figure ends up wrong in both directions.
It matters more than it used to. Making Tax Digital thresholds are tested on gross turnover, so a driver reporting net payouts can convince themselves they are below a threshold when their gross takings put them well above it. Always work from the platform's annual or monthly summary, which shows gross fares, commission and any tips separately. Tips paid directly by a passenger are taxable trading income too.
Making Tax Digital for Income Tax replaces the single annual return with four quarterly updates from digital records, plus a final declaration.
Whether you are in depends on your qualifying income — gross self-employment turnover plus gross property income added together, before expenses — on your previous year's return. Over £50,000 on the 2024–25 return means you joined on 6 April 2026. Over £30,000 on the 2025–26 return means you join on 6 April 2027. Over £20,000 on the 2026–27 return means you join on 6 April 2028. Employment income, dividends and pensions do not count towards it.
The driver in the example above, with £38,000 of takings, is not in Making Tax Digital for 2026/27. They are over £30,000, so they join from 6 April 2027 and their first quarterly update is due 7 August 2027.
The standard quarterly deadlines are 7 August, 7 November, 7 February and 7 May. Each update is cumulative — it runs from the start of the tax year to the end of that period, not the three months in isolation. The final declaration stays on 31 January. Records must be kept in compatible software and held for at least five years after that 31 January deadline. If your turnover is under £90,000 you may report using income and expense totals only.
Penalties inside Making Tax Digital are points-based: one point for each missed quarterly update or return, a £200 penalty at four points, and £200 again for each miss after that. Points fall away 24 months after the missed deadline if you stay below the threshold.
If you drive on one platform, have no other income, take mileage at the flat rate and your figures fit on one sheet of paper, HMRC's own online return will do the job in an hour and it is free. You do not need to pay anyone.
If your takings are under £1,000 gross for the whole year and you have no other reason to file, do nothing at all — the trading allowance covers you.
If you are an employed driver on PAYE with a company vehicle and no side work, you are not self-employed and there is nothing to file unless HMRC has asked you for a return.
And if you are behind on several years, in a payment dispute with HMRC, or under enquiry, that is a different job from filing a return. Speak to someone who handles disputes.
Yes. Tips are trading income whether they come through the app or straight from the passenger in cash. Add them to your takings. The only tips treated differently are those handled through an employer's tronc scheme, which does not apply to a self-employed driver.
Not as an ordinary expense. A vehicle is capital, so you claim it through capital allowances over time rather than deducting the purchase price in one go. If you have chosen the flat mileage rate for that vehicle you cannot claim capital allowances on it at all.
You have one self-employed business, not two. Add the gross fares from both together as a single turnover figure and claim the commission from both as expenses. Your Making Tax Digital threshold is tested on the combined gross figure.
The weekly rental is an allowable expense in full, and so is any fuel you buy yourself. You cannot claim mileage at 55p as well, because that rate is designed to cover the cost of running a vehicle you provide. Keep the operator's rental statements.
Only if your turnover passes £90,000 in any rolling 12-month period. Most single-vehicle drivers stay well below it, but check the rolling figure rather than the tax year figure, because it is a running 12-month test.
Outside Making Tax Digital, it is £100 immediately even if you owe nothing, then £10 a day after three months up to £900, then a further 5% of the tax due or £300 if greater at six months, and the same again at twelve months. Late payment adds 5% of the unpaid tax at 30 days, six months and twelve months, plus interest.
Filed Tax prepares and files your return for you. Send us your platform statements and your costs, and we do the rest. It is £25 a month, which covers all four Making Tax Digital quarterly updates, the year-end final declaration, unlimited questions and deadline reminders, and the first month is free. Rob Webb reviews every return before it is filed.
Rob is a Certified Xero Advisor with a BSc from the University of Salford. Last reviewed September 2026 against GOV.UK guidance current at that date. This guide is general information, not personal tax advice. Figures are for the 2026/27 tax year and can change at each Budget — always confirm the current numbers on GOV.UK or ask us to check your situation.