Dealing with self-employment taxes as an on-demand driver can be quite a chore. We’re here to help you set up your business and offer guidance down the road.
As an on-demand driver, you’re running a small business, so you need to accurately report your income and submit evidence of fuel and maintenance fees. Don’t leave this to the last minute because you’ll find yourself in a chaotic and stressful search for invoices and receipts.
It may sound daunting at first, but this guide will lead you through the process. Shout out to our partner GoSimpleTax for helping us clear things up for you. Using their app will make this process easier for you – check out their special offer at the end of this guide.
For employees, HMRC deducts taxes directly from the gross salary, but if you’re an on-demand driver you need to do this yourself. HMRC will use your Self Assessment to calculate how much Income Tax and National Insurance you need to pay.
As an on-demand driver, you’ll be classed as self-employed from the moment your gross income exceeds the tax-free trading allowance of £1,000 per year.
In other words, unless you drive only a few hours during weekends, you have to report your rideshare income and pay the taxes.
A UK tax year runs from 6 April to the following 5 April. For example, the 2020/2021 tax year starts on 6 April 2020 and ends on 5 April 2021.
You have to file your Self Assessment and pay your taxes by 31 January after the end of the tax year. So for tax year 2020/2021, you can submit your Self Assessment between 6 April 2021 and 31 January 2022.
Important: The paper return deadline is sooner, on 31 October – keep this in mind if you don’t want to file online.
In order to pay your taxes, you first need to register as self-employed by 5 October.
You’ll get a £100 fine if your tax return is up to 3 months late. You’ll have to pay more if it’s later. On top of the late payment penalties, HMRC also charges interest on late payments. Read more about the benefits of filing early.
This step is essential to pay your taxes and avoid penalties.
When registering, you’ll need your National Insurance number, as well as all relevant information regarding your address, the nature of your self-employment, and when exactly you started.
After you create an account and register for taxes, HMRC will send you a letter with your 10-digit Unique Taxpayer Reference (UTR) and set up your account for the Self Assessment online service.
Important: Register by 5 October after your first tax year to avoid any penalties.
Before you start, make sure you have:
You can do this in one of three ways:
Important: bear in mind that the submission deadline for paper returns is 31 October. We recommend one of the first two methods instead, because then you have until midnight on the 31st January to submit your Self-Assessment tax return.
It’s best to get familiar with the online process early, as from April 2023, HMRC will require you to file your self-assessment digitally and provide updates every quarter via your digital platform.
Regardless of which option you choose, it’s best to take a look at the forms and helpsheets first, so that you know exactly what goes where.
Your on-demand driving activity is classed as self-employed, so you’ll have to report your rideshare income on a supplementary form, SA103. This is also where you get to declare any allowable expenses which will be deducted from your tax bill. There are two options:
* £85,000 as of 2019/20
You’ll need to enter your turnover under the business income section. This is the grand total of your income during the tax year before expenses.
If you have other sources of self-employed income, you can enter these separately, but make sure you add the one with the most income as your main employment.
If you have other income to declare that’s not considered self-employment, you may need to fill out other supplementary forms too. See the full list of supplementary pages
You may be able to claim tax relief to lower your Self Assessment tax bill thanks to allowable expenses. There are many ways to reduce your tax liability, but as an on-demand driver, these three are the most relevant:
Your car-related expenditure isn’t the only cost that can claim against. You can also reduce your liability if you buy a computer for work or claim a room’s share of household bills (gas, electricity, telephone, broadband, and even rent) if you use that room as a home office.
Important: for all this, you’ll need to meticulously record and submit evidence of each expense, but you don’t need to send these in when you submit your Self Assessment tax return. However, keep these records of expenses for five years in case HMRC asks for them.
Once you’ve submitted your Self Assessment tax return, HMRC will tell you how much tax and National Insurance Contributions you owe.
Here’s how you can pay your Self Assessment tax bill:
Tip: If you’re making your payment close to the deadline, choose one of the faster options to avoid penalties.
Paying your taxes just once a year is something you need to prepare for, as it can be one hefty bill. To avoid such a big one-time expense, you can distribute your tax payments throughout the year.
Once you’re up to date with your Self Assessment payments, you can start making advance payments in weekly or monthly instalments on your next tax bill.
For this, you can arrange for what is called a budget payment plan:
You can also pay your past liabilities in instalments if:
In this case, however, you’ll have to pay interest, and if you don’t keep up with your repayments, HMRC can ask you to pay everything you owe.
Important: Pay all the taxes you owe until 31 January after each tax year to avoid any penalties.
We’re PCO car specialists enabling on-demand drivers to make money by driving. Our vision is a future where every on-demand driver can be successful.
We can set you up with a brand-new or new-model car, and provide the training and support you need to become a more profitable, safer, and fulfilled driver. Don’t take our word for it — Uber drivers rate us excellent on Trustpilot.