How Amazon Flex Works for Self Employed Drivers

Online shopping has never been simpler and with Amazon Prime members topping 8 million in the UK it is easy to see why there is a growing demand for drivers to sign up to their Amazon Flex Scheme. The Amazon Flex Scheme is open to self employed drivers who have their own vehicles and a mobile phone.

What is Amazon Flex?

Much like Uber, drivers are notified of Amazon packages that need delivering via an app where the driver can opt to pick up a Job from Amazon.

How to Become Self Employed

If you would like to become an Amazon Flex driver, then you must be self employed. When you are self employed you are responsible for your own taxes and national insurance (unlike if you were employed in a job and issued with a payslip each month showing your pay and deductions).

The simplest way to register as Self Employed is to visit the HMRC website and register online. The process can take 10 days to complete upon which HMRC will post you a UTR number (Unique Tax Payers Reference). Keep this safe as you will need this code to file your Self Assessment Tax Return.

Register with HMRC for Self Employment Online

What is a UTR number

From this point you must then:

  1. Keep a list and receipts of all your income and expenses;
  2. Complete a Self Assessment Tax Return by 31 January each year summarising your business income and expenses;
  3. Pay any Tax due by 31 January each year (and payments on account by 31 January and 31 July each year).

What are Payments On Account

Your tax return submitted by 31 January covers the previous tax year (a tax year runs from 6 April to 5 April). So for example, your tax return due by 31 January 2018 details your earnings between 6 April 2016 to 5 April 2017 and this will detail your income from your Amazon Flex delivery work as well as any other earnings you may have (such as from other delivery work, rental income, bank interest or dividends).

Here is a sample Tax Return and Sample Self Employment Section which would need to be included for Self Assessment.  These are samples, you will need to submit your own Tax Return online.

Tax Return Sample

Self Employment Tax Return Section Sample

Amazon Flex Tax

When Should You Register with HMRC as a Self Employed Amazon Flex Driver?

You must register with HMRC as self employed as soon as possible after starting work as an Amazon Flex Driver but HMRC rules are that you must register by 5 October in your business’ second tax year.

How Much Tax Do You Pay being Self Employed?

When you are self employed you pay tax based on your profits of your work (all your income less all your costs) and the amount of tax you pay depends on how much profit you make.  Self employed individuals are also required to pay Class 2 and Class 4 National Insurance, which is again dependant on your profits.

How to Work out Your Profits

You need to add up all your income from being a driver, including what you are paid as an Amazon Flex Driver, then deduct all your expenses as a driver.

Self Employment Income

Your income is everything you earn as a self employed Driver – whether you receive this in cash or bank transfer.

Self Employment Expenses

You are allowed to deducted expenses from your income before working out your tax – these are known as Allowable Expenses.  It is really important that you keep a note of all your expenses because you don’t want to miss out on any since they reduce your tax bill.

Typical Allowable Expenses for Self Employed Amazon Flex Drivers

Your vehicle is likely to be the major cost you incur when you are an Amazon Flex Driver and there are some different ways you can claim for the cost of using your vehicle.  We recommend you consult with an Accountant to find out the best way to claim for this cost for you.

Mileage Claim

If you are just starting out you may opt to use your own car, in which case you can claim for the number of miles you drive. Record you miles to and from your destination since you can claim 45p for the first 10,000 miles of driving and 25p thereafter. If you choose to claim for mileage you cannot claim for the cost of your car, servicing and insurance.

Car Purchase

If you choose to purchase a car to use as your role of an Amazon Flex Driver, then you are entitled to tax relief based on the amount you paid for the car.  However you cannot claim for the full amount of the car in one tax year and instead you may have to claim for a portion of the car cost depending on its emissions using Capital Allowances:

  • up to 50 g/km – 100% first year allowance
  • 51g/km-110g/km – 18% capital allowances
  • 111g/km or more – 8% capital allowances

If you opt to use this method for your car, then you are entitled to claim for fuel, servicing, insurance and repairs on your vehicle as tax deductible expenses.

Car Lease Payments

Leasing a car is a another option for owning a car as an Amazon Flex driver.  In this case, you would be allowed to claim the monthly cost of the lease against tax, as well as fuel, servicing, insurance and repairs.

Here are some other expenses you may have to pay for that can be deduct against your income:

  • Amazon commissions and service charges;
  • Any costs incurred as part of the Amazon application process;
  • Tolls and Parking charges;
  • The business element of your mobile phone, either note down your spending or estimate the percentage business use for example 80% business and 20% personal);
  • Car cleaning and valeting;
  • Vehicle Insurance;
  • Accountants fees;
  • Bank charges of a business bank account.

How much tax to pay amazon flex driver

How Much Tax Will You Pay

As you now know the amount of tax you pay is based on the profit you make from (all your income less all your allowable expenses).

However the amount of tax that you actually pay is based on your circumstances and how much you earn in total during a tax year.

Income tax is calculated at different rates according to how much your profits are.  So for 2017/2018 the rates are:

2017/2018
2016/2017
Personal Allowance
0%
Up to £11,500
Up to £11,000
Basic rate
20%
£11,501 to £45,000
£11,001 to £43,000
Higher rate
40%
£45,001 to £150,000
£43,001 to £150,000
Additional rate
45%
over £150,000
over £150,000

 

Example of Working Out Tax for a Amazon Flex Driver

Graeme is getting ready to submit his tax return for the tax year 2016/2017 which is due by 31 January 2018.  He has worked out that his profit from Amazon Flex Delivery Driving was £22,000 therefore he will need to pay tax of £2,200.

Graeme will also need to pay Class 2 and Class 4 National Insurance as well as the tax. The current rates are:

Class
Rates for tax year 2017/2018
Rates for tax year 2016/2017
Class 2
£2.85 a week
On taxable profits above £6,025
£2.80 a week
On taxable profits above £5,965
Class 4
9% on profits between £8,164 and £45,000
2% on profits over £45,000
9% on profits between £8,060 and £43,000
2% on profits over £43,000

In our example above, Graeme earned £22,000 therefore would need to pay Class 1 National Insurance of £145.60 and Class 2 National Insurance of £1,254.60.

Graeme’s total tax bill is therefore:

  • Income tax £2,200.00
  • Class 1 National Insurance £145.60
  • Class 2 National Insurance £1,254.60
  • Total for 2016/2017 £3,600.20
  • Payment on Account £1,727.30
  • Total to pay by 31 January 2018 £5,327.50

Whether you are already a sole trader or if you are considering becoming a sole trader it is important to budget for your tax and national insurance bill, one of the simplest ways is to set some money aside for HMRC as you get paid. If you are unsure how much tax you need to pay or of your tax status we definitely recommend you ask an accountant.

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