Update 22 September 2017 – If you are a Self Employed Uber Driver, understand the implications of de registering as self employed HERE.
Self Employed Uber Driver? Here is our tax advice guide just for you. Whether you are starting out or just want to understand more about allowable expenses, here are some useful tips specifically for Self Employed Uber Drivers.
THE FOUR ESSENTIALS OF SELF EMPLOYMENT
Although the arrangement look set to change in the future, currently Uber requires its Drivers to be Self Employed so let’s start by summarising the four essential elements of Self Employment:
- Visit the HMRC website and register as Self Employed;
- Keep a list and receipts of all business income and expenses;
- Complete Self Assessment before 31 January each year summarising your business income and expenses;
- Pay any Tax and National Insurance due by 31 January each year (and payments on account by 31 January and 31 July each year).
Register with HMRC as a Self Employed Uber Driver
First things first, you must register with HMRC for Self Assessment and Class 2 & 4 National Insurance. This should be done as soon as possible after starting work as an Uber Driver but HMRC rules are that you must register by 5 October in your business’s second tax year.
You can register online as a Self Employed Uber Driver on the HMRC website. 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. Self Employed Individuals are responsible for reporting their income to HMRC under Self Assessment by submitting a personal Tax Return by 31 January each year detailing your income as an Uber Driver, the income tax and Class 2 & Class 4 National Insurance due as well as making a payment for the tax and NI due. 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 include your income as a Uber Driver as well as any other earnings you may have (such as rental income, bank interest or dividends).
Watch out, you are also required to make a payment on account to HMRC by 31 July each year too which is normally 50% of your previous years tax bill, so make sure you budget for this additional payment too.
It is also worth noting that if you already complete a Self Assessment Tax Return, for example because you collect rental income or have savings interest, that you need to complete a Form CWF1 to notify HMRC that you have a new form of income you need to report on. Again, you can do this online here and you will need your Unique Tax Payers Reference.
WHAT ARE ALLOWABLE EXPENSES?
Your trading income, somewhat deceivingly, actually means your trading profits (all your income less all your allowable business expenses) and it is this figure that your tax and national insurance bill is based on. Generally speaking, business expenses are only tax allowable if they are ‘wholly, necessarily and exclusively’ incurred in the performance of your business. But it is really important to be aware of which expenses are allowable because they will reduce your tax bill and incorrect claims can result in penalties. Expenses must be supported by a receipt, so always make sure you keep hold of all your paper or emailed receipts so they are ready for tax time.
Typical Allowable Expenses for Self Employed Uber Drivers
Your vehicle is likely to be the major cost you incur when you are an Uber Driver and Uber have strict regulations on the age and type of vehicles you can drive. Uber recommend dealers who specialise in car sales and leasing that suit the needs of their drivers but however you choose to own your car there are rules around what you can claim against your tax:
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.
If you choose to purchase a car to use as your role of an Uber 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 Uber 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:
- Uber commissions and service charges;
- Any costs incurred as part of the Uber application process such as Private Hire Vehicle (PHV);
- 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);
- Uber Phone Hire Charge if you opt to use one of their phones/sat nav systems;
- Passenger extras such as water and sweets;
- Car cleaning and valeting;
- Vehicle Insurance and Public Liability Insurance;
- Accountants fees;
- Bank charges of a business bank account.
RECORDING YOUR BUSINESS TRANSACTIONS
It is likely you may be paid in cash or via bank transfer and, like any self employed sole trader, it’s important to keep accurate business activity records and be aware of any entitlements or tax relief that you may be eligible for. Doing so will make life easier when the time comes to completing Self Assessment. Incomplete or inaccurate records will demand more time and hike up any accounting costs. Don’t forget that failure to declare all forms of income could result in prosecution and a fine from HMRC. Accurate returns are important as they affect a person’s eligibility and ability to get things like mortgages and other types of credit finance.
A simple spreadsheet which records your income and expenses is a great start to keeping your business transactions logged and organised. You read some of our tips to keeping your accounts organised here.
You must keep your records and receipts for at least 5 years after the 31 January submission deadline of the relevant tax year. For Example: If you sent your 2016 to 2017 tax return online by 31 January 2018, you must keep your records until at least the end of January 2023.