Tax Guide for Taxi and Private Hire Drivers

The Accounted Business Team·8 January 2026·6 min read

Driving for a Living? Here Is What You Need to Know About Tax

Whether you drive a black cab, a licensed private hire vehicle, or work through platforms like Uber and Bolt, you need to get your tax right. Most taxi and private hire drivers are self-employed, which means registering with HMRC, keeping records, and filing a Self Assessment tax return each year.

This guide covers the key expenses you can claim, the difference between employed and self-employed status, and how to keep more of what you earn for the 2025/26 tax year.

Employed or Self-Employed?

The first question is whether you are genuinely self-employed or effectively employed by the platform or company you drive for. This matters because it determines how you pay tax and what expenses you can claim.

Traditional Taxi and Private Hire

If you own or lease your own vehicle, choose your own hours, and are not controlled by a single operator, you are self-employed. Most black cab drivers and many private hire drivers fall into this category, even if they work through a radio circuit or booking office.

Uber, Bolt, and App-Based Drivers

Following the 2021 Supreme Court ruling in Uber BV v Aslam, Uber drivers in the UK are classified as workers, not self-employed. This means Uber handles certain employment rights such as holiday pay and minimum wage. However, for tax purposes, many app-based drivers are still treated as self-employed and must file Self Assessment returns. The distinction between worker status for employment rights and self-employed status for tax is an important one. If you are unsure, check HMRC's CEST tool online or speak to an accountant.

If you are genuinely self-employed, you must register with HMRC, keep records of all income and expenses, file a Self Assessment return by 31 January, and pay Income Tax and National Insurance on your profits.

Vehicle Costs: Your Biggest Expense

For most drivers, the vehicle is the single largest cost. How you claim depends on whether you lease, finance, or own the vehicle outright.

Leasing

If you lease your vehicle, the monthly lease payments are an allowable business expense. If you use the vehicle for any personal journeys, you need to calculate the business-use percentage and claim only that proportion. For many full-time taxi drivers, business use is 80% or higher.

Buying on Finance

If you buy the vehicle on hire purchase or a personal contract purchase (PCP), you cannot claim the monthly payments as an expense. Instead, you claim capital allowances on the purchase price of the vehicle. The Annual Investment Allowance allows you to deduct the full cost of the vehicle in the year of purchase, up to £1 million. Alternatively, you can use writing down allowances to spread the deduction over several years. Interest on the finance agreement is a separate claimable expense.

Buying Outright

If you pay cash for the vehicle, claim capital allowances on the full purchase price. Electric vehicles qualify for 100% first-year allowances, which means you can deduct the entire cost in year one.

Mileage Method

Instead of claiming actual vehicle costs, you can use HMRC's simplified mileage rates: 45p per mile for the first 10,000 business miles, then 25p per mile after that. This flat rate covers fuel, insurance, repairs, servicing, and depreciation all in one. For high-mileage drivers, the actual cost method often gives a larger deduction, but the mileage method is simpler. Once you choose a method for a particular vehicle, you must stick with it.

Fuel

If you are claiming actual costs rather than mileage rates, fuel is a major expense. Keep receipts for every fill-up and calculate the business-use percentage. A fuel card can simplify record-keeping. If you use the mileage method, fuel is already included in the per-mile rate — you cannot claim it separately.

Insurance

Taxi and private hire insurance is significantly more expensive than standard car insurance. The full cost of your business vehicle insurance is claimable if the vehicle is used solely for work. If there is personal use, claim the business proportion. Public liability insurance, if you carry it, is also a deductible expense.

Licence and Regulatory Fees

All licence fees directly related to your work are allowable expenses, including your local authority hackney carriage or private hire driver licence, your vehicle licence (plate fee), DBS (Disclosure and Barring Service) checks required for licensing, DVLA driving licence renewal (the portion attributable to work), and topographical knowledge tests such as the Knowledge of London.

Radio Circuit and App Fees

Traditional Radio Work

If you pay a weekly or monthly fee to a radio circuit or booking office, this is fully deductible. The fee is a straightforward business expense.

App Commission

Uber, Bolt, and similar platforms take a percentage commission from each fare. This commission is not an expense you claim — it is simply not income you received. Your taxable income is the amount that actually reaches your bank account or is credited to you, after the platform has taken its cut. Check your platform earnings statements carefully to confirm the net figure.

Cleaning and Valeting

Keeping your vehicle clean is essential for licensing and customer satisfaction. Car wash costs, interior cleaning products, air fresheners, seat covers, and floor mats are all claimable. If you pay for a professional valet service, that cost is deductible too.

MOT, Servicing, and Repairs

The cost of MOT tests, regular servicing, repairs, replacement tyres, and breakdown cover is claimable if you are using the actual cost method. These are not claimable if you use the mileage rate, because the rate already accounts for wear and tear.

Road Tax (Vehicle Excise Duty)

Road tax is claimable under the actual cost method. Again, if you use mileage rates, it is already included.

Other Claimable Expenses

Phone Costs

Your phone is essential for navigation, accepting bookings, and communicating with passengers. Claim a reasonable proportion of your phone bill, or the full cost of a dedicated work phone. Phone mounts, chargers, and dashcams also count.

Protective Equipment and Uniform

Hi-vis vests, waterproof jackets for waiting at ranks, and any branded uniform items are claimable. General clothing is not, even if you wear it only for work.

Accountancy and Software

Accountancy fees, bookkeeping software subscriptions, and the cost of filing your tax return are all deductible.

Parking

Legitimate parking charges incurred while waiting for fares or picking up passengers are claimable. Parking fines and penalties are never claimable.

National Insurance

As a self-employed driver, you pay Class 2 National Insurance at £3.45 per week (if profits exceed £6,725) and Class 4 NI at 6% on profits between £12,570 and £50,270, then 2% above that. Both are collected through your Self Assessment return.

Record-Keeping

HMRC requires you to keep records for at least five years after the filing deadline. At a minimum, keep your platform earnings statements and fare records, fuel receipts, insurance documents, licence fee receipts, all other expense receipts, bank statements, and a mileage log if using the mileage method.

Photograph paper receipts as soon as you get them — thermal till receipts fade quickly.

Making Tax Digital

From April 2026, self-employed individuals with income above £50,000 must keep digital records and submit quarterly updates to HMRC under Making Tax Digital for Income Tax. If your income is above this threshold, you need MTD-compatible software. Even if you are below the threshold now, digital record-keeping is good practice.

Keep Every Penny You Are Entitled To

Taxi and private hire driving involves long hours and significant running costs. Every legitimate expense you claim reduces your tax bill and puts more money in your pocket. Accounted handles all of this automatically — connecting to your bank, categorising your income and expenses, and keeping your records MTD-ready. Penny, your AI bookkeeper, learns your spending patterns and flags anything that needs attention. Start your free trial with Accounted today and let Penny take the admin off your plate so you can focus on driving.

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