How Do Uber Drivers Pay Taxes in the UK?

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How Do Uber Drivers Pay Taxes in the UK?

Thinking of joining the 40,000-strong community of Uber drivers working in the UK? Here’s a look at how much you can expect to make a year and what you might have to pay in taxes.

Who can become an Uber driver in the UK?

To become an Uber driver, you’ll need to meet these requirements:

  • Be 21 years old or over.
  • Have a valid UK driving licence. If you have an EU or other foreign driving licence, you’ll need to exchange it for a UK driving licence.
  • Have a private car hire licence? Uber can help you get one through their Ignition programme.
  • Own a car manufactured in 2008 or later.

How much do Uber drivers make a year?

It depends on how much you work. You can take as little as one trip a month and still be on Uber’s books. There’s no limit to how many hours you can work in any given month.

But what’s the hourly rate?

Recently, Uber’s UK head of public policy Andrew Byrne revealed three “typical” hourly rates:

  • £9.50 per hour if you drive your own car
  • £9 per hour if you’re paying for your car through car finance
  • £8 per hour if you drive a hired car

These are the rates you can expect to earn after deducting expenses, including Uber’s cut. Uber’s cut is 25 percent of your earnings.

What is my tax status as an Uber driver?

Uber drivers are self-employed. You’re responsible for paying your own taxes and National Insurance contributions. You must also complete a self-assessment tax return each year.

On the bright side, you don’t pay taxes on all your income, but only on your profits. In other words, you can deduct your business expenses from your total earnings.

How much do I pay in taxes as an Uber driver?

Most Uber drivers in the UK are sole traders. Sole traders pay tax at the same rates as regularly-employed people.

HMRC’s tax rates for the 2018/19 tax year are:

Tax Rate (Band)Taxable IncomeTax Rate
Personal allowanceUp to £11,850 0%
Basic rate£11,851 to £46,35020%
Higher rate£46,351 to £150,00040%
Additional rateOver £150,00045%

Looking forward, the 2019/20 tax rates are:

Tax Rate (Band)Taxable IncomeTax Rate
Personal allowanceUp to £12,500 0%
Basic rate£12,501 to £50,00020%
Higher rate£50,001 to £150,00040%
Additional rateOver £150,00045%

Sole trader National Insurance rates are a bit different to those employees pay. You’ll have to pay:

  • Class 2 National Insurance, which is £2.85 a week
  • Class 4 National Insurance of 9 percent on profits between £8,164 and £45,000
  • Apply Class 4 National Insurance of 2 percent on profits over £45,000

What expenses can I deduct as an Uber driver?

As an Uber driver, driving is your core service. So your car is probably your biggest expense. You can deduct at least part of your car-related expenses. You have to prove you made them “wholly and exclusively” for business purposes.

It’s unlikely you’ll be able to get away with deducting all your car costs in full. HMRC will probably question whether you use the car for personal travel, at least some of the time. This means it’s important to keep detailed records.

How can I deduct my car business costs as an Uber driver?

You can deduct car-related business costs using one of two methods: The mileage method or the actual costs method.

uber mileiq google maps smartphone apps

If you owned your car before you became an Uber driver, the mileage method is probably the simplest. Just track your journeys using an app like MileIQ and multiply your business miles by the Approved Mileage Allowance Payment (AMAP) rates. Don’t forget to keep a mileage log.

The actual costs method is a bit more involved. You’ll need to tot up all your car-related costs and deduct personal use. But if you purchased or leased a car to use as an Uber driver, this method can probably result in a bigger deduction.

Uber driver expenses checklist: Other deductions you shouldn’t miss

Aside from your mileage deduction or actual car costs, you can also deduct the following expenses:

  • Phone related costs (since you have to use Uber’s driver’s app) less any personal use
  • Water or snacks you hand out to passengers
  • Uber’s cut of your earnings
  • The fee for getting a private car hire licence
  • Car cleaning and valeting costs
  • The cost of any training
  • Bank fees and charges
  • Home as office deduction

Will Uber drivers continue being self-employed in future?

A London tribunal recently decided that Uber drivers shouldn’t be regarded as self-employed. This means your tax status and how much money you earn per hour could change in the future.

That said, Uber plans to take its case to the supreme court if necessary. And this could take some time.

So, for now, nothing is going to change.

Andre Spiteri

André Spiteri is an expert fintech copywriter with a passion for making personal finance simple and accessible to everyone. Formerly a financial lawyer, he now helps fintech businesses establish their authority online and make more sales through the power of words. Head over to MaverickWords.com to learn more.

MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.

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