Tax Guide for Self-Employed Delivery and Cab Drivers

Self-employed delivery drivers and cab drivers are on the rise in the UK, with courier work becoming an increasingly popular side hustle. Whether you deliver just 1 day a week or 7 days a week in London, it's important to understand the tax implications and how to file a tax return as a self-employed delivery driver.

What is a Tax Return?

A tax return is the process of declaring and paying tax on any untaxed income you've earned as a self-employed individual. As a sole trader in the UK, you owe tax based on your earnings each tax year, which runs from 6th April to 5th April. You will then pay your tax return by 31st January the following year.

How to File Your Tax Return: step-by-step guide

To file your tax return as a self-employed delivery driver or cab driver, follow these steps:

• Gather your records: Collect all relevant documents, such as invoices, receipts, and bank statements, to accurately report your income and expenses.
• Determine your filing status: As a self-employed individual, you will typically file as a sole trader. This means you report your business income and expenses on a Self-Assessment tax return.
• Complete the Self Employment (SA103) form: Use this form to report your delivery driving or cab income and expenses. Record your total earnings from all delivery platforms and deductible expenses like mileage, vehicle costs, and supplies.
• Calculate your Class 2 and Class 4 National Insurance contributions: As a self-employed individual, you are responsible for paying your own National Insurance contributions. Use the Self Employment (SA103) form to calculate your Class 2 and Class 4 contributions based on your net self-employment income.
• File your tax return: Submit your completed tax return, including the Self Employment (SA103) form, to HMRC by the January 31st deadline. You can file online or by mail.
• Pay your taxes: If you owe taxes, you can pay online, by phone, or by mail. Consider making quarterly estimated tax payments throughout the year to avoid penalties and interest.

What to Include in Your Tax Return

Your tax return should include:

• All self-employed income, mainly how much you've earned and what kind of income it is (e.g. self-employed, rental income, capital gains, pension payments etc)
• Anything you buy wholly and necessarily for work that can be deducted from your end-of-year total earnings, so you're only paying tax on your profits

Allowable Expenses for Delivery and Cab Drivers

As a self-employed delivery driver in London, you can typically deduct work-related expenses on Schedule C. Common deductible expenses include:

• Mileage - Keep track of all miles driven for business, including deliveries, picking up supplies, and running business-related errands. You can claim 45p per mile for the first 10,000 miles and 25p thereafter.
• Tolls and parking fees
• Mobile phone charges
• Motor lease payments
• Bike equipment like thermal bag, phone holder, helmet etc.
• Vehicle expenses like insurance, repairs and maintenance
• Delivery bags and other supplies
• Any meals while working

Make sure to keep receipts (VAT receipts if possible) as evidence of your expenses, as HMRC may request them.

Quarterly Estimated Tax Payments

If you're an independent contractor and expect to owe taxes of £1,000 or more, you're usually required to make quarterly estimated tax payments to avoid underpayment penalties. Those payments are generally due on 31st January, 31st July, 5th October, and 5th April of the following tax year.

Importance of consulting with tax professionals

By understanding your tax obligations and taking advantage of allowable deductions, you can ensure you're paying the right amount of tax as a self-employed delivery/taxi driver. Remember to keep accurate records and consult with your local tax professionals like those at Taxcare Accountancy if you have any questions or concerns, especially if you have multiple sources of income. Our team of tax experts, conveniently located at 103 Cranbrook Road, Ilford, offers competitive pricing for our services and has extensive experience helping self-employed delivery and cab drivers in the UK. Contact us today on 02084783383 or email us on [email protected] for a free consultation and learn how we can help you navigate your tax obligations with confidence.