5 tax mistakes taxi drivers make (and how they cost you money)
The five most common tax mistakes we see self-employed taxi drivers make - and what each one actually costs, in plain English.
We see the same handful of mistakes over and over, from drivers who are otherwise excellent at running their business. None of them are stupid mistakes - they’re just what happens when nobody explains the rules properly. Here are the five worth fixing first.
1. Not setting tax money aside as you earn
This is the one that catches out almost every driver at least once. Your first tax bill doesn’t land until 31 January after your first full tax year - and it can arrive as a double hit, because you may owe a full year’s tax and your first payment on account towards next year’s bill, both at once. If you haven’t been setting anything aside, that’s a genuinely painful invoice. The fix is boring but it works: move a fixed percentage of every week’s takings into a separate account, from week one, and never touch it.
2. Guessing your mileage instead of logging it
Whether you claim the flat mileage rate or actual vehicle costs, HMRC expects you to be able to show your working. A driver who estimates their mileage at the end of the year almost always gets the number wrong - usually too low, which means paying more tax than necessary. A simple log, kept daily or weekly, is worth real money over a full year. It’s also exactly what protects you if HMRC ever asks a question about your return.
3. Assuming platform income is “already sorted”
If you pick up work through Uber, Bolt, or similar apps alongside your own private hire jobs, that income is yours to declare - the platform reporting your data to HMRC doesn’t mean your tax is dealt with. Since January 2024, digital platforms have in fact been required to report driver earnings to HMRC annually, which makes it easier than ever for mismatches between what you declared and what the platform reported to be noticed. All of your self-employment income, from every source, goes on one Self Assessment return. We’ve written more on this in mixing platform work with your own business.
4. Missing a deadline because “it’s not January yet”
The 31 January deadline gets all the attention, but it’s not the only one. If you’re newly self-employed, you need to register with HMRC by 5 October - miss that, and you can be fined even before you’ve filed anything. Payments on account fall due on 31 January and 31 July. And if your turnover is high enough to be brought into Making Tax Digital, there are now quarterly deadlines to keep on top of too. See our full deadlines guide for the complete calendar.
5. Assuming your State Pension is being sorted automatically
Since April 2024, National Insurance for the self-employed changed: if your profits are above the Small Profits Threshold, you get a qualifying year automatically. But if your profits are lower some years - which happens to almost every driver at some point - you won’t get that year credited unless you actively choose to pay voluntary Class 2 contributions, at a genuinely small cost. Skip it without realising, and you can end up short of the 35 qualifying years needed for the full State Pension decades from now. It’s worth checking your forecast well before it matters - we explain how in our State Pension guide.
None of these are things you should have to catch yourself
Every one of the mistakes above is exactly what a proper Income & Expenditure system, tax-saving recommendations, and someone keeping an eye on your dates are meant to prevent. That’s what every one of our plans covers, from £45 a month. Ring Michael on 07799 414972 for a free, confidential chat about where you stand.