What expenses can a taxi driver claim?

Taxi drivers can lower their tax bill by expensing the following:

1. Fuel costs

As a taxi driver, you can claim 100% of the VAT on your fuel costs (e.g. petrol, diesel, EV charging expenses). However, these claims can only be for business expenses. The driver must prove that the fuel was used for work purposes, not personal trips.

2. Vehicle repairs and maintenance

Any costs associated with running your vehicle can be claimed, including:

• Car servicing and maintenance
• Repairs
• Annual road tax (also known as Vehicle Excise Duty)
• MOT test

3. Licence and registration fees

Any fees associated with your vehicle and company can be claimed, including taxi operator licensing and registration fees.

4. Taxi upkeep

Washing and cleaning your vehicle is also eligible for tax relief. These expenses are sometimes included in the mileage fee, but it differs when you are a self-employed taxi driver.

5. Interest on loans

If the vehicle used to run your taxi business was financed with a loan, you can claim back the interest on it.

6. Toll and parking fees

These fees are only tax deductible if they occur while conducting business – not for personal driving.

7. Radio hire

Some cab drivers opt to install a two-way radio for communications. These can be hired from various companies and the expense can be claimed.

8. Taxi insurance

Taxi insurance, a type of public liability insurance, is considered a business and permissible expense (per the HMRC) and is tax-deductible.

Bonus read: [Do taxi drivers need public liability insurance].

8. Breakdown cover

If you do not have public hire insurance, your public liability insurance likely doesn’t include breakdown cover. This can be added to your taxi insurance policy and be claimed as part of your business expenses. Depending on your policy and the company you are insured with, specialist-hired vehicles may be available if your car is out of commission.

9. Accounting fees

Taxi drivers can claim some of their accountant’s fees. Self-employed taxi drivers can claim accounting expenses directly related to their business operations.

This includes tax advice on business issues. If your accountant deals with your personal and business matters, only services relating to your work are tax-deductible.

10. Mileage

Taxi drivers can claim mileage incurred while working to reduce their tax bill. There are two stipulations for submitting this kind of claim:

1. The driver must be on shift
2. The driver must be working in their licensed area.

Taxi drivers need to keep a log of the miles they have covered while on shift.

Bonus read: [Can taxi drivers work outside their licensed area].

11. Membership fees

Any memberships required for taxi drivers to conduct their business are eligible for tax reductions. These memberships include:

• Royal Automobile Club (RAC)
• Automobile Association (AA)
• Taxi associations

A self-employed taxi driver can claim for the same things as a private or public hire taxi driver. The only difference is when it comes to submitting your self-assessment tax return:

As a self-employed driver, you will need to:

• Register as self-employed with HMRC.
• Fill out a self-assessment tax return (this can be done online).
• Apply and pay for National Insurance – a special kind of tax that goes towards state pension when annual profits exceed £6,475.
• Claim tax relief on the expenses listed.
• Adhere to tax submission deadlines.

The UK tax year runs from 6 April to 5 April the following year. This means you must submit your self-assessment tax return online and pay your taxes between 6 April and 31 January of the following year. The paper return must be submitted by 31 October of the same tax year. Failure to submit in time will result in an instant £100 late submission penalty.