One of the biggest advantages of being self-employed as a driver is the range of expenses you can offset against your income — which means you pay tax on less of what you earn.
But a lot of drivers don't claim everything they're entitled to. Either they don't know about certain expenses, or they're worried about getting it wrong. This guide covers exactly what you can and can't claim.
The golden rule
HMRC allows you to deduct expenses that are "wholly and exclusively for business purposes". For taxi drivers, this is relatively straightforward — most of your costs are directly related to driving.
The tricky area is anything with a personal element, like your phone or home broadband. For those, you can only claim the business proportion.
Vehicle expenses: two methods
This is the big one. You have two choices for how you claim vehicle costs, and you should stick with the same method each year.
Method 1: Simplified mileage rate
You claim a fixed rate per business mile:
- 45p per mile for the first 10,000 business miles in the tax year
- 25p per mile for every mile after that
This rate covers fuel, wear and tear, insurance, and everything else related to running the vehicle. You cannot then also claim for fuel or servicing separately — it's all bundled in.
This is the simpler option and works well for most drivers, especially if you drive a reasonably efficient vehicle. The main thing you need is your total business mileage for the year.
Method 2: Actual costs
You claim your actual vehicle running costs:
- Fuel (business proportion)
- Vehicle insurance
- Servicing and repairs
- Road tax (VED)
- MOT
- Breakdown cover (e.g. AA or RAC)
- Car finance interest (not the capital repayment, just the interest)
Plus you can claim capital allowances on the vehicle itself — a percentage of the purchase price each year.
This method involves more record-keeping and is generally only worth it if your vehicle costs are high or if you drive a lot of personal miles (reducing the mileage rate's effectiveness).
If you're not sure which method suits you, ask us — we work it out for each driver.
Licensing fees
All your taxi and private hire licensing costs are fully deductible:
- Private hire driver's licence fee
- Vehicle licence fee
- DBS (Disclosure and Barring Service) check costs
- Medical examination fees required for licensing
- Licence renewal costs
Keep the receipts from your local authority or Transport for London.
Platform fees and commission
If you drive for Uber, Bolt, or another platform, they take a commission from your fares. That commission is a legitimate business expense — you only pay tax on what you actually receive, not the gross fare shown on the platform.
Your annual earnings summary from the platform should show both the gross fare and the commission deducted.
Phone and data
If you use your mobile phone for navigating, accepting bookings, or communicating with your operator, you can claim the business proportion of your phone costs.
For most taxi drivers, this is high — if you use your phone primarily for work, you might reasonably claim 70-90% of your monthly contract costs. Keep a note of your reasoning.
If you bought a dedicated work phone that you only use for driving, you can claim 100%.
Cleaning and valeting
Keeping your vehicle clean for passengers is a business requirement, and the cost is deductible. This includes:
- Car washes
- Interior valeting
- Cleaning products you buy yourself
Keep receipts where you can, or estimate based on what you typically spend.
Uniform and protective clothing
If you wear a uniform specific to your job (branded by an operator, for example), you can claim for it. Generic smart clothing doesn't count — HMRC expects ordinary clothes to double as personal use.
Breakdown cover and vehicle clubs
If you pay for AA, RAC, or similar breakdown cover for your work vehicle, that's deductible. Professional memberships related to your trade are also allowable.
Accountancy fees
This one is easy to forget: the cost of having your tax return prepared by an accountant is itself a deductible expense. Our £99 fee reduces your taxable profit by £99 — so it costs you even less in practice once you account for tax relief.
Insurance
Your taxi or private hire vehicle insurance is fully deductible. If you have a separate personal car, make sure you only claim the insurance for the work vehicle.
What you can't claim
To avoid any issues with HMRC, it's worth knowing what's off the table:
- Personal travel — commuting to a base, or personal use of the vehicle
- Parking fines and penalties — HMRC specifically excludes fines
- Personal clothing — even if you wear it while working
- Food and drink — unless you're away overnight for work purposes
- Your own drawings or salary — as a sole trader, what you pay yourself isn't an expense
Keep your records
You don't need to send receipts to HMRC when you file, but you do need to keep them for at least 5 years in case of an enquiry.
A simple folder — digital or paper — with your annual platform summary, insurance documents, and licensing receipts is usually enough. Bank statements fill in the gaps.
Make sure you're not missing out
The difference between a driver who claims everything they're entitled to and one who doesn't can easily be hundreds of pounds a year in tax saved.
That's exactly why we exist. For £99, we review everything you've spent, identify every deduction, and make sure your return is filed correctly.