Understanding Self-Employment Tax
As a UK delivery driver working with platforms like Uber, Deliveroo, or Just Eat, you're classified as self-employed by HMRC. This means you're responsible for managing your own tax affairs, including filing an annual self-assessment tax return and paying income tax and National Insurance contributions on your profits.
The good news? You can deduct allowable business expenses from your earnings before calculating tax, potentially saving you £1,800 or more per year. Understanding how the tax system works is crucial to maximizing your take-home income.
Key Tax Rates for 2024/25
- • Personal Allowance: £12,570 (tax-free)
- • Basic Rate (20%): £12,571 - £50,270
- • Higher Rate (40%): £50,271 - £125,140
- • Class 2 NIC: £3.45/week (if profit over £12,570)
- • Class 4 NIC: 9% on profits £12,571-£50,270
Making Tax Digital (MTD) Requirements
Making Tax Digital (MTD) is HMRC's initiative to move the UK tax system online. Currently, MTD applies to VAT-registered businesses, but it's expanding to include income tax for self-employed individuals.
From April 2026, if you're self-employed and earn over £50,000 annually, you'll need to:
- Keep digital records using MTD-compatible software
- Submit quarterly updates to HMRC (every 3 months)
- Complete an end-of-year tax return
- Use approved software like MoneyMiles for compliance
MoneyMiles is MTD-Ready
Our platform is designed to be fully compliant with Making Tax Digital requirements, automatically tracking your income and expenses in a format that's ready for HMRC submission.
Allowable Business Expenses
As a self-employed delivery driver, you can deduct legitimate business expenses from your earnings before calculating your tax bill. This significantly reduces the amount of tax you owe.
What You CAN Claim:
Vehicle Costs
- • Fuel for business journeys
- • Vehicle insurance
- • MOT and servicing
- • Repairs and maintenance
- • Vehicle tax (road tax)
Equipment & Supplies
- • Phone and data plan (business use %)
- • Thermal delivery bags
- • High-vis clothing
- • Bike/motorcycle accessories
- • Cleaning supplies
Professional Fees
- • Accounting software (like MoneyMiles)
- • Accountant fees
- • Professional indemnity insurance
- • Bank charges for business account
Other Costs
- • Parking (while working)
- • Tolls and congestion charges
- • Training courses
- • Work-related subscriptions
What You CANNOT Claim:
- • Personal expenses or private use
- • Fines or parking tickets
- • Travel from home to your first job (commuting)
- • Regular clothing (unless it's branded/uniform)
- • Food and drink for personal consumption
- • Entertainment expenses
Mileage Allowance
The simplified mileage expenses method is the easiest way for most drivers to claim vehicle costs. Instead of tracking every fuel receipt and repair bill, you simply claim a fixed rate per mile driven for business purposes.
HMRC Mileage Rates 2024/25
Example calculation: If you drive 15,000 business miles in your car, you can claim:
- First 10,000 miles: 10,000 × £0.45 = £4,500
- Next 5,000 miles: 5,000 × £0.25 = £1,250
- Total deduction: £5,750
At the 20% basic tax rate, this saves you £1,150 in tax. Plus additional savings on National Insurance!
Important: Business Miles Only
You can only claim mileage for business journeys (picking up orders, delivering, moving between zones). Commuting from home to your first pickup location does NOT count as business mileage.
📱 Track Every Mile Automatically
Never miss a claimable mile with automatic GPS tracking. The MoneyMiles mobile app runs in the background and logs every business journey.
- ✓Automatic trip detection - starts when you begin driving
- ✓One-tap classification for business vs. personal trips
- ✓GPS-verified accuracy for HMRC compliance
- ✓Weekly mileage summaries via push notifications
- ✓Export HMRC-ready logs for tax return
Manual mileage logging is time-consuming and easy to forget. With automatic GPS tracking, you'll capture every claimable mile and save 10+ hours per month on admin work.
National Insurance Contributions
As a self-employed delivery driver, you pay two types of National Insurance:
Class 2 NICs
If your profits are £12,570 or more per year, you pay Class 2 NICs at £3.45 per week (£179.40 per year). This is collected through your self-assessment tax return.
Purpose: Qualifies you for state pension and certain benefits.
Class 4 NICs
Paid on profits between £12,570 and £50,270 at a rate of 9%. Above £50,270, the rate drops to 2%.
Example: If your profit is £30,000 after expenses:
- Profit above threshold: £30,000 - £12,570 = £17,430
- Class 4 NIC: £17,430 × 9% = £1,568.70
Class 2 and Class 4 NICs are calculated automatically in your self-assessment tax return and paid alongside your income tax.
VAT Registration Thresholds
Most delivery drivers don't need to register for VAT unless their taxable turnover exceeds £90,000 in a 12-month period (2024/25 threshold).
Should You Register for VAT?
If you're approaching the £90,000 threshold, consider these factors:
- ✓ Pros: You can reclaim VAT on business expenses (fuel, repairs, etc.)
- ✓ Pros: Makes you look more professional to potential clients
- ✗ Cons: Additional admin and quarterly VAT returns
- ✗ Cons: Must charge VAT on services (if applicable)
For most delivery drivers earning under £90,000, staying outside the VAT system is simpler and doesn't impact your business negatively.
Tax Deadlines & Payment Dates
Missing HMRC deadlines can result in automatic fines and interest charges. Here are the key dates you need to remember:
5 October
Registration deadline for self-assessment. Register by this date in the year after you started self-employment.
31 October
Deadline for paper self-assessment tax returns (if you still file on paper).
31 January
Most important date! Deadline for:
- Online self-assessment tax return
- Payment of any tax owed
- First payment on account (if applicable)
31 July
Second payment on account deadline (if your tax bill was over £1,000 and you pay less than 80% through other means).
Late Filing Penalties
- • 1 day late: £100 fine
- • 3 months late: £10 per day (up to £900)
- • 6 months late: 5% of tax owed or £300 (whichever is greater)
- • 12 months late: Another 5% of tax owed or £300
- • Plus interest on any unpaid tax
Common Tax Mistakes to Avoid
Many delivery drivers make these avoidable mistakes that can cost them hundreds or thousands of pounds:
1. Not Keeping Proper Records
HMRC requires you to keep records for at least 5 years. Without proper documentation of mileage, receipts, and earnings, you risk penalties and missed deductions.
2. Claiming Personal Expenses
Only claim genuinely business-related expenses. Claiming personal costs (like your regular shopping or commute) can trigger an HMRC investigation.
3. Missing the Self-Assessment Deadline
Even being one day late triggers a £100 automatic fine. Set reminders and file early to avoid last-minute stress and penalties.
4. Not Setting Money Aside for Tax
Many drivers spend all their earnings and can't pay their tax bill when it's due. Save 25-30% of your profit for tax and NIC.
5. Forgetting About National Insurance
Your tax bill includes both income tax AND National Insurance. Many drivers only budget for income tax and get caught short.
6. Mixing Both Expense Methods
Choose either simplified mileage expenses OR actual costs - you can't use both. Mixing methods will cause errors in your tax return.
How MoneyMiles Helps
MoneyMiles is designed specifically for UK gig economy drivers to make tax compliance effortless:
Automatic Mileage Tracking
GPS-powered tracking that automatically logs every business mile, calculating your deductions in real-time.
Expense Management
Snap photos of receipts, categorize expenses, and store everything securely for HMRC compliance.
Real-Time Tax Estimates
Know exactly how much tax you owe at any time, helping you budget and save throughout the year.
MTD Ready
Fully compliant with Making Tax Digital requirements, ready for HMRC integration when required.
Frequently Asked Questions
Start Tracking Your Tax Deductions Today
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