Navigating New Tax Rules for Uber & Private Hire Drivers
All businesses operating through digital platforms are required to collect information on their workers. This includes details regarding the money they make, and whether taxes should be paid.
Whether you work a side hustle or you’re a full-time gig economy worker, you’re likely to be impacted. His Majesty’s Revenue and Customs (HMRC) are closing in on people who are underpaying their taxes.
From January 2024, new tax rules for Uber and private hire drivers (among other trades) came into force.
We investigate the changes, and what the outcome could be for private hire drivers like you.
A ‘warning’ to Uber drivers from HMRC?
The rise of digital platforms that provide a service to consumers, like Etsy or Uber, has been swift. Now that we can access anything from our phones, digital platforms are cashing in and shaping the modern economy.
- Digital platforms include apps and websites which facilitate the provision of goods and services such as the provision of taxi and private hire services, food delivery services, freelance work and the letting of short-term accommodation. – HMRC
Until now, the responsibility to report earnings has fallen on gig-workers, or those who are self-employed.
Underreporting, calculation errors, or not reporting at all has resulted in an estimated tax gap of £32 billion in 2021. The HMRC are now taking action to close the gap.
In October of 2023, the Revenues and Customs office issued new rules to clamp down on those evading tax.
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What are the HMRC tax changes for Private Hire, Taxi and Fast Food Delivery Drivers?
From January 2024, digital platforms like Uber are required to record and report the income of their drivers directly to HMRC.
From January 2025, workers will be required by law to pay tax on any potential taxable earnings.
While HMRC already had powers to access some of this information, the new rules mean it can quickly and efficiently access data from companies that operate outside of the UK.
A partnership with the Organisation for Economic Co-operation and Development (OECD) includes 38 countries and makes it easier for members to track the earnings of their tax residents. This means if you are a tax resident in your home country, but earn in the UK, your home country can still tax you on those earnings if they are an OECD member.
How to prepare for the new tax rules as an Uber or private hire driver
If private hire, fast food delivery or courier driving is your sole source of income, you must file a Self-Assessment tax return if your earnings, after expenses, are more than £1,000. You can find a great article detailing more about registering for tax here.
If you have multiple sources of income, these will be taxed progressively in line with income tax thresholds.
Keeping on top of your records and paperwork is important, especially when working for multiple platforms. When filling out your Self Assessment, you’ll be required to declare income from all sources, so it pays to be organised.
How much will I have to pay?
The amount of tax you’re required to pay differs depending on your total income and expenses.
However, we’ve included an example from LITRG.org to help explain how taxable income can be broken down:
From: Low Incomes Tax Reform Group
Conclusion
Getting your head around taxes can be complex and confusing, but it pays to stay compliant.
The HMRC have the power to fine you if they discover you are underreporting your income.
You can learn more about reporting rules for digital platforms here, and the LITRG has some great articles regarding tax returns, National Insurance, and Self-assessing.
The vast majority of workers pay the correct amount of tax, the new measures are not about demonising those in the gig-economy.
But the HMRC hopes that these new measures will help to close the Tax Gap, meaning more money for things like infrastructure and services that benefit us all.
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