Can taxi drivers claim mileage?

Are you one of the UK’s 400,000 taxi drivers? Driving thousands of miles a year can take a toll on your vehicle, so you’ll need to be able to recoup those costs to maximise your profits. Read on to find out whether you can claim mileage on their business expenses and how to do so in this article.

Discover:

• When can taxi drivers claim mileage?
• Other expenses taxi drives should account for
• How to claim mileage on taxi journeys
• How to track your expenses more effectively with Countingup

Whether you’re a new driver or seasoned motorist that needs a refresher, find out how you can claim your mileage back on your tax bill to keep you on the road to profitability.  

Like any other expense claim, taxi drivers can only claim back the mileage they’ve undertaken as part of their job. Therefore, you’ll need to track the mileage you drive while on shift. However, this comes with two key conditions: that you’re on shift and within your licensed area.

As a taxi driver or private hire vehicle, you can use your car or van for personal usage. This can occur as part of leisure activities (like visits to family and friends) or running errands (like driving to buy groceries or drop your children off at school). In these circumstances, HMRC doesn’t make any mileage allowances because it’s no different from another person doing the same.

Therefore, you’ll need to carefully track the total miles you’ve driven only while on shift. It’s essential to keep accurate records and avoid claims on additional mileage. For example, deducting a higher mileage figure you think is right because you’ve kept poor records is not acceptable. This is because HMRC only allows claims on the true total figure of miles driven as part of your business, with careless record-keeping and expensing incurring fines of around £250. 

These expense claims include ‘dead miles’ you undertake as part of driving between ranks or fares, but only as long as you’re on shift and operating in your licensed area. This is explained more below.

Taxi drivers and private hire vehicles are given licenses to operate within a specific area. These licenses differ depending on where you work across the UK but are typically managed by a local council authority or public body like Transport for London. As such, you can claim mileage expenses on fares operating as a driver only within this area.

If you are a taxi or private hire driver who lives outside your licensed area, you can’t claim on any miles driven to reach this point. This is because you’re commuting to your place of work and are treated like any other employee doing the same (similar to our personal usage example above). However, if you already live in your licensed area, you can claim on miles driven when you’re on shift.

If you receive a fare that takes you out of your licensed area, you can claim on the miles driven back to your start point or home area. This is because the whole round trip is classified as work-related mileage, regardless of whether you’ve left your licensed area.

When making expense claims, it’s crucial to make consistent claims on all costs associated with your business. On top of tracking your mileage when working, you’ll also need to keep records of things like:

• Fuel costs
• MOT, repairs and servicing
• Insurance 
• Radio hire, business cards and website hosting
• Plate or taxi license

This consistency is important as HMRC have an awareness of the sort of costs your business might incur and can benchmark your figures against the wider industry. Disorganisation can indicate your records are incomplete or inaccurate. For example, it would appear strange to make expense claims on the miles driven by your vehicle while working, but not the fuel needed to run them. 

Therefore, making sure your records are correct and transparent can help you avoid penalties and run your business more efficiently.

Expenses on mileage are calculated according to a ‘flat rate’ pricing framework which has been in place since 2011. As with other expense claims, all mileage must be within the same tax year.

Cars and vans are provided with a rate of 40 pence per mile up to a total of 10,000 miles. Afterwards, mileage in excess of this figure is calculated at 25 pence per mile. For example, if you’ve driven 67,000 miles in a year, of which 50,000 were for work, you’d calculate your mileage expenses like the following:

(10,000 x 0.4) + (40,000 x 0.25)

This gives a total mileage figure claim of £14,000.

Tracking expenses is an essential part of any business’ operations but it can be a time-consuming and meticulous task. Use Countingup to manage your financial admin and make tracking business expenses easy.

Countingup is the business current account with free, built-in accounting software. With all your business’ accounting information in one place, you can ensure your records are always accurate.

Countingup comes with expense reminders and an innovative receipt capture tool so you can capture new expenses quickly on the go. 

The app also offers real-time profit and loss insights, so you can see how expenses affect your income and profit instantly. Gain complete confidence in your finances. Find out more here and sign up for free today.