
If you’re a PCO driver, you already know that every penny counts. Between fuel costs, car maintenance, and platform commissions, keeping track of your expenses is essential. But there’s one thing many drivers overlook until it’s too late—TAXES!
Understanding taxes might not be the most exciting part of your job, but it’s super important. If you don’t stay on top of them, you could end up overpaying or facing penalties.
No worries—we’ve got you covered! Here you will get to know exactly what taxes you need to pay, how much, and how to reduce your tax bill legally.
1. Income Tax (Self-Assessment Tax Return)
As a private hire driver, you’re considered self-employed. That means no one deducts taxes from your earnings automatically—you have to do it yourself through a Self-Assessment Tax Return.
Your Income Tax depends on how much profit you make (earnings minus business expenses). Here’s how the 2024-2025 UK tax rates look:
Tax Band | Taxable Income | Tax Rate |
Personal Allowance | Up to £12,570 | 0% (Tax-Free) |
Basic Rate | £12,571 – £50,270 | 20% |
Higher Rate | £50,271 – £125,140 | 40% |
Additional Rate | Over £125,140 | 45% |
Example Calculation:
Let’s say you earn £35,000 after expenses:
- The first £12,570 is tax-free.
- The remaining £22,430 is taxed at 20%.
- Tax Due: £4,486.
How to Pay It?
- Register for Self-Assessment with HMRC (if you haven’t already).
- File your tax return online by 31st January each year.
- Pay your tax bill (or set up a payment plan if needed).
💡 Pro Tip: Always track your earnings and expenses to avoid last-minute surprises. A good way to manage costs is by using a PCO car hire plan that includes maintenance, insurance, and servicing in one package.
2. National Insurance Contributions (NICs)
National Insurance helps fund your State Pension, NHS, and other benefits. Since you’re self-employed, you’ll pay two types:
- Class 2 NICs – A fixed weekly rate if you earn above a threshold.
- Class 4 NICs – A percentage of your annual profits.
Type of NICs | Who Pays? | Rate for 2024-2025 |
Class 2 | If profits exceed £12,570 | £3.45 per week |
Class 4 | If profits exceed £12,570 | 9% on profits £12,571–£50,270
2% on profits over £50,270 |
Example Calculation:
If your profit is £35,000:
- Class 2 NICs: £3.45 x 52 weeks = £179.40.
- Class 4 NICs:
- 9% on £22,430 (profit over £12,570) = £2,018.70.
- Total NICs: £2,198.10.
How to Pay?
NICs are paid alongside your Income Tax through your Self-Assessment tax return.
💡 Pro Tip: Using rent to buy cars can help spread the cost of ownership while keeping expenses deductible!
3. VAT (Only If You Earn Over £90,000)
VAT (Value Added Tax) is a 20% tax on goods and services. You only need to register for VAT if your annual earnings exceed £90,000.
Do PCO Drivers Need to Pay VAT?
- Most drivers don’t need to worry about VAT unless they earn more than £90,000 per year.
- Uber, Bolt, and other platforms already charge VAT on their service fees, so you’re indirectly paying some VAT.
- If you register for VAT, you must charge VAT on fares and file quarterly returns.
How to Pay?
- Register for VAT through HMRC.
- Submit quarterly VAT returns.
- Pay any VAT due.
💡 Pro Tip: If you’re VAT-registered, you can reclaim VAT on business expenses like fuel, car maintenance, and insurance.
How to Reduce Your Tax Bill (Legally!)
Here are some ways to reduce your tax bill as a PCO driver:
1. Claim Business Expenses
You can deduct the following from your taxable income:
- Fuel Costs – Keep receipts and log mileage.
- PCO Car Rental or Lease Payments – A major deductible expense!
- Car Insurance & Road Tax – Essential costs for your business.
- Car Maintenance & Repairs – MOT, servicing, tyre replacements.
- Uber/Bolt Commission Fees – Deduct their service charges.
- Mobile Phone & Internet – If used for work.
- License Fees – TfL PCO license and private hire insurance.
💡 Pro Tip: If you hire a PCO car, make sure your rental agreement includes insurance and servicing to save money!
2. Use the Mileage Allowance
Instead of tracking fuel and repairs separately, HMRC allows mileage-based deductions:
- 45p per mile for the first 10,000 miles.
- 25p per mile after that.
Example Calculation:
- You drive 20,000 miles in a year.
- Claimable:
- First 10,000 miles: 10,000 x 45p = £4,500.
- Next 10,000 miles: 10,000 x 25p = £2,500.
- Total Deduction: £7,000 off your taxable income!
Final Thoughts
Taxes might seem complicated, but once you break them down, it’s just a matter of keeping track. Here’s a quick recap:
- Income Tax – Paid based on your profits.
- National Insurance Contributions (NICs) – Helps fund pensions & healthcare.
- VAT – Only applies if you earn over £90,000.
By claiming deductions and keeping accurate records, you can reduce your tax bill and keep more of your hard-earned money!
💡 Looking for a cost-effective way to drive? Check out our electric PCO car hire or rent-to-buy programs to save on fuel and expenses.