How to reduce your tax as much as possible by deducting your vehicle-related expenses.
As a courier for Deliveroo or Uber Eats you are self-employed, and can therefore subtract your costs (subject to HMRC rules) from your income to reduce the amount of money you have to pay tax on.
Your biggest costs are likely to relate to your bike or vehicle, but unfortunately vehicles are one of the areas covered by the most complicated HMRC rules.
There are two main options:
- Claim for each individual expense separately
- Claim a flat rate expense
Claim each cost separately
This involves keeping records of each thing you spend money on in relation to your vehicle, from the cost of buying it to AA membership, then working out how much you can claim for each item.
Special rules called capital allowances cover how much you can deduct from your income in relation to big expenditures on items like cars and bikes that you would expect to be able to use for more than one year.
Currently, in any one tax year, you can claim:
- 100% of the cost of a new low emission (or electric) car, with emissions under 75g of carbon dioxide per kilometre;
- 18% of the cost of a car with emissions up to 130g of CO2 per kilometre (if it isn’t eligible for the 100% allowance); or
- 8% of the cost of a car with emissions over CO2 emissions over 130g/km.
The car rules don’t apply to motorbikes, scooters or bikes, and these are always deducted at 18%.
These allowances will be calculated differently if you already owned the vehicle before you started using it for business purposes, in which case allowances will be calculated based on the value at the time that you started using it for business. If you use the vehicle for personal use as well as business, you will also have to apportion all the costs for the proportion of use that is business-related, and the same applies if you only use the vehicle for part of the tax year – for example if you buy or sell it during the year.
In addition to the costs of the vehicle, you can claim for fuel, maintenance, parts, insurance etc. For all of these you will need to work out what proportion of the costs are business-related and what proportion are personal. So, if you do 10,000 miles in a year, and 4,000 of those relate to business use, you will be able to claim 40% of each cost.
Claim a flat rate expense
This is probably the simplest option, but in some cases it might mean you can claim a smaller deduction (and therefore pay more tax) for example if you use a car that is eligible for a 100% capital allowance, or your vehicle has particularly high costs per mile.
You will need to be able to show how many business miles you have done in the year. It’s best if you try to make this figure as accurate as possible, but HMRC will also accept estimates, if they are made on a reasonable basis. For example, you could work out an accurate business mileage figure for one month then multiply this up by 12, assuming there’s no reason to expect your mileage would be significantly different across the whole year.
We’ve got a whole article here about easy, low-fuss ways to track and record your business mileage.
Once you have calculated the number of business miles, you just multiply it by the mileage rate that applies to your vehicle. The current rates are:
|First 10,000 miles/year||Miles over 10,000|
Considerations for both methods
Travel to or from your normal place, or area, of work can’t be claimed. So, for example if you live in Bolton and normally travel into Manchester to work Deliveroo, travel from your home to the login zone cannot be deducted. In this case only travel while you are actually working will count. If you occasionally can’t get enough slots in Manchester, and travel to Liverpool to work, you can claim the full cost of the journey (under either method) from home to Liverpool and back, as well as the journeys you make while you’re working, as Liverpool is not your normal place of work.
You have to choose one option or the other – you can’t double up and claim costs and mileage! You can however claim for extras like parking even if you go for the mileage option.
Once you choose one of the options, and submit a tax return using it, you will need to stick with that option for as long as you use that vehicle, so it’s worth thinking about it from the start and ensuring you make the best choice that will save you the most tax.
If we do your tax return we will ask you for details of your vehicle and all your expenses, and your total miles, then work out for you which option will give you the lowest tax bill. For more details on our tax return service, take a look here.