How Much Tax Do Taxi Drivers Pay? Self-Assessment Explained

“How much tax will I pay?” is the question every new driver asks. The honest answer is: it depends on your profit, not your fares. Here’s how the sums work for a self-employed taxi or private-hire driver.

You’re taxed on profit, not income

Tax isn’t charged on the total that lands in your account — it’s charged on your profit: fares and app earnings minus your allowable expenses (fuel or mileage, insurance, licensing, app commission and so on). Claim your expenses properly and your taxable profit — and your bill — drops accordingly.

The personal allowance

Most people can earn up to a tax-free personal allowance each year before any income tax is due. Only profit above that allowance is taxed, and then in bands — a basic rate on the first slice, higher rates as profits climb. For a typical full-time driver, most profit sits in the basic-rate band.

National Insurance

Self-employed drivers also pay Class 4 National Insurance on profits above a threshold. The rules around Class 2 National Insurance have changed in recent years, so it’s worth confirming your exact position — but the headline is that NIC is charged on profits, alongside income tax, through the same Self Assessment return.

Payments on account — the surprise for new drivers

Here’s the one that catches people out. If your tax bill is above a certain size, HMRC asks you to make payments on account — advance instalments towards next year’s bill, due in January and July. In your first year that can mean paying roughly one-and-a-half years’ tax in one go. It’s not extra tax, it’s early tax — but if you haven’t set money aside, it stings. Budget for it from day one.

A simple rule of thumb

Until you know your numbers, setting aside around 25–30% of your profit for tax and National Insurance keeps most drivers safe. An accountant can give you a precise figure and a payment plan so nothing is a shock.

Let us do the maths

We’ll work out exactly what you owe, make sure every expense is claimed, warn you about payments on account in advance, and file your Self Assessment on time — so you can drive knowing the tax side is handled.

Get taxi-driver accounts sorted — before MTD hits

Tax Digital helps taxi and private-hire drivers across Norwich, Norfolk and the wider UK keep clean digital records, claim every allowable expense and stay ready for Making Tax Digital for Income Tax. Fixed monthly pricing, no jargon, real people.

Talk to us about taxi-driver accounting  or see our accounting for taxi drivers page.

This article is general information, not personal tax advice. Figures reflect the 2025/26 tax year and can change — check your own position with us or HMRC before acting.