If death and taxes are the only certainties in life, we have two questions.
- How can we make the most of the time we have?
- How can we make sure we’re only paying what we need to in tax?
Penalties issued by HMRC for mistakes or late tax returns can wipe out a chunk of cash that’s rightfully yours. Even when HMRC don’t start issuing fines, we see a surprising number of errors where a client paid more tax than they needed to.
If you love doing your accounts every year then you can probably stop reading here. For most taxi drivers, however, it’s a necessary evil. If you’re getting professional advice with your self assessment return then you have more time and energy for the rest of life and to make the most of it. Be it to earn more money, spend more time with your family or to have more time to enjoy spending your hard earned cash!
Vehicle Running Costs vs Mileage Costs
As a taxi driver you can choose to claim either vehicle running costs OR a mileage allowance (NOT both). Which works out more tax efficient for you will depend on your situation and it might be worth asking for help with the calculations. If you do choose a mileage allowance you’ll need to keep good records of your mileage and the purpose of each journey.
The greater the value of legitimate expenses you can demonstrate the lower your profit and therefore the lower your tax bill. So it’s important to make sure you keep good records and include all your business expenses.
What count as legitimate expenses?
You should keep records of the following business expenses so they can be deducted from the money coming into your business and (legitimately) reduce your tax bill. You’re fully entitled to claim tax relief on allowable business expenses, so if you don’t you are throwing money away!
- Vehicle Servicing costs
- Interest charges on any business capital loans taken out to purchase your taxi
- Road tax
- MOT certificates
- Cost of washing and cleaning your own taxi
- Your license and other registration fees
- Vehicle insurance
- AA/RAC membership
- Cost of vehicle hire
- Radio hire
- Phone usage for business use
- Parking fees
Capital Allowances for taxi drivers
Tax and capital allowance gets a little more complicated. If you buy a vehicle and use it as a taxi you can claim capital allowances on the cost of the vehicle. The rate is 18% per year and you may also be able to claim for other assets used for your business, up to a maximum threshold. There are some variations to what you’re eligible to claim based if you use a Hackney Carriage for your taxi business and a qualified bookkeeper can help you get this straight and easily claim all the tax relief you are entitled to.
Deadlines: 31st January isn’t far away
Through our long experience working with self employed and small business clients we know how hard you all work! Even if you do plan to start your self assessment early this year, fitting work around holidays means the Summer always disappears quickly. Then you only have a couple of months (September / October) before the pre-Christmas rush starts. Once you’ve got into November chances are you won’t have a chance to look at tax and admin until well after the New Year. By that point, you’re already on top of the online filing deadline.
We can help! As certified bookkeepers we can take record- and bookkeeping off your hands, quickly complete your Self Assessment return and leave you confident there won’t be any problems with HMRC. You’ll also know you’ve submitted a return with the best possible tax outcome for your business. If you’d like to have a free, no obligation chat to see what we can do and how that can make running your business easier please contact Diane on 01825 763378 or email her on firstname.lastname@example.org.