How is tax calculated for a taxi driver earning £35,000?

A taxi driver earning £35,000 gross with £8,500 in expenses and 12,000 business miles would have a taxable profit of £21,500 (after deducting expenses and mileage allowance). After the £12,570 Personal Allowance, the taxable amount is £8,930. Income Tax at 20% = £1,786. Class 4 NIC at 6% on profit above £12,570 = £535.80. Total tax bill: £2,321.80 (effective rate of 6.6%).

What is the mileage allowance rate for taxi drivers in 2026-2027?

HMRC allows 45p per mile for the first 10,000 business miles and 25p per mile for every mile after that. For example, 12,000 miles = (10,000 × 45p) + (2,000 × 25p) = £5,000 deduction.

Can I claim both mileage and actual vehicle costs?

No. HMRC requires you to choose one method: either claim mileage allowance (simplified flat rate per mile) or actual vehicle costs (fuel, insurance, repairs, etc. plus capital allowances). You cannot switch between methods for the same vehicle once you have chosen.

Free Tool

Free Tax Calculator for UK Taxi Drivers

Wondering how much tax you actually owe? Walk through two real-world examples below and see exactly how HMRC calculates your Income Tax and National Insurance as a self-employed driver. Then sign up to use Fyled's live calculator with your own numbers.

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How Self-Employed Tax Works (2026-2027)

Your tax is calculated on your profit, not your total income. Here is the formula HMRC uses for self-employed individuals:

Gross Income

All fares, tips, and platform income

Allowable Expenses

14 HMRC-approved categories

Mileage Allowance

45p/mile first 10k, 25p/mile after

Taxable Profit

After Personal Allowance of £12,570

2026-2027 Tax Rates at a Glance

Income Tax

Personal Allowance£12,570 tax-free

Basic Rate (20%)£12,571 -- £50,270

Higher Rate (40%)£50,271 -- £125,140

Additional Rate (45%)Over £125,140

Class 4 NIC

No NIC below£12,570

Lower Rate (6%)£12,571 -- £50,270

Upper Rate (2%)Over £50,270

Mileage Allowance

First 10,000 miles45p per mile

Over 10,000 miles25p per mile

Example 1

Full-Time Driver: £35,000 Gross Income

A full-time taxi driver earning £35,000, with £8,500 in expenses and 12,000 business miles.

Step 1: Gross Income

All fares, tips, and platform earnings

£35,000

Step 2: Minus Expenses

Fuel, insurance, repairs, phone, etc.

-£8,500

Step 3: Minus Mileage Allowance

10,000 miles x 45p + 2,000 miles x 25p

-£5,000

Calculation:(10,000 x £0.45) + (2,000 x £0.25) = £4,500 + £500 = £5,000

Step 4: Taxable Profit

£35,000 - £8,500 - £5,000

£21,500

Step 5: Minus Personal Allowance

Everyone gets £12,570 tax-free

-£12,570

Step 6: Taxable Amount

£21,500 - £12,570

£8,930

Step 7: Income Tax

£8,930 x 20% (basic rate)

£1,786

Step 8: Class 4 NIC

(£21,500 - £12,570) x 6%

£535.80

Note:Class 4 NIC is calculated on profit (not taxable amount). Since profit of £21,500 falls between the £12,570 lower and £50,270 upper thresholds, only the 6% rate applies.

Total Tax + NIC for the Year

£1,786 + £535.80

£2,321.80

Effective tax rate: 6.6% of gross income. Without claiming expenses and mileage, this driver would owe £5,812 -- saving £3,490 by tracking everything properly.

Example 2

Part-Time Driver: £22,000 Gross Income

A part-time private hire driver earning £22,000, with £4,000 in expenses and 8,000 business miles.

Gross Income

All fares and platform earnings

£22,000

Minus Expenses

Fuel, insurance, phone, cleaning

-£4,000

Minus Mileage Allowance

8,000 miles x 45p (all under 10k threshold)

-£3,600

Profit

£22,000 - £4,000 - £3,600

£14,400

Minus Personal Allowance

£12,570 tax-free

-£12,570

Taxable Amount

£14,400 - £12,570

£1,830

Income Tax

£1,830 x 20%

£366

Class 4 NIC

£1,830 x 6%

£109.80

Total Tax + NIC for the Year

£366 + £109.80

£475.80

Effective tax rate: 2.2% of gross income. By properly claiming expenses and mileage, this driver keeps £21,524of their £22,000 earnings.

See What Proper Tracking Saves You

Compare your tax bill with and without claiming expenses and mileage allowance.

	Example 1 £35k gross	Example 2 £22k gross
Tax without deductions	£5,812	£2,450
Tax with Fyled tracking	£2,321.80	£475.80
You save	£3,490	£1,974

Why Use Fyled Instead of a Spreadsheet?

Real-Time Updates

Your tax estimate updates the moment you log income, an expense, or mileage. No formulas to maintain.

Accuracy Guarantee

Our tax engine is tested against HMRC's published rates. It handles edge cases like tapered allowances automatically.

HMRC-Ready Filing Pack

Go from estimate to organised records and export-ready reports. Direct HMRC submission is coming soon.

Important Things to Know

Mileage OR actual costs -- not both

You must choose between claiming mileage allowance or actual vehicle costs (fuel, repairs, insurance). You cannot use both methods for the same vehicle in the same tax year.

Payment on Account

HMRC may ask you to make advance payments towards next year's tax bill if your Self Assessment total exceeds £1,000. Fyled accounts for this in your calculations.

Class 2 NIC

Class 2 NIC is no longer payable automatically: since April 2024, self-employed drivers with profits above the small profits threshold get their National Insurance credit without paying it. You only pay Class 2 voluntarily (currently £3.65/week) if your profits are below that threshold and you want to protect your State Pension record.

Deadlines

The 2026-2027 tax year runs 6 April 2026 to 5 April 2027. Your Self Assessment return is due by 31 January 2028 (online) with quarterly MTD updates due in July, October, January, and April.

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