Common allowable expenses
The starting point for any self employed driver is the wholly and exclusively rule. You can claim a cost if it is incurred wholly and exclusively for your business, and where something is used for both work and private life you claim only the business proportion.
For your vehicle you must choose one of two methods, and you cannot mix them for the same car. The first is the mileage method. This lets you claim a flat rate of 45p per business mile for the first 10,000 business miles in the year, then 25p per mile after that. This single rate is designed to cover your fuel, your insurance, your servicing and your general wear and tear, so you do not claim those running costs separately on top.
The second is the actual costs method. Here you add up what the vehicle really costs to run across the year, then claim the business share. Allowable running costs under this method include fuel, vehicle insurance, servicing and repairs, tyres, road tax, breakdown cover and the interest on any hire purchase or finance agreement. You can also claim capital allowances on the vehicle itself. The key is that you claim only the business proportion, worked out from your mileage log.
Whichever method you choose, several other costs sit outside the vehicle running total and are claimable in their own right. These include your taxi or private hire driver licence and plate fees, your vehicle test and operator fees, the radio or circuit subscription you pay to a despatch firm, card machine and payment processing fees, cleaning and valeting your cab, and the business share of your mobile phone and data. Public liability or other business insurance is allowable too.
Expenses people often miss
Drivers who keep careful records often find costs they had forgotten. The radio circuit or app despatch fee is a clear business cost and should be claimed in full. So should card machine rental and the small percentage taken on each card payment, because customers increasingly pay by card and those fees add up across a year.
Cleaning matters more for drivers than for most trades. Regular valeting, car washes and interior cleaning keep your vehicle presentable for fare paying passengers, so the cost is allowable. The business share of your phone is easy to overlook, yet your phone is how jobs reach you and how you navigate, so a sensible business proportion is fair to claim.
If you use the actual costs method, do not forget the finance interest on a vehicle bought on hire purchase, or the capital allowances on the vehicle, both of which can be significant. Accountancy fees and bookkeeping software are allowable as well. Many of these smaller items are covered on our guide to allowable expenses for the self employed, which is worth reading alongside this page.
Risky or commonly challenged expenses
Some claims attract attention from HMRC, so treat them with care. The biggest is mixing the two vehicle methods. You must pick either mileage or actual costs for a vehicle and keep to it while you own that vehicle. You cannot claim 45p a mile and then also claim your fuel and insurance bills, because the flat rate already covers them.
Private mileage is the other common problem. Your journeys from home before your first fare, and any personal trips, are not business miles. If you claim every mile your car covers as a business mile, expect a challenge, which is why a mileage log that separates business from private journeys is essential.
Everyday clothing is not allowable, even a smart jacket you only wear to work, because it could be worn in ordinary life. Only genuine protective clothing or a branded uniform counts. Meals while you are out driving are generally personal and not claimable. Fines and parking penalties are never allowable.
Records to keep
Good records are what turn a sensible claim into one that survives questions. The single most important record for a driver is a mileage log. Note the date, the journey and the business miles for each working day, and keep your odometer readings so your total mileage ties up. This log supports both the mileage method and the business proportion under actual costs.
Keep all receipts and statements for fuel, insurance, servicing, tyres, your licence and plate, the radio circuit or app fees, card machine charges, cleaning and your phone. If you took finance on the vehicle, keep the agreement so the interest and any capital allowances can be worked out. Bank and card statements help you reconcile your takings and your costs, and our bookkeeping service can keep this tidy through the year.
As a self employed driver you should keep these records for at least 5 years after the 31 January Self Assessment deadline they relate to, in case HMRC asks to see them.
A worked example
The choice between methods can make a real difference. The example below compares the two approaches for the same driver, using rounded figures.
Mileage method versus actual costs
Salma is a private hire driver who covered 25,000 business miles in 2026/27. Under the mileage method she claims 45p for the first 10,000 miles, which is £4,500, plus 25p for the remaining 15,000 miles, which is £3,750, giving £8,250. On top of that she still claims her licence and plate of £350, her radio circuit fees of £1,200 and card machine charges of £180, a further £1,730, for a total of £9,980. Under actual costs her fuel, insurance, servicing, tax and breakdown came to £9,200 for the year, but with 80% business use only £7,360 is allowable, plus capital allowances and the same £1,730 of other costs. For Salma the mileage method gives the larger and simpler claim, so she chooses it and keeps to it for this vehicle.
Every driver is different. A newer or more expensive car with high running costs and capital allowances can favour actual costs, while a high mileage driver in an economical car often does better on the flat rate. The right answer depends on your figures, which is why it pays to compare both before you decide.
Common mistakes
The most frequent mistakes we see from drivers are switching between the mileage and actual costs methods, claiming fuel on top of the flat rate, and treating all mileage as business mileage. Each of these can lead to an incorrect return.
Other slip ups include forgetting to claim the radio circuit, card machine and cleaning costs, not splitting the phone between business and private use, and trying to claim everyday clothing or meals. Some drivers also leave their bookkeeping until the last minute, then lose receipts and underclaim. A little organisation through the year almost always means a lower, more accurate tax bill.
Finally, many drivers do not realise that an accountant who knows the trade often saves more than they cost by choosing the right method and capturing every allowable cost.
What you should do
Start by keeping a mileage log from today and holding on to every receipt. Decide early which vehicle method suits your situation, then stay consistent. Separate your business and private journeys honestly, and claim the licence, circuit, card machine, cleaning and phone costs you are entitled to.
If you would like the figures checked and your return handled properly, our accountants for taxi drivers deal with hackney and private hire drivers every day. You can start your quote in a couple of minutes and we will confirm a fixed fee before any work begins.
Taxi and private hire drivers can cut their tax bill by claiming vehicle costs the right way and keeping a clean mileage log.
Frequently asked questions
Should I use the mileage method or actual costs?
It depends on your figures. High mileage drivers in economical cars often do better on the flat 45p and 25p rates, while drivers with expensive vehicles and high running costs may gain more from actual costs plus capital allowances. You should compare both before deciding, and once you pick a method for a vehicle you should keep it while you own that vehicle.
Can I claim my licence and plate fees?
Yes. Your taxi or private hire driver licence, your vehicle licence and plate, and any operator or test fees are allowable business costs and are claimed separately from your vehicle running costs, whichever vehicle method you use.
Are radio circuit and card machine fees allowable?
Yes. The subscription you pay to a radio circuit or despatch firm, along with card machine rental and the processing fees taken on each card payment, are genuine business costs and can be claimed in full.
Do I need to keep a mileage log?
Yes. A mileage log that separates business journeys from private ones is essential. It supports the mileage method directly and is also how you work out the business proportion if you use actual costs. Without it, your claim is hard to justify if HMRC asks.
Can I claim cleaning my taxi?
Yes. Regular valeting, car washes and interior cleaning keep your vehicle fit for fare paying passengers, so the cost is allowable as a business expense.
How long should I keep my records?
As a self employed driver you should keep your records for at least 5 years after the 31 January Self Assessment deadline they relate to, in case HMRC asks to see them.