Uber Driver VAT Registration and Accounting

Driving for Uber can provide a flexible way to earn an income, but keeping on top of your tax and accounting responsibilities is just as important as keeping your passengers moving.

One of the most important areas for higher-earning Uber drivers is VAT registration. Understanding when you need to register, how VAT affects your Uber income and expenses, and how to maintain accurate accounts can help you avoid unexpected tax bills and penalties. This guide explains the key VAT and accounting considerations for Uber drivers in the UK.

Do Uber Drivers Need to Register for VAT?

Not every Uber driver needs to register for VAT. For the current UK VAT threshold, you generally need to register if your taxable turnover exceeds £90,000 over the previous 12 months, or if you expect it to exceed £90,000 in the next 30 days. Voluntary VAT registration is also possible if your taxable turnover is below the threshold. Importantly, VAT registration is based on your taxable turnover rather than simply the amount of profit you make. For an Uber driver, it is therefore important to monitor your income regularly rather than waiting until the end of the tax year.

What Counts Towards Your Uber Turnover?

Your VAT position can depend on your overall business activities, not simply the money you think of as your personal earnings.

Uber explains that drivers should consider income from activities carried out through the Uber platform as well as other relevant business activities when calculating turnover. This means keeping accurate records of your Uber income is essential. Your accountant can help you determine exactly what should be included when assessing whether you have reached the VAT registration threshold.

What Happens After You Register for VAT?

Once you become VAT registered, you take on additional accounting responsibilities.

These can include:

• Charging and accounting for VAT on relevant taxable supplies.
• Keeping appropriate VAT records.
• Submitting VAT returns.
• Paying VAT due to HMRC by the relevant deadlines.
• Keeping VAT invoices and receipts for eligible business expenses.
• Accounting for VAT on certain services received from overseas businesses where the reverse-charge rules apply.

Uber’s UK tax guidance confirms that VAT-registered drivers may be able to reclaim eligible input VAT on certain business expenses, provided the relevant requirements are met and appropriate VAT invoices or receipts are retained. 

VAT and Uber Fees

Uber drivers need to pay particular attention to how VAT applies to services received from Uber. For non-TfL-licensed drivers, Uber explains that its services can be subject to the reverse-charge mechanism, meaning the driver may need to account for VAT on the relevant Uber service fee through their VAT return. There are specific rules and exceptions, including the small-business regime. This is one reason why professional accounting support can be particularly valuable for Uber drivers who become VAT registered. Simply taking the amount paid into your bank account and applying a percentage of VAT may not give you the correct VAT calculation.

Can Uber Drivers Reclaim VAT on Expenses?

VAT-registered Uber drivers may be able to reclaim VAT on eligible business expenses.

Depending on your circumstances, expenses could include items such as:

• Fuel
• Vehicle repairs and maintenance
• Certain vehicle-related costs
• Business equipment
• Other eligible business expenses

You should retain valid VAT invoices and receipts and ensure that the expense meets the relevant HMRC requirements before claiming input VAT.

The rules can become more complicated where a vehicle is used for both business and private purposes, so professional advice can help you determine what you can legitimately claim.

VAT Flat Rate Scheme for Uber Drivers

Some VAT-registered businesses may consider the VAT Flat Rate Scheme.

Uber states that drivers with annual turnover below £150,000 may be able to apply for the scheme, subject to the applicable rules. Uber also explains that drivers using the scheme still charge VAT at the standard rate on their services, while accounting for VAT to HMRC using the applicable flat-rate percentage. The Flat Rate Scheme is not automatically the best option for every driver. Before choosing a VAT scheme, it is worth comparing the likely VAT liability under the available options with the amount of VAT you may be able to reclaim on your expenses.

An accountant can calculate which approach is most suitable for your individual circumstances.

Uber Driver Accounting: What Records Should You Keep?

Good bookkeeping is essential for any Uber driver, particularly if you are VAT registered.

You should keep organised records of:

• Uber income and statements
• Bank transactions
• Fuel receipts
• Vehicle maintenance and repair invoices
• Insurance costs
• Licensing and professional fees
• Phone and other business expenses
• VAT invoices
• Mileage and vehicle-use records
• Other income from your driving or related business activities

Keeping these records throughout the year makes your tax return and VAT returns considerably easier to prepare.

It can also help you understand how profitable your driving business actually is.

Sole Trader or Limited Company?

Many Uber drivers operate as sole traders, while others may consider using a limited company. You do not have to set up a limited company simply because you drive for Uber. Uber confirms that drivers can operate as sole traders. The right structure depends on factors such as your income, expenses, personal circumstances, plans for the business and how you want to take money from the business. A limited company can provide potential advantages in some circumstances, but it also creates additional administration and accounting responsibilities. Before incorporating, it is sensible to speak to an accountant who understands private-hire and Uber driver businesses.

Uber Driver Self-Assessment

VAT is separate from income tax. Uber drivers who are self-employed generally still need to deal with their annual Self Assessment tax obligations. Uber has confirmed that drivers remain self-employed for tax purposes. Your accounts therefore need to distinguish between:

VAT – tax collected and paid to HMRC on relevant taxable supplies.

Income tax – tax calculated on your taxable profits.

Keeping accurate bookkeeping records makes both processes easier to manage.

Updating Your Uber Tax Profile

If you become VAT registered, it is important to make sure your VAT details are correctly recorded with Uber.

Uber advises VAT-registered drivers to add their valid VAT number to their tax profile or invoice settings. Drivers who are below the VAT threshold and are not VAT registered should indicate the applicable small-business status instead. You should also update your information if your VAT registration status changes.

Why Use an Accountant for Your Uber Business?

Uber driving may look straightforward from an accounting perspective, but VAT, expenses, vehicle costs, reverse-charge rules and Self Assessment can make things more complicated.

An accountant experienced in working with Uber and private-hire drivers can help you:

• Monitor your VAT threshold.
• Register for VAT when required.
• Choose an appropriate VAT scheme.
• Prepare and submit VAT returns.
• Maintain accurate bookkeeping.
• Identify legitimate business expenses.
• Keep your Uber and other business income properly recorded.
• Prepare your Self Assessment tax return.
• Plan for your tax and VAT liabilities.
• Avoid common bookkeeping mistakes.

Professional accounting support can also give you a clearer picture of your actual profit after fuel, insurance, maintenance, finance and other running costs.

Frequently Asked Questions

Is the VAT threshold £90,000 for Uber drivers?

The current UK VAT registration threshold is £90,000 of taxable turnover. You may also need to register if you expect your taxable turnover to exceed £90,000 in the next 30 days. 

Can I voluntarily register for VAT?

Yes. Businesses below the £90,000 threshold can generally choose to register voluntarily, although you should consider the additional administration and whether registration is beneficial for your circumstances. 

Can I reclaim VAT on fuel?

If you are VAT registered, you may be able to reclaim eligible input VAT on business expenses, subject to the applicable rules and proper records. Vehicle use can affect the amount you are entitled to claim.

Do I need an accountant as an Uber driver?

You are not legally required to employ an accountant, but professional accounting advice can be particularly useful once your business becomes VAT registered or your income and expenses become more complex.

Do Uber drivers have to be limited companies?

No. Uber states that drivers can operate as sole traders. 

Get Help With Your Uber Driver Accounts

VAT and accounting don’t have to be complicated.

If you’re an Uber driver approaching the VAT threshold, already VAT registered, or simply want help keeping your accounts in order, professional advice can help you stay compliant and understand exactly how much tax you need to set aside.

Speak to our team today about Uber driver VAT registration, bookkeeping, VAT returns and Self Assessment.

This article is for general information only and does not constitute tax or accounting advice. VAT and tax rules can change, and the correct treatment depends on your individual circumstances. Speak to a qualified accountant or tax adviser for advice specific to your business.