Expenses Guide
Private Use Explained - Car & Phone for Taxi Drivers
HMRC expect some private use of a vehicle used in your taxi business. Here is what counts, how the add-back works, and why an honest percentage is cheaper than claiming none.
By Paul Taylor, Registered tax professional Last updated:
Private motoring
What counts as private use of your taxi car?
If the trip is not earning fares for the business, treat it as private.
HMRC expect some element of private use of a vehicle used in your taxi or private hire business. It is quite exceptional to find none at all.
Private use includes, for example:
- Travelling out of area from your home address to your operator’s office
- For hackney drivers, driving to the area where you can start picking up fares
- Dropping children at school or collecting them
- Holidays, socialising and sporting events
- Visiting religious establishments during work or social hours
The point is not to invent a perfect log for every personal errand. It is to recognise that personal miles happen, measure them fairly, and adjust your profit accordingly.
How tax is affected
How private use affects your tax
Claim the full running costs, then add back the private percentage.
In TaxiManager, vehicle running costs sit in the first expenses section - fuel, insurance, road tax (RFL), repairs, loan interest and similar. You claim those costs in full, then adjust for private use.
A simple way to set the percentage is mileage:
Private miles ÷ total miles = private-use %
Then add that percentage of your vehicle running costs back to profit.
Worked example
- Total miles in the year: 42,000
- Total vehicle running costs (fuel, insurance, RFL, repairs, loan interest): £12,000
- Private miles: 3,000 → about 7%
Add back 7% of £12,000 = £840 to profit. That £840 is then taxed in the normal way (Income Tax and Class 4 National Insurance on your taxable profit - the exact rate depends on your band and year).
For a few thousand private miles, an honest add-back is usually far cheaper than the problems that follow from claiming zero.
TaxiManager
Track private-use % for car and phone in one place
Set a defensible adjustment as you go - not as a year-end guess.
Investigations
Why claiming no private use is risky
If every mile is “business”, HMRC can treat the personal miles as missing income.
If you claim that no private mileage was incurred, HMRC may assume your income is based on all mileage being business mileage. Those “missing” private miles can then be treated as if they generated extra fares.
Using the example above: 3,000 miles treated as undeclared work could be valued as thousands of pounds of extra income - with tax and Class 4 NIC on top. That is almost always more expensive than a straightforward private-use add-back.
This comes up in tax investigations
Private use of the vehicle is routinely considered when HMRC look at a taxi driver’s figures. An honest, supportable percentage is part of a clean story - not a weakness.
Phone
Private use of your telephone
Most drivers need a phone for the job - and most also use it personally.
Whether you are on pay-as-you-go or a contract, most drivers have a mobile phone. Business use is real: texts, calls, GPS, apps and day-to-day information for the work.
Private use is subjective. Pick the percentage that fits your circumstances - how much of the bill and use is genuinely for the business versus personal life - and keep it consistent.
The same principle as the car: claim what is allowable for the business share, and do not pretend the phone is 100% work if it clearly is not.
TaxiManager
How TaxiManager helps with private use
Fine-grained private-use % for car and phone so business vs personal stays defensible.
TaxiManager is built for UK taxi and private hire drivers who claim real vehicle and phone costs. You can set private-use adjustments for car and phone so the split stays clear in your records - the same idea Paul explained for drivers years ago, kept in the numbers as you work.
That pairs with tracking income, fuel or mileage, and other expenses so profit is visible without a year-end reconstruction. For the wider picture of what to claim and how to keep books tidy, see taxi accounting software and Uber driver tax UK.
For taxi drivers
Keep private use honest and your profit clear.
Track running costs and set car and phone private-use adjustments as you go - stay ready for Self Assessment and HMRC.
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