Will taxi and private hire drivers need to pay more tax under new HMRC rules?

The new tax rules for taxi and PHV drivers do not change the amount of tax that they have to pay, but they make it easier for HMRC to collect and verify the tax information.

The tax rates for taxi and PHV drivers depend on their income, expenses, and other factors, such as whether they are self-employed or employed by an operator.

According to the GOV.UK website, taxi and PHV drivers who are self-employed have to pay:

• Income Tax on their taxable profits

• National Insurance contributions (NICs) to qualify for certain benefits and the State Pension

• VAT if their turnover is over £85,000 a year.

Taxi and PHV drivers who are employed by an operator have to pay:

• Income Tax on their wages through Pay As You Earn (PAYE)

• NICs on their wages

• VAT if they charge VAT on their fares.

The tax rates for Income Tax, NICs, and VAT vary depending on the amount of income and other circumstances.

The new tax rules for digital platforms require the operators to report the revenue data of their drivers to HMRC, which will help HMRC identify the drivers and assess their tax liabilities. This means that drivers will have to provide more information to their operators, such as their National Insurance number, full name, address, and date of birth. However, this does not mean that they will have to pay more tax than before, unless they were under-reporting or evading tax in the past.

The new tax rules aim to create a fair and level playing field for businesses operating through digital platforms and to support the taxation requirements and national revenue systems. They also aim to reduce the tax gap, which is the difference between the amount of tax that should be paid and the amount that is actually paid. According to HMRC, the tax gap for 2021-22 was £31 billion, of which £5.4 billion was attributed to the hidden economy, which includes businesses that operate through digital platforms.