Taxi Driver Accountant UK: Hackney Carriage and Black Cab Tax Guide

A taxi driver accountant UK hackney carriage and black cab drivers can trust starts with one rule: the simplified mileage rate does not apply to your vehicle. Black cabs and hackney carriages are excluded, so you claim your actual running costs and capital allowances on the vehicle instead.

Private hire drivers in ordinary saloon cars follow different rules, which is why generic advice for "taxi and Uber drivers" often goes wrong. This guide explains how licensed taxi tax works in 2026/27, using Bristol as the local example. It covers expenses, capital allowances, finance, VAT and the Bristol licensing and Clean Air Zone costs.

Key takeaways

• Black cabs and hackney carriages cannot use the simplified mileage rate. You claim actual costs plus capital allowances.
• A traditional hackney carriage is not treated as a "car" for capital allowances, so it can qualify for the Annual Investment Allowance. Most private hire saloon cars cannot.
• Vehicle finance, licence and plate fees, radio circuit or rank fees and cleaning are typical claims, apportioned for any private use.
• The VAT Flat Rate Scheme has a specific taxi rate, but a big vehicle purchase can change which VAT scheme suits you.
• In Bristol, a hackney licence needs a tax check code on renewal, and the Clean Air Zone charge is a running cost to record.

What is a taxi driver accountant UK drivers need?

A taxi driver accountant is a qualified adviser who understands licensed taxi income and costs. That includes hackney carriage capital allowances, plate and testing fees, radio circuit charges, mixed private use and VAT choices. They prepare your Self Assessment return, keep your records HMRC-ready and speak to HMRC for you.

Why is taxi tax different from private hire tax?

Taxi tax differs because a hackney carriage is a purpose-built commercial vehicle, while most private hire cars are ordinary cars. That changes three things: the mileage method you can use, the capital allowance route you get, and the licence costs you record. Both types of driver are still self-employed and file Self Assessment.

If you also drive for apps or a private hire firm, read our guides to Uber driver allowable expenses and how much tax Uber drivers pay in the UK. A good taxi driver accountant UK wide will keep the two apart. This article stays with the hackney carriage side and the ways it departs from those rules.

Can a taxi driver use the simplified mileage rate?

No. According to HMRC's guidance on simplified expenses, cars designed for commercial use, such as black cabs and hackney carriages, cannot use flat mileage rates. You must claim your actual vehicle costs and capital allowances instead. The 2026/27 simplified mileage rates are 55p then 25p for eligible cars, but they are not for your cab.

Many online guides get this wrong, and some still quote old 45p rates. If a page tells a black cab driver to compare the flat rate with actual costs, check the date and check GOV.UK. Private hire drivers in saloon cars can compare both methods with our mileage calculator.

What expenses can a hackney carriage driver claim?

You can claim costs that are wholly and exclusively for your taxi business, in the tax year you incur them. For a hackney carriage that usually means fuel or electricity, insurance, servicing, repairs, licence and plate fees, radio circuit and rank fees. Apportion anything you also use privately.

• Fuel, or charging costs for an electric cab, for business journeys.
• Taxi insurance and breakdown cover.
• Servicing, tyres, repairs, MOT and the council's licensing inspection or test fees.
• Hackney driver licence, vehicle licence, plate and badge fees.
• Radio circuit, dispatch or booking-app fees, and rank or stand fees.
• Taximeter servicing and calibration, cleaning and valeting.
• Business share of your phone bill, plus accountancy fees.
• Interest on vehicle finance, subject to the rules for your accounting basis.

For the full list of allowable costs across all driver types, use the allowable expenses guide linked earlier. Good records matter as much as knowing the list, so use a simple system such as the one in our mileage log and records guide.

What about the costs of getting licensed?

Knowledge test fees, medical and DBS checks and first-time licence costs can be treated differently from ordinary running costs. Some may count as costs of setting up, and their timing can matter. Ask a specialist taxi driver accountant UK wide, or a local one, how to treat them in your first year rather than guessing.

How do I deal with private use of the cab?

If you use the vehicle privately, you must reduce vehicle costs and allowances to the business share. GOV.UK says that if you use something for both business and personal reasons you claim only the business part. A log of business and personal mileage is the best way to support your percentage.

How do capital allowances work for a black cab?

Capital allowances give tax relief on the purchase price of your cab, because the price itself is not an ordinary expense. A traditional hackney carriage is not treated as a car, so it can qualify for the Annual Investment Allowance. Cars cannot use that allowance, so they rely on writing down allowances.

HMRC's Capital Allowances Manual (CA23510) lists hackney carriages, meaning traditional London black cab type vehicles, among vehicles that are not treated as cars for these allowances. GOV.UK sets the Annual Investment Allowance at £1 million a year of qualifying spending. Whether your specific vehicle counts as a hackney carriage rather than a car is a factual point, so confirm it before you claim.

Whatever the AIA does not cover goes into the pool for writing down allowances. According to HMRC's capital allowance rates and pools guidance, the main pool rate is 14% from 6 April 2026 for Income Tax, down from 18%. Cars over a CO2 threshold go into a 6% special rate pool. New zero-emission cars can get a 100% first-year allowance under separate rules.

We deliberately do not quote any other percentage for taxis, because the right route depends on the vehicle and the date you bought it. Look at the GOV.UK guidance on business cars or ask us if you are unsure.

Why is the hackney versus car distinction so important?

It decides how fast you get tax relief. Under the Annual Investment Allowance you can claim the whole qualifying cost in the year of purchase, up to the limit. A private hire car in the main pool gets a slice of its value each year instead. The total relief over the life of the vehicle is not the difference; the timing is.

How do I claim capital allowances step by step?

You claim capital allowances in the capital allowances section of your Self Assessment return, using the purchase price, purchase date and business-use share of the vehicle. Follow the steps below to get the figures right before you file, and keep the purchase invoice and finance agreement safe.

1. Confirm what you bought: the vehicle type, price, date and whether it was new, used, or part-exchanged.
2. Decide whether the vehicle counts as a hackney carriage or a car, using HMRC's manual and your licence category.
3. Work out your business-use percentage from your mileage records.
4. Decide how much of the Annual Investment Allowance to claim, if it applies. You can normally claim less than the maximum.
5. Put any remaining cost in the correct pool and claim the writing down allowance for the year.
6. Enter the figures on your return and keep the invoice, finance agreement and V5C.
7. Carry the pool balance forward and repeat each year, adjusting for disposals.

Worked example: which claim method leaves what profit?

Here is an illustrative example, from the viewpoint of a taxi driver accountant UK clients might consult, comparing three ways of claiming capital allowances on the same hackney carriage. It uses invented numbers and ignores tax bands, so it shows profit only. It is not a forecast or a promise of any saving.

illustrative example: an invented Bristol hackney carriage driver has fares of £62,000 and running costs of £15,000 in year one and again in year two. The profit before any vehicle allowance is £47,000 in each year. She buys a cab for £40,000 in year one, used 100% for business. Assume the AIA applies and the main pool rate is 14%.

Choice A wipes out most of year-one profit, but leaves nothing to claim in year two. Choice B spreads relief thinly and keeps profit higher early. Choice C sits in between. In every case the total relief over the vehicle's life is the same £40,000; only the timing moves.

Timing matters because profit decides your Income Tax and Class 4 National Insurance bill. A very low profit can waste part of your personal allowance, while a very high one may push you into a higher band. This is why the right choice is personal, and why you should model it with an accountant before filing.

Notice what is missing from the example: a simplified mileage line. A hackney carriage cannot use it. A private hire driver doing 20,000 business miles in a saloon car could claim £8,000 by that route (10,000 miles at 55p plus 10,000 at 25p), then compare it with actual costs. That comparison simply is not open to you.

What about vehicle finance, leasing and buying second-hand?

Finance affects your claims, but how it does depends on the type of finance. With hire purchase or a loan you can normally claim capital allowances on the purchase price, and the interest may be an allowable cost. With leasing or rental, the payments are usually treated as running costs instead. Check the rules for your accounting basis on GOV.UK.

Buying second-hand can still qualify for the Annual Investment Allowance if the vehicle counts as a hackney carriage. It also opens up an important local point in Bristol, covered below, because the council limits how many hackney vehicle licences exist. The cost of a licensed plate can be a major part of the overall price, so ask your accountant how any amount paid for it should be treated.

Does a taxi driver need to register for VAT?

Yes, once your taxable turnover passes the VAT registration threshold of £90,000 in any 12 months, you must register. According to GOV.UK's guidance on registering for VAT, you can also register voluntarily below that figure. Turnover means fares before expenses, so full-time cab drivers can get close to the limit.

Our VAT for drivers guide and VAT registration walkthrough explain registration, and our VAT service page covers ongoing returns. The section below covers the scheme that is most specific to taxi work.

What is the VAT flat rate for taxis?

According to HMRC's VAT Flat Rate Scheme rates, the flat rate for transport, including taxis, is 10%. You get a 1% discount in your first year of VAT registration. If your goods cost less than 2% of turnover, or £1,000 a year if that is higher, you pay 16.5% as a limited cost business.

Fuel counts as goods, so most cab drivers are not limited cost businesses, but you should still run the test each year. The scheme also stops you reclaiming VAT on most purchases, apart from certain capital assets over £2,000. If you buy a new cab in a year you are registered, standard VAT accounting may work out better, so compare both before you join.

What do Bristol hackney carriage licences involve?

Bristol City Council licenses hackney carriage drivers and vehicles. New drivers pass a knowledge test, hold an enhanced DBS check and a medical, and confirm their tax responsibilities. Each of these has a cost or a deadline that affects your accounts.

According to Bristol City Council, hackney carriage drivers must answer 90% of knowledge test questions correctly, against 75% for private hire, and the test costs £69 when booked. The council also caps hackney vehicle licences at 795. Check availability with the Licensing Team before you buy a vehicle, as its vehicle licence page advises.

Bristol hackney carriages must be Ultra Low Emission Vehicles, wheelchair accessible and painted Bristol Blue or an approved shade. The council's policy currently allows a vehicle older than 3.5 years at first application if it is Euro 6 or higher. Fees change each April, so use the council's current fee schedule when you budget. These points affect how much capital you spend and which allowances you claim.

What is the Bristol tax check for licence renewals?

Bristol requires a tax check code when you renew a hackney or private hire driver licence, and when you reapply for one held in the last year. You complete the check on GOV.UK with a Government Gateway account and get a 9-character code, which must be under 120 days old. The council receives only confirmation that you completed it, not your tax details.

If you have never filed a return, this is the moment to sort it out. Our key tax dates guide shows the 2026/27 deadlines, and our team can register you for Self Assessment and file your return.

How does the Bristol Clean Air Zone affect taxi drivers?

The Bristol Clean Air Zone charges taxis £9 a day if the vehicle does not meet the emission standard. It runs 24 hours a day, every day, with one charge per 24-hour period. Euro 4, 5 and 6 petrol and Euro 6 diesel vehicles are not charged, so many newer cabs pay nothing.

The Clean Air for Bristol charges page sets these figures, and the council publishes exemption details separately. Bristol's hackney rules already require Ultra Low Emission Vehicles for new licences, which reduces the risk. Older vehicles, a second vehicle or a temporary replacement cab may still be charged, so check each registration on the government checker.

If you do pay the charge, record the date, registration and receipt. It is a running cost of the taxi business, but check how your accountant treats it, particularly if it arises from a private journey.

Which mistakes do taxi drivers make, and what do they cost?

Most taxi tax problems come from wrong methods, missing records and late filing. Each mistake below can trigger a penalty, an enquiry or a bill that could have been avoided. Penalty details are on GOV.UK, and if HMRC opens an enquiry, professional representation is recommended.

• Claiming simplified mileage on a black cab: HMRC can disallow the claim, and you may owe extra tax, interest and possible penalties.
• Claiming capital allowances on a car as if it were a hackney carriage: an overclaim can lead to a corrected return and penalties for careless errors.
• Ignoring private use: claiming 100% of costs when the cab is also used privately can be treated as an incorrect return.
• Poor records: without receipts and mileage evidence you cannot support your claims, and HMRC can refuse them.
• Missing the 31 January 2027 filing and payment deadline for 2025/26: late filing and late payment penalties and interest apply.
• Registering for VAT late: you may owe VAT on sales from the date you should have registered, plus penalties.
• Letting the Bristol tax check code lapse: the council cannot issue or renew your licence without a valid code.

Making Tax Digital for Income Tax also matters. From 6 April 2026 it applies to sole traders with qualifying income over £50,000, then £30,000 from April 2027 and £20,000 from April 2028. Read our Making Tax Digital guide to see when it reaches you.

Key terms

• Hackney carriage: a licensed taxi that can be hailed on the street or taken from a rank. A black cab is a traditional example.
• Private hire vehicle (PHV): a pre-booked vehicle, such as an Uber or minicab. It is licensed separately.
• Annual Investment Allowance (AIA): a capital allowance that can give relief on qualifying spending up to £1 million a year.
• Writing down allowance (WDA): a yearly percentage of the pool balance you can claim as tax relief.
• Self Assessment (SA): the system you use to report self-employed income to HMRC.
• UTR: your Unique Taxpayer Reference, a 10-digit number HMRC gives you when you register.
• NIC: National Insurance contributions, paid on self-employed profit as Class 4 (and sometimes Class 2).

How Uber Driver Accountant helps

Uber Driver Accountant is an accountancy practice for drivers only, and we are independent of Uber and Bolt. We handle Self Assessment, vehicle claims, VAT and HMRC letters for hackney carriage, private hire and delivery drivers. Fees are fixed, from £20 a month, so you know the cost before we start. That makes us a practical taxi driver accountant UK wide, not just in Bristol.

See our personal tax service for taxi and private hire Self Assessment, our pricing page for fixed fees, and who we help for the driver types we support. Drivers in Bristol can also read our Bristol page.

Conclusion

A licensed taxi is taxed differently from a private hire car, and the difference sits in your vehicle claim. Skip the simplified mileage rate, claim your actual costs, and check whether the Annual Investment Allowance applies to your cab. Then add the local costs, from Bristol licence fees to the Clean Air Zone charge, to your records.

If you want a specialist to check your figures, contact us for a fixed-fee quote. We work with drivers only, so as a taxi driver accountant UK clients can call, we know the difference between a hackney carriage and a saloon car.

Last reviewed 21 September 2026 by the Uber Driver Accountant tax team.

This article is general information and is not personal tax advice. Speak to a qualified accountant about your own circumstances, and if HMRC raises a dispute or penalty, professional representation is recommended.