Black Cab Driver Self-Employed Tax Guide (UK 2026/27)

Running Costs: The Bulk of the Deduction

For a self-employed hackney carriage driver, day-to-day running costs — fuel, servicing, repairs, insurance and licensing fees — are all generally deductible against fare income. The vehicle itself, given the specialist and often significant cost of a purpose-built London taxi, is typically claimed through capital allowances rather than as a simple one-off expense, spreading (or in many cases immediately relieving, subject to the Annual Investment Allowance) the cost against taxable profit. Estimate the resulting tax position with the

The Knowledge: A Different Category of Cost

The Knowledge of London — the famously demanding training required to first qualify for a hackney carriage licence — sits in a different tax category from ongoing costs of running an established cab business. HMRC generally treats the cost of acquiring a brand-new qualification differently from maintaining an existing one, meaning study costs, examination fees and related expenses incurred before actually qualifying may not be as straightforwardly deductible as, say, annual licence renewal once already qualified and trading. This is a nuanced area worth checking carefully rather than assuming full deductibility either way.

Renting Rather Than Owning

Many black cab drivers rent their vehicle from an owner rather than buying one outright, particularly earlier in their career. Rental payments to the vehicle owner are a straightforward allowable business expense, deducted from fare income in the same way vehicle running costs would be claimed by an owner-driver, simplifying the tax position considerably since there's no vehicle capital allowance calculation to manage.

VAT and Scaling to a Small Fleet

Individual black cab drivers rarely approach the £90,000 VAT registration threshold from fares alone, but a driver who expands into operating several vehicles with other drivers, or diversifies into related services, needs to track combined turnover across the whole operation on a rolling 12-month basis.

Checklist

• Keep receipts for fuel, servicing, repairs and insurance
• Establish whether vehicle costs are claimed via capital allowances (owner) or as rental payments (renter)
• Check the specific tax treatment of Knowledge-related costs before assuming deductibility
• Track turnover on a rolling 12-month basis if operating more than one vehicle

This article is general information, not financial or tax advice. Figures use 2026/27 UK tax, National Insurance and VAT rates.