Are Taxi Drivers Self Employed?
When you hop into a taxi, you probably don’t think much about the person behind the wheel — but for the drivers themselves, one big question shapes their entire working life: Are taxi drivers self-employed?
The short answer is: Most of the time, yes — but not always.
In this blog post, we’ll explore everything you need to know about the employment status of taxi drivers, how it affects their taxes, and why it’s important for drivers to understand their legal and financial obligations.
The taxi industry is one of the key assets in the UK transport sector which provides imperative services for millions of passengers on an annual basis. One of the most frequently asked questions about this profession is whether the taxi drivers are self-employed or they work for a company. The answer isn’t always as simple as that question, due to different factors, which involve the type of work arrangement and licensing as well as contractual agreements.
Employment status should not be determined before knowledge of the types of taxi drivers in the UK is obtained. There are two main categories which apply:
Hackney Carriage Drivers.
- These are licensed by local councils.
- They can pick up from taxi ranks or be hailed in the street.
- Fares are usually metered and regulated by local authorities.
- Normally they work on their own, but sometimes a taxi will be lent to them by a private individual.
Private Hire Vehicle (PHV) Drivers.
- Must be pre-booked through a licensed operator and cannot pick up passengers without a prior booking.
- They typically work under a license from some private hire operator.
Most self-employed private hire drivers, but some may be under an employment contract depending on the arrangement with the taxi firm or app-based platform.
Are Taxi Drivers Self-Employed or Employed?
The employment status of taxi drivers varies, but most are classified as self-employed. Here’s why:
Self-Employment in the Taxi Industry
Independent Contractors: Many taxi drivers own their vehicles and pay a fee to a taxi firm or operator for access to jobs.
Control Over Work: Self-employed drivers choose their hours, accept or reject jobs, and manage their expenses.
Financial Responsibility: They cover fuel, maintenance, insurance, and licensing costs.
Employed Taxi Drivers (Less Common)
Drivers are only truly employees of a taxi firm if:
- They receive a fixed salary
- The company provides the vehicle and covers running costs
- They have set working hours and cannot refuse jobs
This is rare most taxi firms would prefer to have a self-employed model thus reducing their liability and costs
The Uber Case: Employment vs. Self-Employment
A Landmark UK Supreme Court ruling in 2021 (Uber BV v Aslam) Found that Uber drivers should be classified as Workers not self-employed. This Entitles them to:
- Minimum wage
- Holiday pay
- Pension contributions
Despite the ruling, A large proportion of PHV drivers still operate on a self-employed basis especially those working with the smaller firms
Understanding Self-Employment
Before we dive deep, let’s first clarify: What does it mean to be self-employed?
Self-employed individuals work for themselves instead of being employed by someone else. They control their hours, decide how they provide their services, and are responsible for handling their own taxes.
Being self-employed usually means:
- You are your own boss
- You pay your own taxes (no automatic deductions from a paycheck)
- You can claim business expenses
- You are not entitled to employee benefits like sick pay, holiday pay, or pensions (unless you arrange them yourself)
Are Taxi Drivers Self Employed?
In most cases, yes, taxi drivers are self-employed.
This means they run their own business — even if they operate under a larger taxi company or use popular ride-hailing platforms like Uber, Bolt, or Ola.
Here’s how it usually works:
- They own or rent their vehicles.
- They choose their own working hours.
- They pay for their own fuel, insurance, maintenance, and other business expenses.
- They handle their own tax returns and National Insurance contributions.
However, not every taxi driver is automatically self-employed.
Some drivers might be employees if they meet certain conditions, such as working exclusively for one company with fixed shifts, using company-provided vehicles, or following strict management control.
Different Scenarios for Taxi Drivers
Let’s break down the typical setups you might find:
- Self-Employed Owner-Drivers
These drivers own their vehicles and operate independently.
They may:
- Find their own fares
- Set their own schedules
- Choose which companies to affiliate with (e.g., multiple taxi dispatch firms)
- Be fully responsible for all vehicle and business costs
Definitely self-employed
- Rent-A-Plate or Rent-A-Car Drivers
Some taxi drivers rent a licensed vehicle or a taxi plate from a larger operator but manage their day-to-day business independently.
Even though they pay rent to someone else, if they control their work pattern and take on the risk of profit or loss, they are still self-employed.
Usually self-employed
- Platform-Based Drivers (Uber, Bolt, etc.)
Drivers who work with ride-hailing apps like Uber or Bolt often operate on a flexible basis, choosing when and where to work.
However, the legal status of Uber drivers has been debated heavily.
For example:
- In the UK, Uber drivers were ruled to be “workers”, not purely self-employed.
- As “workers,” they get some benefits (like holiday pay and minimum wage) but still pay their own taxes.
Bottom line:
If you drive for a platform, check whether you are classified as self-employed, a worker, or an employee under local laws.
- Employed Taxi Drivers
Some larger firms directly employ drivers.
Signs that a driver is an employee include:
- Fixed shifts
- Salaries paid through payroll
- Company ownership of vehicles
- Strict control over working patterns
Employees — not self-employed
Why Does It Matter?
Understanding your employment status is crucial because it affects:
- How you pay tax and National Insurance
- Your eligibility for benefits like sick pay, pension, and holiday leave
- What expenses you can claim
- Your legal rights and protections
If you’re self-employed, you’re responsible for self-assessment tax returns, paying Class 2 and Class 4 National Insurance, and setting money aside for tax bills.
If you’re employed, your company deducts taxes and National Insurance automatically from your salary.
Tax Responsibilities for Self-Employed Taxi Drivers
If you are self-employed, you must:
- Register as self-employed with HMRC or the appropriate tax authority.
- File an annual Self-Assessment Tax Return.
- Pay Income Tax and National Insurance based on your profits.
- Keep accurate records of your income and expenses.
- Claim legitimate business expenses to reduce your tax bill.
Common deductible expenses include:
- Fuel costs
- Vehicle insurance
- Repairs and servicing
- License fees
- Metering equipment
- Mobile phone bills (business use)
- Office supplies
- Advertising and marketing costs
Pro Tip: Always keep receipts and records organized to avoid headaches at tax time!
Challenges of Being Self-Employed as a Taxi Driver
Of course, there are challenges too:
- Irregular Income: Earnings may vary week to week.
- Tax Management: You must plan and save for your tax bills yourself.
- No Employee Benefits: No sick pay, holiday pay, or employer pension.
- Business Costs: You bear all vehicle-related expenses.
- Regulatory Compliance: Keeping up with licensing, insurance, and tax rules can be complicated.
How an Accountant Can Help Self-Employed Taxi Drivers
Managing your finances as a self-employed driver can be overwhelming.
A specialized accountant can:
- Help you register correctly with tax authorities
- Advise on VAT registration (if needed)
- Maximize your allowable deductions
- File your self-assessment tax returns accurately
- Provide cash flow advice to avoid financial stress
- Ensure you stay compliant with changing tax laws
- Help you plan for pensions, savings, and long-term financial security
Remember: A small investment in professional advice can save you thousands in taxes and penalties over time.
Final Thoughts
So, are taxi drivers self-employed?
Most of them, yes — but it depends on how their work is set up.
Self-employment brings flexibility, independence, and opportunity, but it also comes with responsibilities like managing your own taxes and business costs.
Whether you’re driving your own cab or working with an app like Uber, understanding your employment status is key to protecting your income, complying with tax laws, and planning a successful future.
If you’re a taxi driver and unsure about your self-employment status or need help with your tax returns, partnering with an experienced accountant can make all the difference.
Take control of your financial future today — drive smarter, not harder
