As a self-employed taxi driver, you’ll need to stay on top of your business finances. Strong bookkeeping helps you track your earnings and performance. It’s also crucial for tax reporting, and you should keep these records for about six years. But how can you make the most of bookkeeping for taxi drivers?  

This guide will cover bookkeeping tips for taxi drivers, including: 

  • Tracking your expenses and earnings
  • Prioritising cash flow
  • Hiring a professional 
  • Using tools to simplify your bookkeeping 

Following taxes and regulations 

As a self-employed person, you need to maintain accurate records of your business expenses and earnings and keep these records for about five years. This data is crucial for calculating your taxable income and filing your Self Assessment tax return. 

Plus, bookkeeping for taxi drivers is easier when you’re aware of the taxes you pay. Like most self-employed persons, Taxi drivers pay income tax, dividend tax, and national insurance. On top of this, you’ll have to pay Vehicle Excise Duty (VED), which is a tax for all vehicles using public roads. 

Tracking your taxi driver expenses and earnings

An essential part of bookkeeping for taxi drivers is maintaining a clear and updated record of your business expenses. Expenses are anything to spend on running or growing your business. Along the same lines, you’ll need detailed books of your taxi driver earnings to report your income. 

Fixed vs variable expenses

You likely have both fixed and variable business expenses. Fixed expenses remain the same, such as insurance fees, subscriptions, marketing expenses, or car payments. Then, variable expenses might include your fuel costs, vehicle maintenance, travel, and supplies. For example, the amount of petrol you pay for will vary depending on how many people you drive each month, and how far.

Record-keeping

Set aside time each day to keep records of the money you spend for your business and collect all transaction receipts. Your books should note transaction amounts, dates, and purposes. For example, take pictures of petrol receipts and maintain a log of your fuel costs.  

As you record expenses, also log your business profits. You’ll need to track each job you do, when you do it, and how much you earn. You can use this information to create a profit and loss statement, which determines your income. 

Tax deductions 

You can claim some of these expenses as tax-deductible, meaning they reduce your taxable income and lower how much you pay on taxes. Learn about which self-employed expenses are tax-deductible here

Also, as a self-employed taxi driver, you can claim your business mileage as an expense. With simplified expenses, you can claim 45p per mile for the first 10,000 miles travelled. So, keep updated records of where you travel, when, and how far. 

Prioritising your cash flow 

Cash flow is another thing to track for your bookkeeping. Your cash flow is the money entering and exiting your business over a set time. it’s different from profits because you may not convert your earnings to cash immediately if you take card payments. But, taxi drivers need to cover financial obligations. 

So, consider how much you need to spend each month to run your business. Then, use this information to estimate the cash flow you’ll need. For example, you’ll likely need cash to cover your petrol costs so you can drive more clients. But, you may experience issues with your vehicle and need cash to fix it to keep working. So, you may want to create a cushion to cover unexpected costs like these.  

To improve your cash flow, you may want to promote cash payments or convert your invoices to cash quickly. 

Hiring a professional 

Staying on top of your record-keeping may be daunting if you’re not a natural with numbers. Plus, you may be busy driving clients and completing jobs. So, to ensure accurate and updated records, you may want to hire a professional accountant. They can help you understand your business performance and alter your budget for the better. Plus, an accountant can file your business taxes for you to save time. 

Using tools to simplify your bookkeeping  

Once you understand bookkeeping for taxi drivers, you may wonder how to simplify the process for yourself. We’ll offer a few great tips for easier bookkeeping. 

Separate your business finances 

If you separate your business finances from your personal ones, it’ll be easier to track your earnings and expenses. You won’t have to shuffle through all your transactions to find the ones for your business. To do this, open a business current account, just like a regular bank account, but specifically for your business. 

Accounting software

Next, investing in modern accounting software can help you manage your records and understand your business performance. With a tool like Countingup, you can track your expenses and earnings and use the tools to make better business decisions. 

Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With automatic expense categorisation and the receipt capture tool, you can organise and find proof of expenses. 

The app labels them for you and reminds you to snap a picture of receipts. For example, you can find your fuel charges to add them up and estimate your average petrol costs. As a result, you can digitise and easily track your expenses. 

The Countingup app also lets you create and send unlimited invoices on the go. Plus, it offers cash flow insights so you can easily track your business earnings and expenses. There are also tax estimates in the app that help you prepare for these expenses. With these tools, you can save time and simplify your taxi driver bookkeeping.

Simplify your bookkeeping with Countingup

Financial management can be stressful and time-consuming when you’re self-employed. That’s why thousands of business owners use the Countingup app to make their financial admin easier. 

With features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. 

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! 

Start your three-month free trial today. 

Find out more here.