How to Handle Multiple Income Streams as a UK Delivery Driver

How to Handle Multiple Income Streams as a UK Delivery Driver

The rise of the gig economy has opened up various income opportunities for delivery drivers across the UK. Many drivers now earn from multiple sources, often juggling multiple delivery platforms and self-employed jobs. However, managing multiple income streams effectively can be challenging without a clear understanding of tax implications, record-keeping, and financial planning. In this guide, we’ll cover key strategies UK delivery drivers can use to maximise and manage their income effectively.

1. Understanding Self-Employment Income

Most delivery drivers in the UK operate as self-employed individuals. This means you’re responsible for tracking your income and expenses, managing your taxes, and meeting HMRC’s requirements. Self-employed delivery drivers must register with HM Revenue and Customs (HMRC) and file a self-assessment tax return each year. Registering can be done online, and it's recommended to do so as soon as you start earning from self-employment to avoid any potential penalties.

• Tip: Keep records of all your earnings and expenditures across all income streams. Many drivers find it useful to use apps designed for self-employed individuals, such as QuickBooks or Xero, to track finances and streamline tax filing.

2. Claiming Expenses

One of the biggest advantages of being self-employed is the ability to claim expenses. The types of expenses you can claim include:

• Vehicle costs: Fuel, repairs, insurance, and depreciation.
• Phone and internet: The costs of running your mobile and internet connections, as they're essential tools for modern delivery work.
• Other essentials: Protective clothing, car cleaning, and certain memberships.

Keeping detailed receipts and accurate records of these expenses is crucial, as HMRC requires evidence for claimed deductions. This can lower your taxable income, potentially resulting in significant savings over time.

Reference: GOV.UK – Claiming self-employed expenses

3. Organising Your Income Streams

Managing multiple platforms can be complex. To keep things streamlined:

• Track earnings from each source separately: Each income stream will likely have its own income pattern, so consider maintaining separate tracking sheets or sub-accounts in your bookkeeping software for each platform.
• Set aside money for taxes: With multiple income streams, it’s easy to miscalculate tax liability. Setting aside around 20-25% of your income for tax payments is a common approach.
• Consider a single bank account for work-related expenses: Having a dedicated account for work-related expenses and income can simplify record-keeping, especially if you use multiple platforms like Uber Eats, Deliveroo, and Just Eat.

4. Understanding Tax on Multiple Income Streams

When you earn from multiple sources, your tax calculation can get a bit more complex. Here’s a quick rundown:

• Income from each platform is added together: HMRC considers all self-employed income as one single income for tax purposes.
• Class 2 and Class 4 National Insurance Contributions (NICs): As a self-employed worker, you’ll pay both Class 2 and Class 4 NICs if your profits exceed a certain threshold.
• Self-Assessment deadlines: Each year, the deadline to submit a self-assessment online is the 31st of January. Missing this deadline can result in penalties, so make sure you’re on top of your dates.

Reference: GOV.UK – National Insurance Contributions

5. Staying on Top of VAT Requirements

In rare cases, drivers may find that they hit the threshold for VAT registration, which currently stands at £90,000. If you do exceed this limit within a 12-month period, you’re required to register for VAT. Although this isn’t typical for most delivery drivers, if you operate multiple delivery streams with high turnover, it’s something to be mindful of.

• Registering for VAT: This can increase administrative tasks but may be beneficial if you’re incurring substantial expenses that include VAT, as you could reclaim it. However, this also means that VAT would need to be charged on your services, impacting your clients directly.

Reference: GOV.UK – VAT Registration

6. Optimising Your Earnings and Reducing Tax Liabilities

To make the most out of your earnings, consider consulting with a professional accountant who specialises in self-employment and gig economy income. Here are some specific strategies an accountant can help with:

• Reducing taxable income through legal deductions and allowances.
• Setting up a pension fund: As a self-employed driver, you won’t automatically receive a pension. However, personal pensions and self-invested pension plans (SIPPs) are available, and contributions may be tax-deductible.
• Planning for unexpected costs: Vehicle repairs, fines, or even quiet periods where fewer gigs are available can all impact your income. Setting aside a small amount regularly can serve as an emergency fund.

7. Considering Professional Financial Advice

While online platforms and mobile apps can help streamline financial tracking, professional financial advice can be highly valuable when managing complex income streams. A qualified accountant can provide personalised insights on tax efficiency, deductions, and more. They can also help with:

• Maximising savings on expenses by categorising them accurately.
• Tracking earnings across multiple platforms to avoid mistakes or overlooked income, which HMRC could penalise if audited.
• Setting up a retirement plan suitable for your income level and lifestyle.

Final Thoughts

Handling multiple income streams as a delivery driver in the UK requires effective financial management and a good grasp of tax rules. Staying organised, keeping accurate records, and understanding your obligations can make a significant difference. For tailored advice, consulting with a professional accountant who understands the gig economy can be invaluable. Virtue Accountants is here to help; get in touch today to ensure you’re making the most out of your earnings.