Nearly all minicab and taxi drivers are self-employed. Unless you are the owner of a taxi firm you will only be required to submit a self-assessment tax return each year. As a taxi driver the only liability you are likely to have is your car (if you are an owner driver), therefore, operating as a sole trader is the most appropriate and simplest method.
If I buy a car with a loan to use as a taxi, can the repayments be put against be offset against my income tax liability?
Yes this is possible by a combinations of two matters, the first being the interest which is a deductible expense. Aside from the interest, the monies you pay are not deductible, however, you can claim depreciation which amounts to 1/8th of the vehicle value each year. Therefore, if your loan spans 8 years then by applying the allowance for depreciation and the interest as a deductible expense, a great deal of the amount you pay can be offset against your tax liability.
Do I have to pay income tax if I make a loss in any one year?
Income tax is based on what you receive from your business, not what the business makes or loses. Therefore, however much you have received from your business will depend on how much income tax you are due to pay. If the business has suffered losses, but the amount you received from it has not altered, your income tax liability will not alter. If on the other hand you have consequently received less money from your business, this will have an effect on the amount of income tax you pay.
Do I qualify for any assistance if my income drops below a certain threshold?
You can qualify for working tax credit depending on how much you receive from your business. This will take into account any other benefits that you or your partner may already receive such as child benefit and family tax credit.