Multi-drop couriers and delivery drivers: vehicle costs, fuel, and MTD compliance

Your weekly parcel payment may already have scanner hire, administration charges or other costs taken off. It is tempting to treat the amount landing in the bank as your earnings. That can leave both turnover and expenses understated.

The second major decision is your vehicle claim. For a courier with substantial mileage and heavy tyre wear, comparing the available methods is worthwhile. Making Tax Digital works best when those two foundations are settled before the quarterly deadline.

When Making Tax Digital applies

Making Tax Digital for Income Tax changes how qualifying sole traders and landlords keep records and report income. Under HMRC’s timetable, the starting points are:

• From 6 April 2026, if qualifying income exceeded £50,000 in 2024–25.
• From 6 April 2027, if qualifying income exceeded £30,000 in 2025–26.
• From 6 April 2028, if qualifying income exceeded £20,000 in 2026–27.

Qualifying income generally means gross self-employment and property income combined, before expenses. Salary, pension income and dividends do not count towards this particular test. Check HMRC’s qualifying income guidance, including the treatment of VAT and shorter accounting periods where relevant.

The test uses the relevant earlier tax year; passing a figure during a busy month does not mean you join that day. Exemptions can apply. These rules concern your individual business and property income, rather than a limited company’s Corporation Tax reporting.

Rebuild the gross payment from the statement

Start with what you earn under your contract with the parcel network. If the network deducts your costs from those earnings, record the gross amount and the deductible charges separately. Retain the remittance statement as well as the bank entry.

Do not assume the network’s retail delivery charge is your turnover. Where it contracts with the sender and pays you an agreed delivery fee, your contractual fee is the starting point. The aim is to report your own gross business earnings accurately.

Worked example: deductions before payment

Sam, a non-VAT-registered owner-driver using the cash basis, has the following illustrative weekly statement.

Sam records £1,200 income and £40 expenses, assuming the fees are genuine business costs. He then adds his other allowable expenditure. Recording only £1,160 as income hides the charges and reduces the turnover used for the MTD test.

Mileage or actual vehicle costs?

For eligible cars and goods vehicles, HMRC’s simplified mileage rates for 2026–27 are 55p for the first 10,000 business miles and 25p thereafter. The first band was 45p before 6 April 2026, so using an older guide can produce the wrong claim.

Mileage covers the relevant purchase and running costs, including fuel, insurance, repairs and servicing. Do not add those same costs separately. Business parking and other qualifying travel costs may be additional.

Actual costs instead require the allowable business share of relevant expenditure and the correct treatment of buying, hiring or financing the vehicle. Keep total and business mileage to support private-use adjustments. A lease payment, hire purchase instalment and ordinary loan repayment are not interchangeable tax categories.

A comparison for a leased van

Suppose an eligible van covers 18,000 business miles in 2026–27. Simplified mileage gives £5,500 + £2,000 = £7,500.

Now suppose allowable lease charges, diesel, insurance, repairs and other covered running costs total £11,000, with 80% business use. Subject to the agreement and eligibility, the actual-cost calculation would be £8,800. That is £1,300 more deduction in this illustration, before considering any separately deductible travel costs.

This is a method comparison, not permission to switch each year. You cannot use mileage for a vehicle whose cost has already been deducted or for which capital allowances have been claimed. Once you use mileage for a vehicle, you normally continue while using it in the business.

Claim the right supporting equipment

Commercial phone mounts, parcel trolleys, goods-in-transit insurance and suitable protective high-visibility clothing can have a clear business purpose. Ordinary personal clothes do not qualify simply because you wear them on deliveries. HMRC explains clothing expenses and business insurance.

Section 34 of the Income Tax (Trading and Other Income) Act 2005 provides the underlying business purpose test. A mixed-use mobile contract needs a reasonable business allocation. For equipment, apply your accounting method and avoid claiming costs that are already included in a bundled network fee.

Fuel card records should show purchases, refunds and separate charges. Do not claim both the fuel purchases and the later payment that clears the fuel card account as two expenses. With mileage, retain useful journey evidence rather than treating every fuel debit as an additional deduction.

Fit the review around the round

Keep a record of business journeys, including customer deliveries and other qualifying trips. Assess travel to a regular depot carefully: being self-employed does not automatically make every home-to-depot journey deductible. HMRC’s travel guidance looks at the actual working pattern.

Review network statements weekly, when disputed deliveries and charges are still familiar. Log cash earnings and identify personal transfers. Avona AI can help with categorisation, but a net bank payment still needs the statement that explains it. A short review while parked safely can be useful; the completeness of the records matters more than a promised filing speed.

A manageable quarterly routine

For a business using standard tax-year periods, the 2026–27 quarterly update deadlines are 7 August 2026, 7 November 2026, 7 February 2027 and 7 May 2027. Updates are cumulative: each covers the tax year so far. Calendar update periods are also available, with the same deadlines.

Keep digital income and expense records, reconcile them regularly and send the required totals through compatible software. The Income Tax (Digital Obligations) Regulations 2026 underpin the requirements; HMRC’s digital record-keeping notice explains the applicable directions. A bank feed needs supporting detail wherever a payment conceals fees, private purchases or several transactions.

Normally, record the transaction date, amount and relevant category, retaining supporting invoices or receipts. HMRC’s digital records guidance explains permitted simplifications and digital links where more than one software product is used.

Quarterly updates do not replace the annual tax return. The 2026–27 return is due by 31 January 2028, and normal tax payment dates continue. HMRC is not applying late quarterly update penalties for 2026–27, but digital records and updates are still required. That first-year approach does not waive other filing or payment obligations.

Make the numbers reflect the work

Complete earnings and a consistent vehicle method give you a stronger basis for tax reporting. Explore Avona.app at £15/month, or choose Avona Concierge, managed by chartered accountants, starting from £60/month, for ongoing help with your courier accounts.