Uber is a ride-sharing platform that many vehicle owners have turned to for an income. From extra money during spare hours to full-time work, lots of people have found that driving for Uber is profitable (and sometimes even fun). Not everyone who begins offering rideshare services on the platform, however, realizes that they effectively become their own business owner the minute they get paid for a ride.

When you begin driving for Uber, you assume the role of a business owner because you aren’t an employee of the platform. This isn’t inherently a bad thing, but it does mean you can get into trouble if you mismanage certain aspects of your efforts. Specifically, there are financial items related to income tax and HST for Toronto Uber drivers to take care of — or else they’ll face penalties and consequences that could be difficult to get out of.

Here’s a guide to income tax for Uber drivers and HST in Toronto.

Uber Drivers Have to Register for HST

Put simply, Uber drivers are responsible for HST just as many other businesses throughout Canada are. This has several implications on what drivers must do, but the simplest and first is that all uber drivers are required to register for HST and to charge and collect tax on their fares. This requirement is for all uber drivers regardless of whether their total annual revenues exceed the $30,000 small supplier threshold as the small supplier threshold does not apply to taxi businesses.

Drivers can register for an HST number via the government’s online form, mail, telephone or fax. They’ll also receive a business number (BN) when they register, and those who have a BN should already be registered for HST.

Importantly, this registration should be specifically for rideshare driving. Drivers who have HST or BN numbers for other business ventures normally also need a separate one for their Uber driving.

How Often Does an Uber Driver Have to File HST Returns?

Most Uber drivers who are required to file HST returns can file them annually. Drivers with high earnings, however, may have to file quarterly or monthly. The frequency depends on a driver’s annual billings.

Uber Collects the Fares and Does Not Pay HST to the Uber Driver

In Uber’s setup, the platform collects the rideshare fares from passengers and then passes the driver’s share onto them. Uber doesn’t directly pay HST to the government, and it also doesn’t pass on any portion of a fare specifically so that drivers can pay HST. Additionally, drivers are prohibited from collecting higher payments beyond the allowed fare in order to cover HST.

As a result of all of this, drivers are responsible for paying HST on their own and must deduct the payment from the fare that Uber gives them. Not doing this can result in substantial penalties and, if the issue is ignored long enough, other consequences.

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Expenses That an Uber Driver Can Deduct for Canadian Income Tax

Because Uber drivers are essentially their own business owners, they can deduct legitimate business expenses when filing income taxes. Some examples of qualifying expenses usually include maintenance, repair, license, fuel, insurance and depreciation costs. If a vehicle’s used for a combination of rideshare and personal driving, only those expenses arising from rideshare driving qualify.

As deductions, these don’t directly lower how much income tax an Uber driver owes. Instead, the deductions lower the net earnings that a driver must pay income taxes on. Taxes are then reduced proportionally according to a driver’s specific tax situation.

If you drive for Uber and need help with HST and/or income taxes, schedule a consultation today with one of our Toronto HST lawyers today.

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Make sure you keep detailed records of all the expenses you incurred as an Uber driver.


How is Uber income taxed?

Uber drivers are considered self-employed or independent contractors, so the Canada Revenue Agency (CRA) requires that they file income tax each year. Income tax is not deducted from Uber earnings made throughout the year so drivers must keep records of the money they receive from Uber and all of their expenses to prepare and file proper income tax returns each year. They are responsible to collect, remit, and file sales tax on all ridesharing trips to the CRA.

Is Uber Eats income taxable?

Uber drivers are considered independent contractors. Similar to small business owners, they need to report their income for the year and pay applicable taxes. This applies to earnings on both Uber rides and Uber Eats. They are responsible to collect, remit, and file sales tax on all ridesharing trips to the Canada Revenue Agency (CRA).

How do Uber drivers pay taxes?

When preparing and filing their tax returns, Uber drivers must complete a T2125, also known as a statement of business activities. It lists the income earned and breaks down all of the expenses incurred in that year. Because Uber drivers are independent contractors, they will not be issued a T4 slip.

Disclaimer: The information provided in this article is only general in nature. Only the posting date makes it current. It can be outdated because it hasn’t been updated. It should not be trusted and does not provide legal advice. Every tax case is different from the examples given in the article since it is specific to its own set of circumstances. Consult a Canadian tax lawyer if you have any particular legal issues.