What will the Uber decision mean for drivers' tax bills?

The recent Supreme Court decision confirming that four Uber drivers were employees, not contractors, has raised important questions about how gig-economy workers may be taxed in the future.

While this ruling sits within employment law, it has potential flow-on effects for income tax and GST. Inland Revenue has not yet confirmed how it will approach these changes, but here is what drivers and businesses need to know.

Current Position for Drivers

Until now, Uber drivers have operated as contractors. This means
• they are responsible for their own income tax
• they can claim business expenses such as fuel and vehicle costs
• many are registered for GST and can claim GST input credits

This structure gives drivers flexibility but also places the full compliance burden on them.

What Changes if Drivers Are Treated as Employees

If Inland Revenue follows the Supreme Court’s position, the tax rules would shift.

As employees -

• Uber would handle PAYE and other tax obligations

• Drivers would no longer be able to claim deductions for business expenses

• Drivers could not be GST-registered for the services they perform for Uber

In this model, the responsibility for vehicle running costs and other work expenses would sit with the employer, not the driver.

What This Could Mean for Income Levels

Unions have noted that while drivers might lose the ability to deduct expenses, they could benefit overall. As employees, they may gain

• a minimum wage safety net

• sick leave and annual leave

• more stable pay

• fewer compliance requirements

Higher base pay and leave entitlements may outweigh the loss of contractor deductions.

What Happens Next

Inland Revenue has not yet provided guidance, and the tax treatment may not automatically follow the employment ruling. If changes occur, there will need to be a clear process to

• unwind past GST and income tax positions

• clarify whether reimbursements apply for vehicle and running costs

• determine how pay structures need to change

More clarity is expected once Inland Revenue completes its review.

In conclusion,

This decision has opened the door to potential changes in how gig-economy drivers are taxed. While contractors currently manage their own compliance and deductions, a shift to employee status may simplify the process for drivers and provide stronger pay protections. Businesses operating in the gig economy should monitor developments closely.

If you have questions about how this decision may affect your own tax obligations or business structure, our team can support you with tailored advice.