Running a Chauffeur Company? It's Not Just About VAT

Many VIP and chauffeur drivers set up a limited company, register for VAT and assume the job is done once the quarterly VAT return is filed. It isn't. VAT is only one of several taxes and deadlines your company has, and the one most often forgotten is Corporation Tax.

We see it every year: a driver has paid every VAT bill on time, then gets a letter from HMRC about an unpaid Corporation Tax bill, a late Company Tax Return and penalties that keep growing. This guide explains what your company really owes, and when.

VAT: important, but not the whole picture

VAT is a tax you collect from your customers on behalf of HMRC. It was never your money, so paying it over each quarter is not "paying your tax". Your company still has to pay tax on its own profit.

You must register once your VAT-taxable turnover goes over £90,000 in any rolling 12 months. Many chauffeur companies use the VAT Flat Rate Scheme, where the rate for passenger transport is 10% of your VAT-inclusive turnover.

Watch out for the "limited cost trader" rule. If your company spends very little on goods (less than 2% of turnover, or under £1,000 a year), the flat rate jumps to 16.5%. For transport businesses using their own vehicle, fuel usually counts as goods, so most drivers stay on 10%, but it should be checked every quarter.

Corporation Tax: the bill drivers forget

Every limited company pays Corporation Tax on its profit: income minus allowable costs such as fuel, insurance, vehicle finance, servicing, phone and accountancy fees.

Taxable profit	Corporation Tax rate (2026/27)
Up to £50,000	19% (small profits rate)
£50,001 to £250,000	Between 19% and 25% (marginal relief)
Over £250,000	25% (main rate)

For example, a chauffeur company with £40,000 profit owes £7,600 in Corporation Tax. That money needs to be in the bank when the bill is due.

The key dates, counted from your company's year end:

• 9 months and 1 day: Corporation Tax must be paid

• 9 months: annual accounts filed at Companies House

• 12 months: Company Tax Return (CT600) filed with HMRC

The tax is due before the return. Many drivers miss this and pay interest as a result.

What it costs to ignore it

Penalties for late Company Tax Returns doubled for returns due on or after 1 April 2026:

• £200 the day after the deadline

• £400 in total once the return is 3 months late

• 10% of the unpaid tax at 6 months, and another 10% at 12 months

• £1,000 and £2,000 instead of £200 and £400 if the return is late three times in a row

Late payment also builds up interest every day. Separately, Companies House charges its own penalty for late accounts, and in the worst case can strike the company off.

Taking money out of your company

The money in the company account belongs to the company, not to you. You can take it out in three main ways:

• Salary: paid through payroll, deductible for Corporation Tax.

• Dividends: paid only from profit left after Corporation Tax. From April 2026, dividends above the £500 allowance are taxed at 10.75% (basic rate), 35.75% (higher rate) or 39.35% (additional rate), and you report them on your Self Assessment return.

• Director's loan: if you take more than salary and dividends, you owe the company. If the loan isn't repaid within 9 months of the year end, the company pays an extra 33.75% charge on it.

Taking money "as needed" without a plan is how most drivers end up with an overdrawn director's loan and an unexpected tax bill.

A simple year-round checklist

• Keep every receipt: fuel, tolls, parking, car washes, servicing, insurance, phone

• File and pay VAT every quarter

• Move 20–25% of each month's profit into a separate savings account for Corporation Tax

• Agree a salary and dividend plan with your accountant at the start of the year

• Check your director's loan balance before the year end

• Put your Corporation Tax, accounts and CT600 deadlines in your calendar

• File your personal Self Assessment return by 31 January

Let us handle it for you

At TSSAMT we work with chauffeur and VIP transport companies across England. We take care of your VAT returns, annual accounts, Corporation Tax, payroll and Self Assessment, and we tell you how much to put aside, so there are no surprises.

Get in touch through tssamt.co.uk for a free, no-obligation chat.

This article is general information based on UK tax rules for 2026/27. It is not advice for your specific situation.