Uber vs Lyft: What is the Difference in Driver Income and Taxes

Uber is the biggest rideshare company in Canada but in late 2017, Lyft came in to challenge by expanding internationally into Toronto. This was the first time the Uber vs Lyft debated was sparked up on Canadian soil.

In this post, we will explore the two ride-hailing companies side-by-side and we will explain the differences that driver need to know.

Uber vs. Lyft – Let’s GO!

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Pay & Rates

Let’s examine Uber & Lyft rates in Toronto which is the only market Lyft is operating in Canada right now. We can check out first an UberX vs. Lyft trip which are your standard sedan rides.

If you want to see the rates for all Uber service types in Toronto, check out Rates & Requirements to Drive for Uber in Toronto.

For a complete list of Lyft rates in Toronto, have a look at our article on The Rates & Requirements to Drive for Lyft in Toronto.

As you can see, the rates are nearly eidentical except Uber offers a higher minimum fare. The minimum fee guarantees you that amount for the trip, even if you only drive someone one block.

Let’s look at a different vehicle type. Lyft Premier is your higher end sedan and Uber’s version is Uber Select.

The winner goes to Uber again with the higher minimum fare even though the rates are all the same.

If you want to know if your vehicle meets the requirements for these ride types and more you can check out our Uber Car List & Lyft Car List.

Though the difference may seem small between Uber & Lyft, if you are working downtown doing a lot of short trips, a couple bucks per trip can start to add up over your shift and work week.

Not so fast though, what about Uber Surge and Lyft Primetime? Is one better for drivers than the other?

Surge vs. PrimeTime & Powerzones

When there is high demand in an area, Uber charges a Surge price and Lyft implements Primetime pricing. As demand increases and there is a lack of drivers in an area, Uber & Lyft raise the prices to the customer and offer drivers Surge or Primetime bonuses for pickups in these areas.

Uber uses a fare multiplier, for example, a 2.0 surge, which means the fare is doubled.

With Lyft, Primetime is represented as a percentage, for example, 200%, which is the amount the fare is increased over the base fare.

That would mean a Lyft Primetime rate of 200% would be the equivalent of an Uber Surge of 3.0.

With Lyft, they offer increased fares to drivers by setting Powerzones at the start of the week which is also a percentage like Primetime but guaranteed and set in advance. If Primetime pricing is also in effect you will get whichever amount is higher. You won’t get both Primetime and Powerzone.

This is where the real money is to be made and also why it can be so difficult to estimate earnings. It depends on not only company, city, vehicle type as mentioned above, the times you drive and when Surge or Primetime & Powerzone come into play.

It is hard to say which company offers better pricing as Lyft hasn’t been in Toronto for more than a couple months.

A popular rideshare blogger, The Rideshare Guy, wrote about this subject with a test case. Although it is a US based example, they found that Uber surge was the winner for drivers in their rideshare market showdown.

Understanding Your Earnings

After you complete a trip, you will be able to see how much money you made. Let’s break it down for you.

Uber Earnings Breakdown

Lyft Earnings Breakdown

Uber EATS and Food Delivery

One major difference between Uber & Lyft is Uber has a food delivery service called UberEATS. In addition to picking up passengers, you can also get requests (if you want) to deliver food. You can also just do UberEATS if you want and not pickup any passengers. To learn more Uber EATS in Toronto, see our guide to getting started. 

Don’t live in Toronto or the GTA? Head over to our courier page, select your city and learn more about driving with UberEATS.

Taxes & HST

Remember that you are an independent contractor, not an employee with either Uber or Lyft. This means you are responsible for paying your taxes to the government as well as HST on your earnings. 

Taxes for Uber & Lyft

Both companies are hiring your business (that’s you and your car) to perform transportation services for their clients, the passengers. In fact, Uber famously skirted many cities taxi by-laws by asserting they were not a transportation company, they were a technology company. So if you were on board with Uber right in the beginning, you were a real trendsetter. 

As a business owner, you don’t have an employer taking taxes off your pay and giving them to the government. These are things like Canada Pension Plan contributions, Employment Insurance (optional), Provincial and Federal Income Tax. You will have to pay them yourself when it comes time to file your taxes so make sure you save up! After your first year, you may even have to make instalment payments depending on tax situation.

For more information on the type taxes you need to pay, instalment payments, filing deadlines, and more head over to our FAQ on income tax.

Expenses

You can deduct a lot of expenses from your income so you remit less tax. For example, if you made $50,000 last year but spent $10,000 for things like gas, maintenance, etc. then you really you only made $40,000. That means you are only paying taxes on that amount which saves you money. 

Keep track of your mileage to make your life easier when it comes to tax tip. You will need to calculate how many kilometres you drove for Uber and how many you drover personally to divide up your expenses properly. 

For more information on expenses and bookkeeping, check out our new FAQ. 

HST

As of July 1, 2017 the government announced all rideshare companies had to charge HST on rides. That brought in a whole new mess for drivers to deal with and much more responsibility. 

So Uber & Lyft rides have HST on them now, a 13% sales tax. Sounds awesome, right? You check out your pay and you got a 13% bonus! Slow down, that is not your money. It is the governments money and the rideshare company charged it to the customer and passed it on to you. 

The good news if you don’t have to pass all the money off to the government. Whenever you spend money on things that have HST on them, like gas for example, you can deduct the HST off the amount you collected and have to pay. These are called Input Tax Credits. Simply put:

HST you collected – HST you paid on expenses for your business = net sales tax which you have to pay the government. For example:

$3,500 collected from Uber in HST – $1,500 spent in HST on business expenses related to Uber = $2,000. That’s what you are going to pay the government in HST.

The above calculation uses what is called the regular method. You can also use something called the Quick Method which is where you just use a government set percentage to calculate how much HST to remit based upon your income. As you can guess, this is the “quick” way of doing it but you should check with a tax professional to see what is better for you. 

To learn more about HST and rideshare, check out our FAQ on how sales tax works. 

What is the difference with HST between Uber & Lyft?

For both companies, HST is charged on the entire amount the customer pays. Then, Uber & Lyft take off their booking/service fees and commission. Here is where the difference is:

Uber gives you ALL the HST. 

Lyft only gives you the HST on your earnings. They keep the HST charged on their fees and commission to send in to the government themselves. This is a big difference compared to most other rideshare companies including Uber. In some ways, this may be easier for you to budget because when you claim your Input Tax Credits you should actually get money back instead of owing like you would most likely with Uber. 

For your records, Lyft’s HST registration number is 70664 7328 RT0001.

Is there HST on Uber & Lyft tips?

No but they do count as income. You should keep track the date, trip and amount you have receive if you get them in case you get audited.

Nothing here should be taken as professional tax, legal or business advice. Every persons situation is unique and different. The government often changes rules and each province has their own requirements. You should consult with a tax and/or legal professional for advice and can also ask questions with your tax authority.

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