Petrol money from your mate could invalidate your insurance

Brits are being warned that giving a friend or family member a lift in their car could land them in trouble with the law.

Taking a colleague to work or dropping a friend home after a night out is a common practice for many car owners. However, car insurance comparison experts at Tiger.co.uk are advising drivers that they could face a steep fine and may even invalidate their insurance if they are found to be charging passengers and making a profit from providing lifts.

This is because insurance providers may consider this as operating an unlicenced taxi, which is not typically covered in standard policies.*

According to the Public Passenger Vehicle Act 1981, passenger contributions should be arranged before the journey and should only cover the running costs of the vehicle, such as fuel and wear and tear. Exceeding these limits could see drivers hit with a fine of up to £2,500.**

While it is perfectly legal for drivers to take petrol money from their mates in exchange for the occasional lift, police have been cracking down on groups who use social media platforms to arrange illegal ‘cash for lifts’ schemes, essentially operating as unlicenced taxis.

This trend, known as ‘doing lifts’, hit the headlines back in 2018 when Dorset Police warned against a closed Facebook group with 7,000 members in Bournemouth, which was set up to buy and sell car journeys in an online illegal taxi service.

Meanwhile in Jersey, it is estimated that the illegal taxi trade is valued at a staggering £1m a year, with some drivers said to be making as much as £300 in a single night from providing lifts.****

Ian Wilson, car insurance expert and Managing Director at Tiger.co.uk said a special policy needs to be in place for any drivers looking to make a profit from offering lifts. 

He added: “Sharing a car is a great way to split the cost of your journey and reduce your carbon footprint.

“Most drivers are more than happy to offer a friend or a co-worker a lift, and there is nothing wrong with accepting a few pounds from passengers to help cover running costs, particularly given the stubbornly high prices of fuel.

“But issues can arise if you are making a profit from doing this, as it can be legally classed as a ‘hire or reward’ transaction. This would require taxi insurance rather than standard car insurance, which typically only provides cover for social, domestic and pleasure use.

“As this is a relatively unknown law, many unwitting motorists could be caught out and risk having their insurance invalidated and slapped with a hefty fine.

“To make sure you aren’t benefitting financially from your act of kindness and stay on the right side of the law, you can use legitimate and regulated ride-sharing apps like Liftshare. This calculates a suggested contribution per passenger for your journey based on the length of your trip and uses the HM Revenue and Customs Approved Mileage Payment Allowance.

“Taking steps like this will ensure passenger costs offset actual running costs and no profit is made, therefore not invalidating your car insurance.”

Tiger.co.uk helps drivers compare and find savings on all sorts of car insurance products, including taxi and private hire cover.

This article is intended as generic information only and is not intended to apply to anybody’s specific circumstances, demands or needs. The views expressed are not intended to provide any financial service or to give any recommendation or advice. Products and services are only mentioned for illustrative rather than promotional purposes.

References:

*https://www.abi.org.uk/products-and-issues/choosing-the-right-insurance/motor-insurance/car-sharing-and-insurance/

**https://www.legislation.gov.uk/ukpga/1981/14#:~:text=(a)a%20vehicle%20is%20to,may%20be%20made%20by%20road.

***https://www.bbc.co.uk/news/av/uk-england-dorset-46048914

****https://jerseyeveningpost.com/news/2024/12/12/illegal-lifts-industry-could-be-making-as-much-as-1m-a-year/