There is nothing wrong with giving a friend a lift in your car as long as you are not doing so with a view to making a profit and this should not have any negative impact on your car insurance. For instance, you could pick up a friend in your car and drop them at the likes of a railway station so that he or she can catch a train or drop them at the local supermarket.
The problem occurs when you start to take money and you are deemed to be making a profit. It is quite acceptable to take just enough money towards the cost of fuel but if you start taking excessive amounts resulting in you making a profit then this has a number of potential implications.
For instance, you could be faced with a fine of up to £2,500. You could receive penalty points on your driving license. You could also invalidate your car insurance policy.
As soon as you start giving lifts to friends and receiving money from them resulting in you making a profit then, to all intents and purposes, you are offering a taxi or private hire service. In order to do this, you would need to have suitable car insurance and also have a suitable license i.e. private hire license.
The police would take a very dim view of things if you were proven to be charging too much for giving someone a lift in your car.
Of course, if you were found to be involved in giving people lifts for financial gain then you may find it harder to arrange suitable insurance cover and it would no doubt cost you an awful lot more money to insure your car as you would have some penalty points on your driving license.
So, do be careful if you are going to give lifts to friends and receive money for doing so. Make sure that you are not making a financial profit.