A Self-Employment Crash Course For Driving Instructors

After months of being in lockdown, driving instructors are free to teach again – albeit with the proper protective clothing and equipment. As a result, approved driving instructors (ADIs) are either back on the roads attempting to make up for lost income or are thinking of setting up their own driving school for the first time.

A great way of ensuring that you remain compliant and maximise your take-home pay is by keeping on top of your taxes. We’ve provided this guide to help you stay financially successful as a self-employed ADI.

DO DRIVING INSTRUCTORS PAY TAX?

Yes. The average income for driving instructors is around £1,600 per month after expenses. For most, you can earn anywhere between £20,000 to £30,000 a year. This is provided you are working as a driving instructor full-time, of course. Earning this amount will take you over the £12,570 Personal Allowance, meaning you will pay Income Tax.

ARE DRIVING INSTRUCTORS SELF-EMPLOYED?

If you run your business yourself and are responsible for whether it succeeds or fails, then there’s a good chance you’re self-employed. You can find further criteria from HMRC here.

Just like any other self-employed individual, then, ADIs must inform HMRC of their self-employed status by registering for Self Assessment.

If you have already registered as a sole trader in a previous role, you’ll need your Unique Taxpayer Reference (UTR) number to hand when you re-register. If you’ve never registered before, you’ll need to first do so online and then wait for your UTR to arrive before you can set up an account. This can take up to 10 days, so try to give yourself as much time as possible before the deadlines of any tax return submissions and payments of tax.

Once you’ve registered, you have a number of tasks you’ll need to perform in order to stay on the taxman’s good side. This includes filing a Self Assessment tax return (more on this below) and declaring your income and expenditure correctly.

WHAT EXPENSES CAN A DRIVING INSTRUCTOR CLAIM?

Of course, with this extra responsibility comes some benefits – namely, the opportunity to potentially reduce your tax liability by claiming allowable business expenses.

While car mileage may appear to be the only obvious ADI expense that can qualify for tax exemption, the following may also be considered:

• Franchise fee – Some drivers may prefer to work under the name of another organisation in order to generate clients. These franchises usually come at a cost; thankfully, monthly or annual franchise fees can often be claimed back.
• Parking and tolls – Parking fees and the cost of motorway tolls, provided they occurred while travelling for business-related reasons (such as when picking up a student or during a lesson), can be claimed as a business expense.
• Cleaning – With ADIs under so much scrutiny to keep their cars clean, it should come as some relief to know that cleaning carried out by a garage or other service provider can be claimed on.
• Education and training – If you wish to further your career as a driving instructor, any continuous professional development courses can be claimed. Unfortunately, the cost of actually training to be a driving instructor cannot be claimed as a business expense!
• Professional services – If you use any accountancy services in order to support your business financially, this can be claimed on. This extends to legal services should you need to be represented.

If you ever find yourself under investigation by HMRC, you will need to evidence that you have indeed purchased any of the above for legitimate business reasons. That’s why you should log records of all your expenses safely – ideally with tax software – to guarantee your compliance.

DO DRIVING INSTRUCTORS FILE A SELF ASSESSMENT TAX RETURN?

The only individuals that are exempt from filing a Self Assessment tax return are those earning less than their personal trading allowance (£1,000). Again, you won’t be subject to Income Tax until you earn over the Personal Allowance threshold. Following that, your tax bill will be determined by the tax band you fall into.

Once you’ve submitted your Self Assessment tax return, you’ll need to pay your tax bill through the HMRC portal, by post, or by BACS from your bank account. This must be paid no later than 31st January. You’ll also make your first payment on account (advance payment towards your tax bill) on 31st January.

You may additionally need to make a second payment on account, usually due in July every year.

WHAT ARE THE BEST TIPS FOR FILING?

The submission date for your Self Assessment tax return is 31st January. As this is also the date you are required to pay any tax you owe, we recommend filing early. Filing earlier than the deadline does not affect the deadline for payment. It simply means that you will know your tax bill ahead of time, allowing you to budget accordingly.

Outside of that, make sure that you have the following additional information to hand and your Self Assessment tax return should be a success:

• Your National Insurance number
• Your UTR number
• Your income from employment or pensions
• Any allowable expenses
• A total of any rent you have received
• All taxable benefits you receive from the state
• All capital gains
• Any income you’ve received from overseas
• Any interest you’ve received from the bank
• Any dividends you’ve received
• Any pension contributions you’ve made
• Any tax payments you’ve already made this year

If you wish to simplify the process even further, using tax software is the next step. By displaying the sections of the Self Assessment tax return you need to fill out and using automation, it saves you time and unnecessary stress.

WHAT MAKES OUR SOFTWARE DIFFERENT?

GoSimpleTax goes further than other platforms. You input your income and expenditure, and we alert you when there’s a possibility of a mistake or even an opportunity to reduce your tax liability. All of this can be done with a freemium version of our software. In fact, you won’t need to pay a thing until you want to input more than five income and five expense entries a month, or file your Self Assessment tax return directly to HMRC.

To see how our tax software for the self-employed can simplify your Self Assessment, sign up today.

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.