Accounting

How can driving instructors in the UK manage their accounts better

7 min read

As a self-employed driving instructor, you must file a Self Assessment tax return annually. Chances are, you are not an expert in tax law – which means you likely have several questions about where you need to register, what forms to fill out, what information you will need, how much time it will take and so on. Minimise your accounting and taxation woes with this blog:

Taxation tips for driving instructors in the UK

1. Determine your tax status

As a driving instructor, you are considered self-employed and are required to pay income tax on your earnings. If you are unsure of your tax status, you can use the HMRC’s online tool to check or consult a professional accountant for the same.

2. Register for Self Assessment

When starting as a self-employed driving instructor, and if you  have never completed a Self Assessment form before, you must fill out the registration form on the HMRC website. You can do this online or by filling out a paper form.
 
You must include details like your name and address, contact details, work address, when you started being self-employed, the nature of your work, your National Insurance (NI) number and so on. You can also fill out a paper form and mail it in – be sure to keep a copy of the form for your own records.

3. Note down your UTR number

Once your information has been confirmed, HMRC will send you a Unique Tax Reference (UTR) number. You must quote this number or your NI on any payments or communications you share with HMRC.

4. File your tax return

Your tax return will show the details of your taxable income and profits for the year starting on 6 April and ending on 5 April of the following year. You must submit paper returns by 31 October and online returns by 31 January.
 
Your returns must show full details of all income and gains, including items for which you have already paid the tax, such as employment income. If you delay your filing and miss the deadline dates, you will be slapped with an automatic £100 fine, with additional penalties for further delays.

5. Pay your tax bill on time

All taxes owed need to be paid by 31 January of the year following the end of the tax year.  So for the tax year 2021-22 which ended on 5 April 2022, you must submit your tax assessment and pay any taxes due by 31 January 2023.
 
You have multiple payment options, such as online banking and bank credit. If you have already paid any portion of the tax you declared in the statement, this amount will be deducted from your final tax bill.
 
And finally, bear in mind that if you have not paid much tax at source or if your tax liability is over £1000, you may need to pay an instalment for next year’s tax bill on 31 January too. 
Accounting tips for driving instructors: Maintain key accounts
As a self-employed driving instructor in the UK, here is a complete list of the records you need to maintain:
 
  • A Self Assessment tax return
  • Monthly income and expenses
  • Annual P&L (profit and loss) sheet
  • Your pupil payment records (this is more for your personal records)
  • Record of bank balances, including petty cash and credit card balances
  • Capital expenditure, i.e. the cost of acquiring necessary business assets
  • Allowable expenses, i.e. direct business expenses that you can claim back
  • A record of mileage covered based on the rates set by HMRC (currently 45p/mile for the first 10000 miles and subsequently 25p/mile)
 
There are no clear rules about the format to maintain these records. We recommend starting with some spreadsheets and investing in more sophisticated bookkeeping software if your business model needs it.
 
We know that this can all seem rather overwhelming, especially when you are already busy running your driving school business, getting more clients or looking for a new car. Golding Accountancy is just a click away if you want someone to help you get set up. Fill out the contact form for us to reach you.

FAQs

Some of the business expenses that you can claim against taxable income include the following:
  • MOT
  • Travel costs
  • Franchise fees
  • Parking and tolls
  • Petrol and diesel
  • Office internet costs
  • Road tax and insurance
  • Office supplies, like stationery
  • Office rent or use of home office
  • Vehicle cleaning and maintenance
  • Telephone/mobile connection charges
  • Bank charges on your business account
  • Continuing professional education as an instructor
  • Costs of using your home/personal vehicle for work purposes

Always ask your accountant whether any particular cost can be claimed. Unfortunately, the initial training cost to become an instructor cannot be claimed.

In most cases, the answer will be no. This is based on the Norman VS Golder case in 1944, wherein it was ruled that people do not pursue medical treatment merely for doing their jobs but also for general well-being and happiness. In that sense, it cannot be seen as a strictly “business” expense.

It may be possible to bring down your tax bill by bringing your spouse into the business if the spouse is otherwise earning little or no income. However, you will need to pay them market wages for a specific job, as you would for any other employee.

If the clothing in question is a work-specific uniform, such as a shirt with the business logo on it or any protective gear, you may be able to claim it as a business expense. However, regular clothes you wear to work are not work-specific and thus cannot be claimed.

Here is what the HMRC says about gifts – “You should give no deduction unless it can be shown that there is some contractual obligation to offer the gift.”
 
So broadly speaking, you cannot claim the cost of gifts. However, you could do so if you could show that the gift cost was effectively included in the sale price. If you want to give your students flowers, for instance, or merchandise with your driving school’s logo, you could claim the cost by stating that it is included in the fees your students have paid.
Over to you
In conclusion, preparing your tax return as a driving instructor can be tricky, but you will be sorted with an accountant by your side.
 
Luckily, we can help you determine what expenses you can claim, complete all registration and form submissions on your behalf and ensure that you are always compliant. You certainly do not want to get on the wrong side of HMRC. Visit our website for more info.
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