Take a full-time instructor's year and follow the money through it. Ruth teaches from home in Wakefield, works on a driving school franchise, and bills £38,400 of lesson fees across the 2026/27 tax year. She pays a franchise fee every week, runs one dual-control car, and has never asked anyone which way to claim for it. That last point is worth about £316 of tax to her, and it is the only decision on this page you cannot undo later.
The year in order: what goes in and what comes out
Your lesson fees are trading income in the tax year you earn them. That includes cash, bank transfers and card payments through a booking app, and it includes a cancellation fee you keep when a pupil does not turn up. If your franchise collects fees from pupils and pays you a net figure, your income is still the gross lesson value and the school's cut is an expense, not a reduction in turnover. Test fees you pay to the Driver and Vehicle Standards Agency (DVSA) on a pupil's behalf and then recharge are income when recharged and a cost when paid, which nets to nothing but has to appear in both columns if money passes through your account.
Ruth's year looks like this before the car:
| Item | Amount | Treatment |
|---|---|---|
| Lesson fees billed, 6 April 2026 to 5 April 2027 | £38,400 | Trading income |
| Franchise fee, £75 a week for 48 weeks | £3,600 | Deductible revenue cost |
| Instructor insurance, Approved Driving Instructor re-registration, phone, bookkeeping software, professional subscriptions | £1,450 | Deductible revenue costs |
The franchise fee is the one instructors most often query. It is an ongoing cost of trading, so it comes off in full in the year you pay it, however long the franchise agreement runs. The same applies to the DVSA fees that keep you on the Approved Driving Instructor (ADI) register, including four-yearly re-registration and the costs around a standards check. Those are maintenance of a trade you already carry on. The picture is different for someone paying for ADI training before they have started instructing, which is why this page speaks to instructors who are already on the register.
The fork inside the year: the tuition car
Ruth bought a dual-control car for £24,000 and paid £1,200 to have the controls fitted, so the car cost her £25,200. She keeps a log and 90% of her miles are lessons. She now has two ways to get tax relief on that car, and she has to pick one.
Method one: actual running costs plus capital allowances
You deduct the real cost of running the car, restricted to the business proportion, and you claim a capital allowance on the purchase price. A tuition car is a car for capital allowance purposes, so the £1,000,000 Annual Investment Allowance does not apply to it, and neither do the first-year allowances that cover vans and other plant. Relief instead comes as a writing down allowance, which is a percentage of the unrelieved cost each year: the main rate for low-emission cars, or 6% for cars above the CO2 threshold. The main rate is 18% up to 5 April 2026 and 14% from 6 April 2026 for income tax, so date matters when you read older advice. A new zero-emission car is the exception and can attract a 100% first-year allowance.
Ruth's car is a low-emission hybrid, so it sits in the main pool at 14% for 2026/27. Fitting dual controls is part of the car's cost, so the whole £25,200 goes in.
- Writing down allowance: £25,200 x 14% = £3,528
- Restricted to 90% business use: £3,528 x 0.9 = £3,175.20
- Running costs for the year (fuel, servicing, tyres, motor insurance, breakdown cover): £5,600
- Restricted to 90% business use: £5,600 x 0.9 = £5,040
- Total car deduction: £8,215.20
Method two: mileage rates
Instead of the above you claim a flat rate per business mile and claim nothing else for the car. Ruth drove 16,000 business miles.
- First 10,000 miles at 55p: £5,500
- Remaining 6,000 miles at 25p: £1,500
- Total car deduction: £7,000
Which one Ruth picks, and why she cannot change her mind
Actual costs give her £8,215.20 against £7,000, so she is £1,215.20 better off on the deduction. At basic rate that is 20% income tax plus 6% Class 4 National Insurance, the 6% main rate set for 2025/26 and still current when this page was checked in August 2026, so around £316 of tax. Not huge, but it repeats every year the car is in the business, and the gap widens on an expensive car with high depreciation and low mileage.
The reason to get this right first time is that the choice is fixed per vehicle. Once you claim mileage rates for a car, you keep mileage rates for that car for as long as it is used in your business, and you cannot switch to running costs and capital allowances later. It works the other way too: a car you have already claimed capital allowances on can never go onto mileage rates. Change the car and you get a fresh choice on the new one. If you run a second car for lessons, that car gets its own decision.
Mileage rates tend to win for an instructor with a cheap, economical car and very high mileage. Actual costs tend to win where a dual-control conversion, a newer car or heavy servicing bills sit against moderate mileage. Run both numbers before your first claim on any car, because that first claim is the decision.
Can a driving instructor claim 45p per mile?
Not for 2026/27. The Approved Mileage Allowance Payments (AMAP) rate for the first 10,000 business miles in a tax year was 45p from 2011/12 through to 2025/26, with 25p a mile beyond 10,000. From 6 April 2026 the first-10,000 rate is 55p and the rate above 10,000 miles remains 25p. Any advice you find quoting 45p as the current figure was written before that change.
| Tax year | First 10,000 business miles | Above 10,000 business miles |
|---|---|---|
| 2011/12 to 2025/26 | 45p | 25p |
| 2026/27 onward (from 6 April 2026) | 55p | 25p |
Two conditions sit behind the rate. The mileage has to be business mileage, so travel between pupils and to test centres counts and your own private journeys do not. And the per-vehicle stick rule above applies: you can use mileage rates for a car only if you have never claimed capital allowances on it. The 10,000-mile band resets each tax year, and it is per vehicle where you genuinely run more than one.
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Registration, deadlines and the first-year bill
You register for self assessment once your gross trading income for a tax year passes £1,000, and the deadline is the 5 October after the end of that tax year. Gross means fees before the franchise takes its share. The £1,000 trading allowance is an alternative to deducting expenses rather than an addition to it, so an instructor with a franchise fee and a car will always claim real expenses instead.
The online return and the balancing payment are due on 31 January after the tax year ends. Where your income tax and Class 4 liability for a year exceeds £1,000 and less than 80% was collected at source, you also make payments on account on 31 January and 31 July, each 50% of the prior year's liability. That is why a first full year as an instructor lands as a double bill on one 31 January: last year's balance plus the first instalment toward this year. Budget for it in your second autumn, not your second January.
When quarterly reporting starts for you
Making Tax Digital (MTD) for Income Tax phases in by gross income from self-employment and property combined, not by profit. Over £50,000 and you start from 6 April 2026. Over £30,000 and you start from 6 April 2027. Over £20,000 and you start from 6 April 2028.
Ruth bills £38,400, so she is in from 6 April 2027. From that point she keeps digital records and sends quarterly updates through compatible software, then finalises the year as now. Her franchise fee and her car method do not change, but her bookkeeping does: a shoebox of receipts reconciled each August stops being viable. The cheapest move is to get the records digital in the year before you are mandated, not the week it starts.
VAT and the instructor who grows
Driving tuition is standard rated, and you register for VAT once taxable turnover passes £90,000 in any rolling 12 months. A sole instructor rarely gets near it. It becomes real if you take on other instructors and bill their lessons through your own business, because then their fees count toward your threshold. At that point you are running a small driving school and the questions change to payroll and employer costs, so take advice before the turnover arrives rather than after.
Where an accountant changes the number
The car method is the only decision here that cannot be undone, so it is the one worth paying to get right first time. We set it on the evidence rather than by habit, keep the capital allowances pool straight across a change of car, file the return, and get your records MTD-ready ahead of your mandation date. Instructors sit alongside our wider driver work: see our pages for taxi and private hire drivers, Uber drivers and delivery drivers, where the same mileage decision appears with different numbers around it.