Driving instructor expenses you can claim for tax

Every allowable expense comes off your taxable profit. HMRC's own example: £40,000 of turnover with £10,000 of allowable expenses means Income Tax on £30,000 (GOV.UK).

For an ADI the biggest decisions are about the car, and one rule catches people out: HMRC's flat mileage rate cannot be used for a dual-control tuition car. This guide covers the car first, then everything else, then what Making Tax Digital changes about keeping the records.

The basic rule

You can claim costs you incur for the business. If you use something for both business and personal reasons, like your phone, you can only claim the business share. HMRC's example is a £200 phone bill with £70 of business calls: you claim £70 (GOV.UK).

Keep receipts, invoices and bank statements. You need them if HMRC asks, and you still need them under MTD alongside your digital records (HMRC).

Running the car

Actual costs, not the mileage rate

HMRC's simplified expenses guidance lets sole traders claim a flat rate per business mile (55p for the first 10,000 miles from 2026-27, 45p before 6 April 2026, then 25p) instead of actual costs. It excludes "cars designed for commercial use, for example, black cabs, hackney carriages or dual control driving instructors' cars".

So if you teach in a dual-control car, you claim the actual costs of running it. HMRC lists these as allowable for the self-employed (GOV.UK):

• Fuel
• Insurance, including your ADI business-use cover
• Repairs and servicing
• Vehicle tax
• Breakdown cover
• Parking

Lease payments are claimable too: GOV.UK lists leasing payments as a financial cost (GOV.UK).

Tyres, MOTs and valeting are running costs as well. If you buy the car on hire purchase, the repayments are not a running cost: GOV.UK says you cannot claim repayments of finance arrangements. The car itself is claimed as described below, and the hire purchase interest is a financial cost.

The business share

If you also use the car privately, you claim only the business share of these costs. Work it out from your mileage: 22,000 business miles out of 25,000 is 88%. You cannot claim travel between home and work or other non-business driving, so keep a mileage log that shows which miles were lessons.

Buying the car

For capital allowances, HMRC does not treat a car used by a driving school and fitted with dual controls as a car. Its Capital Allowances Manual lists "cars used by a driving school and fitted with dual control mechanisms" among the vehicles not to treat as cars (CA23510).

That matters because the car rules are the slow ones. An ordinary business car gets writing down allowances of 14% a year (18% before April 2026) or 6% a year depending on its CO2 emissions, or a 100% first-year allowance if it is new and zero-emission, and cars cannot use the annual investment allowance (GOV.UK).

A dual-control tuition car sits outside those rules, so:

• Traditional (accruals) accounting: it is plant and machinery that is not a car, so it can qualify for the annual investment allowance, which deducts the full cost in the year you buy it.
• Cash basis, the standard basis for sole traders: GOV.UK says only cars go through capital allowances, and other items you buy and keep for the business are claimed as allowable expenses (GOV.UK).

Either way, private use reduces the claim to the business share, and the same treatment applies to dual controls you buy and have fitted. HMRC's guidance does not spell out how the dual-control exception works under cash basis, and the car is a large claim, so check the treatment with an accountant before you buy.

Other allowable expenses

Training

GOV.UK allows training that improves the skills and knowledge you already use in your business or keeps you up to date in your industry. It does not allow training that helps you start a new business (GOV.UK). For an ADI:

• Allowable: standards check preparation, CPD courses and workshops, refresher training
• Not allowable: your original Part 1, 2 and 3 training to qualify

DVSA and registration costs

• ADI registration renewal: £300, and you renew every 4 years (GOV.UK)
• Criminal record check for your renewal: £5.40 to apply (GOV.UK)
• Pupil test fees, if you pay them as part of a lesson package

Phone, software and equipment

• Phone and mobile data: the business share only
• Diary and booking software: subscriptions you pay to renew are claimable (GOV.UK)
• Dashcam, tablet, phone holder, cables: equipment you keep for the business, claimed as an expense under cash basis or through capital allowances under traditional accounting

Insurance

• ADI business motor insurance: the business share of the premium
• Public liability insurance (GOV.UK)
• Professional indemnity insurance

Marketing

GOV.UK lists advertising and website costs as allowable (GOV.UK):

• website hosting and your domain
• paid ads for new pupils
• business cards, car signage and magnetic signs
• paid directory listings (your Google Business Profile is free)

Office and admin

• Working from home: instead of splitting your bills, you can use HMRC's flat rate if you work at least 25 hours a month from home. It is £10 a month for 25 to 50 hours, £18 for 51 to 100 hours and £26 for 101 hours or more. Phone and internet are not included in the flat rate, so claim their business share separately (GOV.UK).
• Accountancy fees for business work such as bookkeeping. GOV.UK says you cannot claim the cost of preparing and submitting your Self Assessment tax return (GOV.UK).
• Bank charges on your business account
• Stationery and lesson materials: workbooks, progress cards, printing

Record-keeping under MTD

Making Tax Digital for Income Tax applies to sole traders registered for Self Assessment whose qualifying income is over £50,000 from 6 April 2026, over £30,000 from 6 April 2027 and over £20,000 from 6 April 2028. Qualifying income is turnover (your lesson fees before expenses), not profit. Our Making Tax Digital for driving instructors guide covers who is in and when.

Once you are in, MTD requires you to:

1. Keep digital records of your self-employment income and expenses in compatible software, each with its amount, date and category
2. Send quarterly updates to HMRC through that software. These are summaries of income and expenses for the tax year so far, not tax returns
3. Submit your tax return through the software by 31 January after the tax year ends. You stay registered for Self Assessment; HMRC says quarterly updates do not replace it

The quarterly update deadlines are 7 August, 7 November, 7 February and 7 May, for the periods from 6 April to 5 July, 5 October, 5 January and 5 April respectively.

For mixed-use costs, HMRC lets you record only the business part, or the full amount and the private part, or the full amount with one adjustment to the category total before you submit your tax return (HMRC).

What this means in practice

You need software that keeps your digital records, sends quarterly updates and submits your tax return, or separate products that are digitally linked. Orbit's Making Tax Digital tools are built on HMRC's MTD for Income Tax API, so your lesson income and tracked expenses become your quarterly figures without a separate accounting package. Orbit is completing HMRC's software recognition process, and live submissions to HMRC open once HMRC approves it; until then, updates have to go through software on HMRC's compatible list.

Accounting packages such as FreeAgent, Xero and QuickBooks also work with MTD, but you will need to enter or import your lesson income and expenses yourself.

If what you want from an accountant is someone to do the bookkeeping, accounting software built for driving instructors covers that for a single-income, single-vehicle business: lesson income recorded as pupils pay, expenses and mileage logged against each lesson, and the quarterly MTD figures built from the same records.

Common mistakes

1. Claiming the mileage rate on a dual-control car. HMRC's flat rate excludes dual-control driving instructors' cars. Claim actual costs.
2. Not tracking expenses at all. Without records you pay tax on profit you did not make.
3. Mixing personal and business spending. A separate business bank account makes the business share of each cost much easier to show.
4. No mileage log. If you use the car privately, the log is how you show the business share of your running costs. Orbit lets you log business mileage against each lesson.
5. Claiming your initial training. Your Part 1, 2 and 3 qualification costs are not allowable. Ongoing professional development is.
6. Charging your tax-return fee as an expense. GOV.UK says the cost of preparing and submitting your Self Assessment return is not allowable.
7. Ignoring the MTD deadlines. There are no penalties for missing a quarterly update deadline in 2026-27, but from 2027-28 each missed deadline earns a penalty point, and 4 points means a £200 penalty.

To see what your costs leave you per lesson, try the lesson rate calculator.

Disclaimer

This article is for general information and does not constitute tax, legal, or financial advice. UK tax rules change frequently and individual circumstances vary. Consult a qualified accountant, tax adviser, or HMRC directly for advice specific to your situation. Orbit (listed with HMRC as DrivePro) is built on HMRC's Making Tax Digital for Income Tax API and is completing HMRC's software recognition process; live submissions open once HMRC approves it. It does not provide personalised tax advice.