Making Tax Digital for driving instructors: thresholds, deadlines and penalties
Making Tax Digital for Income Tax started on 6 April 2026 for sole traders with qualifying income over £50,000. On 6 April 2027 the threshold drops to £30,000, and on 6 April 2028 to £20,000. HMRC's guidance gives all three as fixed start dates.
For a full-time ADI, £30,000 of lesson fees is not a high bar. At £35 an hour, 20 paid hours a week for 43 weeks comes to £30,100. If your 2025-26 diary looked like that, April 2027 is your start date.
Who has to use it, and from when
You need to use MTD for Income Tax if you are a sole trader registered for Self Assessment, you get income from self-employment or property, and your qualifying income is over the threshold for the relevant year (HMRC).
| Qualifying income over | Tax year HMRC checks | You must use MTD from |
|---|---|---|
| £50,000 | 2024-25 | 6 April 2026 |
| £30,000 | 2025-26 | 6 April 2027 |
| £20,000 | 2026-27 | 6 April 2028 |
HMRC reviews your Self Assessment return each year and writes to you if your qualifying income is over the threshold. If no letter arrives, HMRC says it is still your responsibility to check and sign up. For the £30,000 group, the return that decides it is 2025-26, due by 31 January 2027.
What counts as qualifying income
Qualifying income is your total self-employment and property income before expenses, which HMRC also calls turnover. For an instructor, that means the lesson fees you take. Fuel, insurance, car lease payments and franchise fees are expenses, so they do not pull you under the line.
Some income does not count: employment income through PAYE, dividends (including from your own company), the State Pension, private pensions and your share of profit from a partnership. Rent from a property does count and is added to your self-employment income. HMRC's own example is £25,000 of rent plus £27,000 of self-employment income, giving qualifying income of £52,000.
HMRC is now signing people up
HMRC announced on 12 August 2026 that more than 436,000 sole traders and landlords had sent their first quarterly update, and over 570,000 had signed up.
From September 2026, HMRC began signing up people who should be using MTD for 2026-27 but have not done it themselves, where its records show qualifying income over £50,000 in 2024-25. It is doing this in stages and contacts you once it is done. If you get that letter, HMRC's next steps are to check the income sources it holds for you, get compatible software, catch up your digital records from the start of the tax year and send any overdue update.
You can still sign yourself up. HMRC points out that when it signs you up, it only uses the information it already holds, which may not reflect changes since your last return.
What you have to do each year
You still pay your tax bill by 31 January after the tax year, and you are still in Self Assessment. You need to be registered for Self Assessment to sign up, and HMRC's press release says "quarterly updates do not replace Self Assessment". What changes is how you keep records and report. Using compatible software, you:
- Keep digital records of your self-employment income and expenses, with the amount, date and category of each.
- Send a quarterly update after each update period.
- Submit your tax return through the software by 31 January after the tax year ends.
Quarterly update deadlines
Each update covers the tax year so far, not only the last three months (HMRC). That means you can correct earlier figures without resending old updates.
| Update period | Deadline |
|---|---|
| 6 April to 5 July | 7 August |
| 6 April to 5 October | 7 November |
| 6 April to 5 January | 7 February |
| 6 April to 5 April | 7 May (the following tax year) |
If your accounts run from 1 April to 31 March you can choose calendar update periods instead. The deadlines stay the same. A quiet quarter still needs an update: HMRC says you must send one even if you had no income or expenses in the period.
Quarterly updates are summaries, not tax returns. After you send one, your software or HMRC online account can show an estimate of your tax bill.
The tax return
After the fourth update you make any adjustments, for example for simplified expenses or the private-use share of a cost, and then submit your tax return through your software by 31 January. For the tax year before you join MTD, you submit a Self Assessment return as you normally would. For the £30,000 group, that means a normal 2025-26 return by 31 January 2027, then MTD from 6 April 2027.
Penalties: what applies now and from April 2027
The full detail is in our MTD penalty points guide. The short version, from HMRC's penalties guidance:
- 2026-27: there are no penalties for missing a quarterly update deadline. You still have to send the updates before you can submit your tax return, and a late tax return still earns a penalty point.
- From 2027-28: each missed quarterly update or tax return deadline earns one point. At 4 points you get a £200 penalty, then another £200 for each further missed deadline.
- Late payment: new late payment penalties apply from the tax year you join MTD, and late payment interest is charged from the first day a payment is late.
Spreadsheets and software
HMRC does not supply software. You can use one product that keeps your records, sends updates and submits the return. Or you can keep records in spreadsheets and use bridging software that connects to them and makes the submissions. If you use more than one product, HMRC says you must digitally link them. Writing figures out again by hand, or copy and paste, is not a link. Our spreadsheet and digital-links guide goes through the options.
Your booking app does not need linking unless it creates your digital records. HMRC gives software that takes bookings as an example of something you do not need to digitally link.
MTD for VAT is a separate regime for VAT-registered businesses. The VAT registration threshold is £90,000 of taxable turnover.
What to do now
1. Check your 2025-26 turnover. Add up your lesson fees (and any rent) for 6 April 2025 to 5 April 2026. Over £30,000 means MTD from 6 April 2027. HMRC has an online checker that also covers exemptions.
2. File your 2025-26 return on time. It is due by 31 January 2027, and it is the return HMRC uses to decide whether you are in from April 2027.
3. Choose your software before April. If your accounts run to 5 April, your digital records start on 6 April of the year you join. HMRC's software finder helps you find software that meets your needs.
4. Think about volunteering early. You can sign up for the current tax year or the next one before you have to. HMRC says penalties do not apply to late quarterly updates while you are volunteering, so it is a low-risk way to learn the routine. Late tax returns still earn points, with a 2-point threshold for volunteers.
5. Already in the £50,000 group and behind? Send the overdue update now. There is no penalty for it this tax year, but you cannot submit your 2026-27 tax return until the updates are in.
Where Orbit fits
Orbit is built on HMRC's Making Tax Digital for Income Tax API (HMRC's permission screen lists the app as DrivePro). Lesson payments taken through Orbit and the expenses you log build your quarterly figures. Orbit is completing HMRC's software recognition process, and live submissions to HMRC open once HMRC approves it. Until then, HMRC says quarterly updates must go through software on HMRC's compatible list. Orbit is free for instructors. See how the MTD tools work.
Common mistakes
"The threshold is my profit." It is turnover. £32,000 of lesson fees with £12,000 of car and fuel costs is still over £30,000.
"MTD replaces my tax return." It does not. You still submit a tax return by 31 January, through your MTD software.
"I missed the August update, so I'll be fined." Not for 2026-27. Send it as soon as you can, because you need all the updates in before you can submit your tax return.
"My accountant will sort it." An accountant can act as your agent: create and correct your digital records, send updates and submit the return. The records still have to be kept digitally through the year, so agree who does it.
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.