---
title: "Making Tax Digital for driving instructors: ADIs and franchises"
description: "Self-employed ADI? MTD counts your lesson income before franchise fees and car costs. What to record, what to claim and what to do each quarter."
url: https://mtdmatch.uk/blog/mtd-for-driving-instructors.html
last_updated: 2026-10-26
language: en-GB
publisher: MTD Match (independent; not affiliated with HMRC)
---

# Making Tax Digital for driving instructors: ADIs and franchises

Whether you run your own driving school or pay a weekly franchise fee to a national brand, as a self-employed approved driving instructor (ADI) Making Tax Digital (MTD) for Income Tax will reach you soon, if it hasn’t already.

A full diary at today’s lesson prices can mean £30,000+ of takings. MTD counts all of it – **before** the franchise fee, fuel and the car – so many instructors are in from 2027.

**In short:** If you’re a self-employed driving instructor and your takings (plus any rent) were over £30,000 before costs in the 2025/26 tax year, Making Tax Digital for Income Tax applies to you from 6 April 2027. Over £50,000 and it has applied since 6 April 2026; the threshold is planned to fall to £20,000 from April 2028. You’ll keep digital records in HMRC-recognised software, send four quarterly updates a year (due 7 August, 7 November, 7 February and 7 May) and file a final declaration by 31 January.

## Are you in? It’s your takings, not your profit

Add up everything pupils paid you in the 2025/26 tax year – single lessons, block bookings, intensive courses and test-day car hire – before taking off your franchise fee or any other cost. If that total (plus any rent from property you let) is over £30,000, MTD applies from **6 April 2027**. Over £50,000 and you have been in since April 2026.

### April 2026: Over £50,000

### April 2027: Over £30,000

### April 2028: Over £20,000

planned

## Your work in accountant language

What actually happens in your working life, what your accountant and HMRC call it, and what to do about it.

| What happens | Accountant calls it | What you do |
| --- | --- | --- |
| A pupil pays for a two-hour lesson | Turnover | Record each payment – cash, card or bank transfer. |
| A pupil pays upfront for a block of ten lessons | Turnover when received (cash basis) | Record it when the money arrives, even if lessons run into the next quarter. |
| A pupil pays for the car on test day | Turnover | Include it with lesson income. |
| You pay your weekly franchise fee | Allowable expense | Keep the franchise statements. |
| You fill up and pay for the tuition car insurance | Actual vehicle costs – or mileage instead | Keep receipts if you claim actual costs; you can’t also claim mileage for that car. |
| You have dual controls fitted | Car costs – part of the vehicle claim | Keep the invoice; treated with the car under actual costs. |
| You renew your ADI badge | Allowable expense – registration | Keep the DVSA confirmation. |
| You take money out for your own bills | Drawings – not an expense | It doesn’t reduce your tax. |
| Every three months / after 5 April | Quarterly update / final declaration | Send totals each quarter; finalise the year by 31 January. |

## What can a driving instructor claim?

### ✓ Usually allowable

- Franchise fees to your driving school
- Tuition car lease or rental, or capital allowances if you buy it
- Fuel, servicing, tyres, clutches and repairs (business share)
- Driving instructor car insurance
- Dual controls, roof sign and magnetic signs
- ADI registration fee and standards check costs
- CPD and training to keep your ADI skills up to date
- Booking app or diary software, and card reader fees
- Website, local advertising and listing fees
- Business share of your phone bill

### ✗ Not allowable

- The private-use share of the tuition car
- Mileage claimed on top of actual car costs
- Parking and speeding fines
- Lunch between lessons
- Money you take out for yourself (drawings)

## Rules that matter for driving instructors

### The car: actual costs or mileage

Most instructors use their tuition car for personal journeys too. If you claim actual costs, work out the business share (for example from your mileage) and claim that share of fuel, insurance and repairs, plus capital allowances if you own the car. Or use 45p a mile for the first 10,000 business miles and 25p after. Not both.

### Franchise fees and gross takings

If pupils pay the driving school and the school pays you after taking its fee, your turnover is still the full amount pupils paid for your lessons, and the fee is an expense. Check your franchise statements to see how payments are recorded.

### Prepaid blocks

Under the cash basis, block bookings are income when the money arrives. If you refund a pupil for lessons not taken, record the refund to reduce your income.

## Worked example

**Lisa, a franchised ADI in Cardiff (illustrative example)**

|  |  |
| --- | --- |
| Takings (turnover) | £39,500 |
| less Franchise fees (including car) | −£12,000 |
| less Fuel | −£3,800 |
| less Tyres, clutch and servicing | −£900 |
| less ADI fee, standards check and CPD | −£300 |
| less Booking app, phone and advertising | −£900 |
| Profit | £21,600 |
| Income tax (estimate) | £1,806 |
| Class 4 National Insurance (estimate) | £542 |
| Total tax for the year | £2,348 |
| Put aside each month | £196 |

**In MTD from 6 April 2027.** MTD looks at the £39,500 of takings, not the £21,600 profit.

Estimate for 2026/27 using England, Wales & NI rates, assuming no other income. Scotland has different income tax bands.

## What a quarterly update looks like

A typical quarter for a driving instructor: export lesson payments from your booking app or bank, add any cash, total franchise fees from your statements, add fuel and car receipts (or your mileage) – then submit through your software, or let your accountant do it. If pupils pay by transfer with their name as reference, matching takes minutes.

| Quarter | Period | Submit by |
| --- | --- | --- |
| Q1 | 6 Apr – 5 Jul | 7 Aug |
| Q2 | 6 Jul – 5 Oct | 7 Nov |
| Q3 | 6 Oct – 5 Jan | 7 Feb |
| Q4 | 6 Jan – 5 Apr | 7 May |
| Final declaration | The whole tax year | 31 Jan following |

Quarterly updates are summaries – they don’t change *when* you pay. Tax is still due by 31 January (plus payments on account on 31 January and 31 July if they apply to you).

## What will an accountant cost?

Typical monthly fees under MTD for Income Tax for: **Sole trader, one business**.

| Option | What you get | Per month |
| --- | --- | --- |
| **You do it yourself** | MTD-compatible software. You keep the records and send the updates. | **£0–£15** (up to £180 a year) |
| **Accountant files for you** | You keep records in an app; they check them, send the 4 quarterly updates and the final declaration. | **£30–£60** (about £360–£720 a year) |
| **Full service** | They do the bookkeeping too – you share receipts and bank feeds, they handle the rest. | **£60–£120** (about £720–£1,440 a year) |

**What pushes the price up:** lots of transactions every month, or more than one income stream; records kept on paper rather than in an app; being VAT-registered; catching up on missed updates or late returns.

### What a fixed-fee quote should include

- All 4 quarterly updates *and* the final declaration (your tax return)
- The MTD software licence – or whether you pay for it separately
- Whether they do the bookkeeping or only check what you’ve recorded
- A reminder before each deadline and an estimate of the tax to put aside
- Whether VAT (20%) is added on top – not every practice charges it

Accountancy fees for your business are an allowable expense, so they reduce your tax bill.

Indicative ranges from published UK price lists, checked October 2026. Not a quote – your fee depends on how many transactions you have, how tidy your records are and where you live.

## Questions driving instructors ask

### My franchise includes the car. Can I still claim fuel?

Yes. The franchise fee is one expense and fuel you pay for yourself is another – as long as you use actual costs rather than mileage.

### Pupils pay me for ten lessons at once. When is that income?

Under the cash basis, when you receive it. That can make one quarter look busier than the next – that’s fine.

### Can I claim my ADI badge renewal?

Yes. The DVSA registration fee needed to work as an instructor is an allowable expense.

### Is a trainee licence (PDI) any different for tax?

If you are self-employed on a trainee licence, your lesson income counts in the same way.

## Sources

- [Find out if and when you need to use Making Tax Digital for Income Tax](https://www.gov.uk/guidance/find-out-if-and-when-you-need-to-use-making-tax-digital-for-income-tax) – GOV.UK
- [Work out your qualifying income for Making Tax Digital for Income Tax](https://www.gov.uk/guidance/work-out-your-qualifying-income-for-making-tax-digital-for-income-tax) – GOV.UK
- [Send quarterly updates using Making Tax Digital for Income Tax](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/send-quarterly-updates) – GOV.UK
- [Find software that works with Making Tax Digital for Income Tax](https://www.gov.uk/guidance/find-software-that-works-with-making-tax-digital-for-income-tax) – GOV.UK
- [Penalties for Making Tax Digital for Income Tax](https://www.gov.uk/guidance/penalties-for-making-tax-digital-for-income-tax) – GOV.UK

This guide is general information about HMRC’s Making Tax Digital rules as of 26 October 2026, not tax advice. MTD Match is an independent introduction service and is not affiliated with HMRC. Check gov.uk or speak to an accountant about your own situation.

**Written by the MTD Match team:** We turn HMRC’s Making Tax Digital guidance into plain English for each trade, cite the GOV.UK pages we rely on and update every guide when the rules change.

[How we check our guides](https://mtdmatch.uk/methodology.html) · [About us](https://mtdmatch.uk/about.html)

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