Driving instructors face a lot of challenges in day to day work. One issue that is at the back of many instructors’ minds is taxes. Whether self employed or under contract with a school, there are several tax issues that should be considered.
Self employed driving instructors
Like any self employed person, it is a legal requirement for a self employed driving instructor to file a self assessment tax return and pay any taxes due on their income. This is filed annually, with paper returns due in late October and electronic filing due by late January.
Self assessment requires that you keep track of all your earnings and expenses. There are some expenses that are allowable, and others that are not. Some of these expenses are fairly straightforward – such as the costs of advertising materials. Others can be a bit trickier to work out.
For instance, if you own the vehicle you use for instruction and use it for other purposes, too, you’ll need to work out the allowable percentage of the costs associated with it. This includes everything from petrol and repairs to the annual depreciation. These expenses are easier to determine if you use that vehicle exclusively for work, but can still involve some complicated calculations.
If your income is above a certain level, you will also need to be registered for VAT. This is a separate filing that also needs to be done each quarter. As a self employed instructor, you would be responsible for accounting for the tax on the amount you charge for your tuition services.
The final part of your tax liability is of course, road tax. As a self employed instructor, you are responsible for paying for this yourself. However, it can be considered one of your business expenses.
Contracted as a full-time driving instructor
At the other end of the spectrum, if you are employed full time as a driving instructor for a school, your taxes are probably much simpler. In this case, your paycheck will most likely reflect a Pay As You Earn (PAYE) tax collection. This means that your tax liability is being deducted each time you are paid.
Similarly, the school you work for will be registered for VAT, if applicable. It is the school’s responsibility to account for the income and VAT payable on it.
As a business, the school will also be in charge of paying road tax. The vehicles used for training will likely be maintained as a fleet, and the taxes paid directly by the school.
Self-employed contractors working for a driving school
Between self employed and employees are a growing number of instructors who work on contract for a larger school. In these scenarios, you get work through the school, but are not an employee of the school.
For this class of driving instructor, your accounting will be the same as if you were self employed and taking on students directly. While your income will come from the school, you will need to file a self assessment return and account for your income and expenses.
If you are VAT registered, you will need to do this accounting, too. However, if the school is VAT registered but your income is below the limit for registering, currently set at £81,000 per annum, you do not need to worry about VAT.
In terms of road tax, it will often be down to who owns the vehicle. If the school provides the vehicle as a hire car to you, they should pay for the road tax. If you provide the vehicle yourself, you will be responsible for it. In either case, the costs of the vehicle usage should be accounted for as part of your expenses for self assessment purposes.
Taxes can be tricky for any industry. With so much variation in how driving instructors are paid and employed, it can be even more confusing. If in any doubt, the best