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Are Training Costs Tax Deductible for the Self Employed?

If you’re wondering whether training costs are tax deductible for the self-employed, then you’ve come to the right place. When you’re investing in training to develop your skills as a self-employed person, then claiming training costs on your tax return is a handy way to reduce your tax bill.

In this guide, you’ll find out what the HMRC rules are to help you to decide whether what you’ve paid for on training costs are tax-deductible if you’re registered as self-employed.

This guide is for self-employed business owners, different rules apply if you have a Limited Company.

1. Are Training Costs Tax Deductible for the Self Employed?

In general, training tends to fall into two categories. Each one is subject to different tax rules, depending on whether you’re registered as self-employed or have a Limited Company. The two usual types of training are:

  1. Training courses to update and improve existing professional skills and expertise;
  2. Training courses that business owners and staff attend to learn new skills.

2. How to Claim Training Costs on Your Self-Assessment Tax Return (Self Employed)

If you are self-employed, any training keeps your existing skills and expertise up to date are an allowable business expense. That’s because HMRC recognises that you need to undertake training as part of running your business to keep your knowledge up to date.

However, if you attend training to learn new skills, this will most likely not be tax-deductible. This is because when you learn a new skill, it is to create a brand new revenue stream so it’s not part of your day-to-day trade. These costs are considered capital in nature so cannot be expensed on your tax return.

2.1 Example

A self-employed beautician goes on a course to learn about a new technique in eyelash extensions. This would be a refresh of existing skills so would be tax-deductible. If the beautician decided to take a course to learn how to become a tattoo artist, then this would most likely represent a new revenue stream and not a course to keep existing skills up to date so it would be a disallowable expense.

Are Training Costs Tax Deductible for the Self Employed?
Are Training Costs Tax Deductible for the Self Employed?

2.2 How to Claim for Training Courses On Your Tax Return

You’ll need to claim the cost of allowable training courses in the self-employment section of your tax return. If your business turnover is less than £85,000 for 2021/2022, you’ll have the option to fill in the simplified version of this part of the tax return. Therefore, you only need to enter your total expenses. You’ll need to include your training courses in the figure you enter alongside your other allowable business expenses.

If your business turnover is more than £85,000, you’ll need to enter a breakdown of your expenses in the boxes set out by HMRC. In addition, you’ll need to include your training courses within ‘other allowable expenses‘.

How to Claim for Training Courses On Your Tax Return

Whatever your business turnover, you should keep a note of what you are claiming for and how you worked it out as part of your business records. This is in case of an HMRC investigation and they ask for evidence of what you are claiming for to check you’ve paid the right amount of self-employed tax.

3. How to Claim Training Costs in Your Limited Company

If you have a Limited Company, are a Director or a registered employer providing training for your employees, then as long as the training is to keep existing skills and expertise up to date, these can be claimed as an allowable expense against Company profits. This is similar to sole traders whereby any training costs for new skills are not tax-deductible

There are times when employers pay for things are not business-related. However, they are part as part of a remuneration package. Training courses of this nature are tax-deductible. However, there will be a P11d benefit in kind charge arising since they are not part of the day-to-day trading.

3.1 How to Claim for Training Courses on a CT600 Tax Return

You can claim tax relief when you fill in your annual corporation tax return, along with other allowable business expenses. Any P11d benefit in kind will need to be reported by the employer by July each year on a separate P11d form.

4. Claiming for Incidental Costs of Attending Training Courses

Whether you are self-employed or a Limited Company, if the training course is tax-deductible, you’ll also be able to claim for any incidental costs you pay for as a result of attending course such as:

  • Travel
  • Hotel
  • Subsistence
  • Books/Guides

Find out more about claiming business travel in this guide.

When it comes to claiming expenses, always use your judgement when it comes to deciding what you deduct against your taxes. Incorrect claims can result in penalties. And, as always, if you aren’t sure, seek the advice of a professional.