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Are Training Costs Tax Deductible?

I’ve updated this post on 17 April 2020

Upgrading your skills is one of the most valuable things you can do for your business. But did you know that not all training costs are tax deductible?

I’ve met 100s of successful business owners over the years but the most successful ones invested in their own skills and their team, to keep their business one step ahead of the competition.

But I know how expensive training can be.

So it is worth knowing which ones you can claim against your taxes so you can keep reducing your tax bill.

Like I always say, claiming all the allowable business expenses you can is the easiest way you can reduce the amount of tax you pay.

To make managing your finances a bit easier, I’ve put together a flowchart to help you decide if the training course you attended is tax deductible.

Use this flowchart to decide if your training courses are tax deductible
Are Training Costs Tax Deductible?

Are Training Costs Tax Deductible?

Broadly speaking, training tends to fall into two categories, each one being subject to different tax rules:

  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.

HMRC set out different legislation for each of these, with some slight differences depending on whether you are self-employed (sole trader) or a Limited Company Director/employee.

Tax Relief on Training Courses If You’re Self-Employed or a Sole Trader

If you are self employed, any training you do that keeps your existing skills and expertise up to date would be a tax allowable expense.

HMRC recognises that you need to undertake training as part of carrying out your trade to keep your knowledge up to date. So this is part of your day-to-day trader.

If you attend training to learn new skills however, this is likely to not be tax deductible.

This is because when you learn a new skill it is to create a brand new revenue stream so not part of your day-to-day trade. These costs are considered capital in nature so cannot be expensed.

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 be 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 would not be tax allowable expense.

How to Claim Your Tax Deduction

You can claim tax relief when you fill in your self assessment tax return. You’ll need to include it within the self employment section of your return as a business expense.

As with any other business expense, always make sure you keep your receipt as evidence of your claim.

Tax Relief on Training Courses If You’re a Limited Company Director or Employee

If you are a Limited Company Director or provide training for your employees to keep skills in the business up to date, then you can claim for these as a tax deduction against your business profits.

Training for new skills are not tax deductible

There are times when courses get paid for that are not business-related but agreed as part of a remuneration package. Training courses of this nature are tax deductible so they will reduce taxable business profits but there will be a P11d benefit in kind charge arising since they are not part of the day-to-day trading.

How to Claim Your Tax Deduction

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.

Claiming for Incidental Costs

Whether you are a sole trader, self-employed or Limited Company owner, if the training course is tax-deductible from your allowable business profits you’ll also be able to claim for any incidental costs as a result of attending course such as:

  • Travel
  • Hotel
  • Subsistence
  • Books

When it comes to travel, you’ll still need to follow the rules of claiming business travel and I’ve written a separate guide to claiming travel costs to help you keep within the tax rules.

Wrapping Up

The tax rules surrounding training courses are quite lengthy. But put simply if you attend a course that is wholly work-related to keep your existing skills and expertise up to date, then you can claim a tax deduction regardless of your business structure.

When you work for yourself, keeping your skills and expertise up to date can be the key to staying ahead of your competitors and make you more attractive to potential clients. Don’t let the tax regulations put you off spending money on training or affect your decision-making. Always consider the return on investment when you have the ability to offer a new or improved service to your customers.

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Anita Forrest
About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek, money nerd and creator of www.goselfemployed.co - a UK small business finance blog where she shares help and advice with the self-employed community to make topics like registering a business, bookkeeping and taxes easy to understand.