Are Training Costs Tax Deductible for the Self-Employed?

Generally, training costs fall into two categories, each subject to different tax rules depending on whether you're self-employed or operate a Limited Company. The two main types of training are:

1. Courses that update and improve existing professional skills and expertise.

2. Courses that business owners or staff attend to learn new skills.

 

How to Claim Training Costs on Your Self-Assessment Tax Return

As a self-employed individual, training that keeps your current skills and expertise up to date is an allowable business expense. HMRC recognizes the necessity of ongoing training to maintain your business operations.

However, if you undertake training to acquire new skills, these expenses are typically not tax-deductible. Learning new skills often aims to create a new revenue stream, making these costs capital in nature, which cannot be expensed on your tax return.

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Example:
A self-employed beautician taking a course on a new eyelash extension technique can claim the expense as it's a skill update. However, if the beautician takes a course to become a tattoo artist, this would likely represent a new revenue stream, making it a disallowable expense.

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How to Claim for Training Courses on Your Tax Return

You can claim allowable training course costs in the self-employment section of your tax return. If your business turnover is below £85,000 for 2021/2022, you can complete the simplified version of the tax return by entering your total expenses, including training costs, alongside other allowable business expenses.

For businesses with a turnover exceeding £85,000, you'll need to provide a detailed breakdown of your expenses as required by HMRC, including training costs under 'other allowable expenses.'

Regardless of your business turnover, it's essential to keep records of what you're claiming and how you've calculated these amounts in case of an HMRC investigation.

How to Claim Training Costs in Your Limited Company

If you run a Limited Company and provide training to maintain existing skills and expertise, these costs are allowable expenses against company profits. This rule is similar to that for sole traders, where training costs for new skills are not tax-deductible.

Sometimes, employers pay for training that isn't directly related to business operations but is part of an employee's remuneration package. Such training courses are tax-deductible, but a P11D benefit-in-kind charge may apply since they are not part of regular business activities.

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How to Claim for Training Courses on a CT600 Tax Return

You can claim tax relief for training costs when filing your annual corporation tax return, along with other allowable business expenses. Any P11D benefit-in-kind must be reported by the employer by July each year on a separate P11D form.

Claiming Incidental Costs of Attending Training Courses

Whether you're self-employed or operating as a Limited Company, if the training course is tax-deductible, you can also claim incidental costs related to attending the course, such as:

• Travel

• Hotel accommodations

• Subsistence

• Books/Guides

Always use your judgment when deciding what to deduct against your taxes. Incorrect claims can lead to penalties. If you're unsure, consult a professional.

Related Reading:

• Can I Buy a Car Through My Business as a Sole Trader?

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