Are training courses tax deductible if you're self-employed?
Continual learning and development are essential features of self-employment. The prospect of new challenges every day is a big driver for many people to start working for themselves. But are training courses tax deductible if you’re self-employed?
Which courses and training are allowed as tax deductions?
There are no restrictions on who provides any training, or how you access it. There’s no difference between any online course or in-person education when it comes to allowable business expenses. Or whether it’s offered by another freelancer, a professional industry organisation, or an educational institution. This could include the webinars and training offered by IPSE events, for example.
HMRC regulations on allowable expenses focus on the subject of any training. To be able to claim, it needs to improve the skills and knowledge you use in your current business, and has to be closely related.
You can’t claim for anything completely unrelated to your occupation, or to prepare to start a new business. And training courses that help you expand into new areas are also ineligible, even if it’s related to your current business.
As an example, if you currently work as a freelance web designer, a refresher course to update your Photoshop skills would be allowed, as it’s software you use every day. But you couldn’t claim for a course on cyber security or IT networking, even if they may come in useful setting up your home office, or as new services to offer clients.
This does mean there are some potential grey areas, including where only part of a course would be considered acceptable.
As a business owner, you’re typically able to claim for anything relating to the management of your company, such as project management, health and safety, or leadership skills.
What counts as work-related training?
Business expenses are allowed if you’re improving existing skills and knowledge which is used for your business. This also applies if the training is for maintaining membership or certification by a professional industry body.
If you need to do a set number of continual professional development (CPD) hours to maintain your professional association membership these hours would usually count as an allowable expense, and can include seminars and conferences along with online courses.
For example, if you’re an electrician and attend a course on ensuring your work meets the latest regulations, or a beauty therapist taking online training on the newest techniques for manicures, these would be suitable expenses. But if you decided to learn plumbing or how to become a tattoo artist, these would represent new skills and revenue streams, and wouldn’t be applicable for tax relief.
The same rules apply to any employees of your company. A training course which isn’t business related would be treated as a ‘benefit in kind’ which may incur tax and NI payments by both the company and employee. You should also be careful if you’re offering training to a family member who is also an employee, ensuring that it benefits the company and existing work-related skills and tasks.
For example, if you offer to pay for a family employee to pursue a degree or MBA qualification, it’s likely to be seen as offering new skills and knowledge, except in very specific cases.
How to claim for training courses if you’re self-employed?
If you’re operating as a new sole trader, any training costs will likely be classed as capital expenditure, but for the more experienced, it will fall under revenue expenses, which can be declared as part of your Self Assessment tax return.
Limited company directors can claim the cost of allowed training against Corporation Tax each year, on the relevant CT600 tax return form.
If you do decide to fund a course for an employee that isn’t an allowed expense as a benefit in kind, they will need to be reported on a P11D form, along with paying tax and National Insurance.
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