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Which self-employed training costs are tax deductible?

If you are self-employed, you should already be aware that you can deduct some of the running costs of your business from your taxable profit to reduce your tax bill.

Allowable expenses include costs like office equipment, clothing, travel, insurance, advertising, staff, premises, and stock or raw materials that you buy to sell on.

These expenses do not include business money used for private purchases, and you cannot claim allowable expenses if you use your tax-free trading allowance.

However, some self-employed individuals may not know that some training costs are also tax deductible – such as training courses that help you to update or expand your current skills relating to the operation of your business.

HMRC recently updated its online guidance on the tax deductibility of self-employed training costs, so here’s a quick explanation of which training costs count as tax deductible for self-employed people and which ones don’t.

Which training costs are tax deductible?

Even with updates, the deductibility rules for self-employed earners are stricter than the rules for employers. To count as an allowable expense, the training course needs to relate to your existing self-employed business.

This means you can only claim business expenses for training that allows you to:

  • • Improve your skills and update knowledge that you use in your line of work.
  • • Stay up to date with technological advances within your industry.
  • • Develop new knowledge and skills to expand your business activities.
  • • Enhance your ability to run your business (e.g. administrative processes).

HMRC has provided several examples of scenarios where a self-employed business owner could claim allowable expenses for training costs, which include:

  • • A wedding photographer taking a photo editing course to refresh and improve their photography skills.
  • • A personal trainer gaining a basic qualification from a nutrition course to help them provide better training.
  • • An author taking a beginners’ illustration course to start illustrating the children’s storybooks they write.
  • • A plumber taking a bookkeeping course at a local college to help them improve record-keeping for their business.A local potter taking an e-commerce course to learn how to move into online sales and set up a website.

Which training costs don’t count?

HMRC does not allow deductions for training costs that help a self-employed person to start up a new business, or to expand into another area of business that does not directly relate to the work they currently do.

This means you cannot deduct training costs if they do not support your current self-employed business – examples provided by HMRC include:

  • • A freelance makeup artist undergoing training to become a tattoo artist.
  • • An unemployed person completing training to qualify as a driving instructor.
  • • A sportswear shop owner enrolling in university to do a sports science degree.
  • • A taxi driver training as a painter and decorator to start their own business.

These training costs would not be allowable expenses and would not be tax deductible.

With the newest rules dating back to a consultation in 2018, it’s unlikely that HMRC will change these rules for self-employed training tax deductions any time soon.

Get help with self-employed accounts

More information about whether training could be an allowable expense for your business if you’re self-employed is available on the government website.

If you need help managing your business accounts and ensuring you comply with tax rules, you may want to outsource your bookkeeping to our accountants in Barnsley.

It’s important to keep up with changes like National Insurance cuts and Making Tax Digital for ITSA that could affect your business finances and administration.

We can help with this here at gbac, so if you would like to learn more about our services and how we can support self-employed business owners, please get in touch.