Apr 11
HMRC's New Guidance on Training Costs for the Self-Employed

HMRC’s New Guidance on Training Costs for the Self-Employed

Recently, HMRC released new guidelines to clarify which training expenses can be deducted from taxes by self-employed individuals. These guidelines state that not only can costs for updating existing skills be deducted, but expenses for acquiring new skills or knowledge beneficial to the business are also deductible.

What costs count?

Training costs must relate to the existing business, including:

  • Keeping pace with technological advances and changes in industry practice; and
  • Training which is ancillary to a person’s main trade, such as digital skills or bookkeeping.

HMRC has provided various examples, such as a potter who takes courses on e-commerce and website development with the aim of making online sales. Although the courses have nothing to do with pottery, the costs should be deductible as they are helping a move into online selling.

Similarly deductible would be the costs for a writer who takes a course on drawing illustrations with the aim of illustrating his or her own books. Again, the new skills will be used to improve an existing business.

Despite the changes, the training costs deductibility rules for the self-employed are still stricter than they are for employers.

What costs don’t count?

There is no deduction for training costs that allow a person to start a new business or to expand into a new, unrelated, area of business. For example:

  • A make-up artist takes tattooing courses with the aim of opening their own tattoo studio. The training costs are unrelated to the make-up business, so they are not deductible.
  • An unemployed person completes a course to become an approved driving instructor. There is no deduction for the training costs as new skills are being acquired that will help the person start a business which does not already exist.

The changes date back to a 2018 consultation, so don’t expect further relaxation of the rules anytime soon.

The full list of examples provided by HMRC can be found here.

For more information, contact our Yorkshire and Derbyshire based Accounting & Business Advisory can assist on 01142 664 432 or info@smh.group