Extension to Tax Relief on Self-Funded Training Shelved

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June 25th 2022
Tax Week 12
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Extension to Tax Relief on Self-Funded Training Shelved

Consultation outcome leads government to consider alternative schemes instead of extending tax relief on courses and training.

A consultation was launched earlier this year to discuss extending tax relief for self-funded work-related training.

Tax relief for training that is self-funded, for self employed people, must be wholly and exclusively related to the employment and not introduce unrelated new skills. For employees, as long as the training expense is reimbursed by the employer, or employer funded, then the relief is allowed.

The move was set out to gather ideas on extending the definition of training tax relief so people can pay out of their own pocket for training that would provide transferable skills, not fully related to their current employment, and still receive tax relief on the costs.

The consultation outcome has been eagerly awaited by near 900,000 employees and 500,000 self employed people who currently pay for training and are disallowed tax relief on the costs. This particularly skews toward the lower end of the pay scale, students and unemployed people - 600,000 of people in that bracket would be better off if the tax law was changed.

Responses to the consultation has led to the government conclusions that:

  • Any move to change the existing rules would not effectively incentivise self-funded training.
  • Tax relief would encourage additional training that people would pay for regardless of receiving tax relief.
  • People at the lower end of the pay scale, paying for training out of pocket, would be unlikely to bother to claim due to the complexity involved in making a claim.

Instead the government is going alternative measures such as the National Retraining Scheme. The first phases has just received £100 million in the 2018 Budget.

The careers guidance service would provide courses with online learning options to help people find work opportunities in their locality and then learn the key skills required.

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