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Published on 14 June 2018

Taxation of self-funded work-related training

LITRG recently responded to HM Treasury’s consultation document exploring the possibility of extending tax relief for the cost of training by employees and the self-employed, in an attempt to encourage more individuals to develop and improve their skills or to retrain completely to help boost the country’s productivity.

In LITRG’s view, the biggest hurdle for most wishing to retrain or upskill is finding the funds to meet the upfront costs of any training, and therefore claiming tax relief after the training has been purchased will not help with this cost. Consequently, it is questionable whether tax relief in itself will be a sufficient incentive to encourage individuals on low incomes to invest in their own training.

For those who do choose to self-fund some low cost training, many will not benefit from tax breaks as they will not be earning enough to pay tax. Many will be in receipt of tax credits or universal credit to supplement their income, and therefore we believe it would be better to provide more immediate assistance with costs of training for this group via the welfare benefits system rather than via the tax system as this will get the funds to them more quickly and more directly.

One of the biggest challenges in developing a new policy in this area will be identifying what type of training will qualify for relief. It needs to encompass a broad spectrum to meet the variety of training needs of the individuals, but must be easily identifiable so it does not create ambiguity and scope for abuse.

The consultation document can be found on GOV.UK and our full response can be found here: Taxation of self-funded work-related training – LITRG response

Sharron West

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