Surely acquiring new skills must be tax deductible?

Employees who want to further their careers may need to develop new skills by means of some additional training. The tax treatment of these costs depends on how they are paid for and how relevant they are to the job.

Do you pay for training for your employees?

If you do then these are tax deductible for your business. Generally your employees are not taxed on the value of the training, providing it relates to their current role or to some activity they may have to perform as part of their job.

What if employees pay for the training themselves?

The same does not apply in this case. Unfortunately an employee cannot claim a tax relief for training costs unless the training was actually carried out in the performance of their job, as opposed to preparing them to do the job. So it is highly unlikely that an employee who pays training costs personally will obtain any tax relief for the costs.

Salary sacrifice

An alternative would be to agree with the employee, in advance of them undertaking the training, for the employer to pay for the training and the employee to reduce their salary to compensate.

As you can see from the comparison below both the employer and employee are better off after the salary sacrifice due to the tax and National Insurance (NI) savings.

It is vital that salary sacrifice arrangements are implemented correctly. Please contact us if you would like to discuss this further.

	Pre-salary sacrifice £	Post salary sacrifice £
Salary	20,000	18,500
Training costs paid	1,500	1,500
Employer's NI at 12.8%	1,891	1,699
Employee's NI at 11%	1,625	1,460
Employee’s tax saved	-	330
Total employer cost	21,891	21,699