Hi guys, I have recently registered with HMRC as a sole trader due to getting work on a freelance basis. In order for me to get more and more work I will need to do more training and qualifications and my question to the Collective is Thus:

Can I claim back some of the Tax on any training/assessment courses I undertake?

Can I claim back some of the Tax on any training/assessment courses I undertake?

Not unless you are VAT registered, but you can record the cost of the training courses as business expenses.

Have a look here: http://www.contractorcalculator.co.uk/contracting_training_expenses_what_can_claim.aspx

Anything that is wholly and necessarily spent on your business is allowable against tax. VAT can only be reclaimed if you are registered. If you can keep records it’s worth registering as it is the equivalent of 20% off your car fuel.

I wouldn’t be earning the VAT threshold of 73k to warrant being registered.

Highclimber

Any expense you incur in the legitimate pursuance of profit is allowable against Taxation.

I write software, any development software/hardware I buy is allowable.
Any courses I go on to use said development software is allowable against tax.

Remember, you use the cost of the training and qualifications to reduce your profit, which is then subject to taxation. You don’t deduct the cost of the training FROM the tax you have to pay!

HTH

The VAT threshold is set by HMRC and isn’t an indication of whether it’s worthwhile or not. You can still be VAT registered below the threshold.

Depends if you are going to have many VAT liable expenses and whether your main customer base is VAT registered to make it worthwhile. If you provide to domestic customers, then don’t do it, as you’ll price yourself out of the market.

To clarify, I am essentially a labourer (working under other people on a freelance basis) so I am not selling anything other than my skills so my only VAT expense is on fuel and purchases I require for me to do my job (and training too).

You can be VAT registered no matter what your turnover is. The threshold is a point at which HMRC thinks it might not be worth your hassle (so to speak). Remember you have to then charge VAT which might make your contracting work more expensive. Though, I’d assume your clients are VAT registered and thus, it might not be a huge difference to them. Don’t mess up with VAT!! Income tax gets you threatened, VAT gets you royally shagged!

See Highclimber’s answer for the normal case.

One other thing to consider :- If until recently you have been employed, and your sole trader earnings are lower or if you even make a loss this tax year after paying for equipment and training you may be entitled to a refund of tax paid under PAYE.

You do have an accountant don’t you? 🙂

Or jeff, like me who went self employed in January last year – I’d paid my PAYE on my earnings to the point of leaving my old company and was in the 40% tax bracket.

This meant that everything I earned self employed (which was quite substantial) then instantly became liable for 40% tax 🙁

You do have an accountant don’t you?

not yet, that is on the cards as my cousin is an accountant but he’s currently out of the country.

If until recently you have been employed,

I have been unemployed since before the current tax year claiming JSA

A Sole Trader who is in effect only billing clients for his time really doesn’t really need the additional expense of an Accountant.
The OP should have a very straight forward income and allowable expenses trail. The Tax Forms that you need to complete are all on line. If you don’t feel up to doing the on line returns then seek out an Accountant.
All you need to do is to be totally thorough with your record keeping and don’t take the Micky claiming for your new domestic washing machine etc.
I have been in this position for the last 10 years and have never used an Accountant. My tax office has given me all the advice I need after I attended an initial course for those newly self employed.

assuming my book keeping is up-to-date and accurate, are there any negative aspects to being VAT registered below the threshold or is the threshold a ploy to stop small fry traders from claiming money back from the Gov?

As others have said you can claim all expenses related to you making an income. If you require training as part of your job it’s allowable but if the training is so you can start a different career then it’s not i.e. as labourer you’re CITB is allowable but a course in computer programming isn’t.
Any tools and materials you require are allowable including the VAT if not not VAT registered. Tools that are designed to last for long periods i.e. drills and cement mixers are capital expenses and their capital allowances are deducted from the profits.
If you have any job seekers allowance since 6/04/11 then you will need to declare that on your tax return too.

Any one below the threshold can apply to be VAT registered but your clients may not like it so think about that before applying. It is also an extra burden on record keeping for you.
In most cases unless you are paying money over to HMRC and not getting a refund otherwise you would be making a Gross loss which is a disaster.

When I was self-employed sole trader I registered for VAT as all my clients were VAT registered. Well worth it because you can claim all (well, most) of your VAT back. My work (surveyor) involved driving approx 30k miles a year so really was worth it. VAT book-keeping is very straightforward as long as you meet the time periods (I was quarterly) and if you have a fairly consistent monthly income there are quick self-calculting schemes.
With regard to accountants, for me having one probably covered his cost in the savings he found on things I had no idea about (and there are a lot!).

EDIT – if most of your clients are NOT VAT registered but you are, then you will be immediately 20% more expensive than any of your non-registered competitors so obviouly not so worthwhile then!

@TheArtistFormerlyKnownAsSTR good point + very true.

When I started up we were loss making. If we’d been a Ltd company at that point, those would have been company losses, not personal ones that could be offset against PAYE tax. Good advice from my accountant has saved me a lot of money, but I know that’s not how everyone likes to work.