Online Course Creators — How to Handle Tax

The Accounted Business Team·8 March 2026·8 min read

Online courses are one of the fastest-growing digital businesses in the UK. Whether you are teaching graphic design on Skillshare, selling a photography masterclass on Teachable, or running live workshops through your own platform, there is real money to be made — and where there is money, HMRC is never far behind.

The tax treatment of online course income is not always intuitive, particularly when it comes to VAT on digital services and the distinction between employed and self-employed income. This guide covers everything UK-based course creators need to know to stay compliant and keep more of what they earn.

When does course creation become taxable?

The moment you start selling courses with the intention of making a profit, you are running a business in HMRC's eyes. It does not matter whether this is your full-time occupation or something you do on Sunday evenings after putting the kids to bed.

You have a trading allowance of £1,000 per tax year. If your total gross income from course sales (before expenses) stays below this amount, you do not need to register as self-employed or file a Self Assessment return. But be honest with yourself — if you are investing time and money into creating courses, you are probably going to blow past £1,000 fairly quickly.

Once you exceed the trading allowance, you need to register as self-employed with HMRC. You will then file a Self Assessment tax return each year, reporting your course income and claiming allowable expenses against it.

If you are earning royalties through a platform like Udemy or Skillshare rather than selling courses directly, the income is still taxable. The platform may or may not deduct withholding tax (particularly if they are US-based), but you are responsible for reporting the full amount on your UK tax return and claiming credit for any foreign tax withheld.

Income tax and National Insurance

Your course income is treated as self-employed trading income. You pay income tax on your profits (income minus allowable expenses) at the standard rates:

0% on the first £12,570 (your personal allowance)
20% on profits between £12,570 and £50,270
40% on profits between £50,270 and £125,140
45% on profits above £125,140

If you have a full-time job alongside your course business, your personal allowance is likely already used up by your salary. That means your course profits are taxed from the first pound — and if your combined income pushes you into the higher rate band, you could be paying 40% on your course earnings.

You will also pay Class 2 National Insurance (a flat weekly amount) and Class 4 National Insurance (a percentage of your profits). Together, these add roughly 6–9% to your tax bill depending on your income level.

Our side hustle tax guide walks through how employment income and side income interact in more detail.

What expenses can course creators claim?

Course creation typically involves more upfront investment than ongoing costs, but there are plenty of legitimate expenses you can deduct:

Equipment and hardware. Cameras, microphones, lighting, tripods, a new laptop — anything you buy specifically for creating course content. If you also use the equipment for personal purposes, you can only claim the business proportion.

Software and subscriptions. Screen recording tools (Loom, Camtasia), video editing software (Final Cut Pro, DaVinci Resolve), course hosting platforms (Teachable, Thinkific, Kajabi), email marketing tools, and design software all count.

Platform fees and commissions. Udemy takes up to 63% of each sale if they drive the traffic. Skillshare pays based on minutes watched. Whatever the model, the fees or commission taken by the platform are deductible expenses.

Marketing and advertising. Facebook ads, Google ads, influencer collaborations, or even the cost of running a YouTube channel to promote your courses.

Professional development. Courses you take yourself to improve your teaching skills or deepen your subject expertise. Yes, you can claim courses against course income — just make sure there is a clear business connection.

Home office costs. If you film, edit, or manage your course business from home, you can claim a proportion of your household bills. The simplified method lets you claim a flat rate based on the hours you work from home each month.

Freelancer costs. Payments to video editors, graphic designers, virtual assistants, or copywriters who help you produce your courses.

Tracking all these expenses manually is a chore, which is why many course creators use Accounted to categorise transactions automatically as they come in. Penny can even flag expenses you might have missed.

VAT — the digital services question

VAT on online courses is one of the areas where creators most often trip up. The rules depend on who you are selling to and where they are located.

UK sales: If your taxable turnover is below the VAT registration threshold (currently £90,000), you do not need to charge VAT. Most sole trader course creators will not hit this threshold, but if your courses take off, it is worth monitoring.

Sales to EU consumers: Post-Brexit, the UK is a "third country" for EU VAT purposes. If you sell digital services (which includes online courses) to EU consumers, you may need to register for the EU One-Stop Shop (OSS) scheme and charge VAT at the rate applicable in the buyer's country. Crucially, there is no minimum threshold for non-EU businesses — even a single sale can trigger obligations.

Sales to non-EU international customers: Rules vary by country. Some nations (Australia, India, South Africa, and others) have their own digital services tax regimes.

The simplest solution for many course creators is to use a platform that acts as the "merchant of record," meaning they handle VAT collection and remittance on your behalf. Teachable, for example, offers this through their tax-inclusive pricing. If you sell directly through your own website using Stripe or PayPal, you are on the hook for managing VAT yourself.

For a full breakdown, read our guide on VAT for digital services in the UK.

Revenue recognition — when do you report the income?

This is a surprisingly common question. If you sell a course in March but the payment does not hit your bank account until April (because the platform holds funds for 30 days), which tax year does it fall into?

For most sole traders using the cash basis of accounting, you report income when you actually receive the money. So if the cash lands in your account in April 2026, it goes on your 2026/27 tax return, not your 2025/26 return.

However, if you use traditional accrual accounting, you report income when it is earned (i.e., when the sale is made), regardless of when the cash arrives. Most small course businesses use the cash basis because it is simpler, but if you are growing quickly, the accrual method can give you a more accurate picture of your financial position.

Platform-specific considerations

Different platforms have different models, and this affects your tax position:

Udemy and Skillshare pay you a share of revenue. You report whatever they pay you as income. They may issue you a 1099 form (a US tax document) — you do not need to file this with HMRC, but it is a useful record of your earnings.

Teachable, Thinkific, and Kajabi are more like tools — you set the price, they process the payment, and you receive the proceeds minus their fees. Your gross income is the full sale price, and the platform fee is a deductible expense.

Your own website gives you the most control but also the most responsibility. You handle everything — pricing, payments, VAT, refunds, and record-keeping.

Whichever platform you use, download your sales and payout reports regularly and reconcile them against your bank statements. Accounted can connect to your bank accounts and pull in transactions automatically, making reconciliation far less painful.

Payments on account — plan for the tax bill

One thing that catches new course creators off guard is payments on account. If your Self Assessment tax bill exceeds £1,000, HMRC will ask you to make advance payments towards the following year's bill. These payments are due on 31 January and 31 July, and they are each set at 50% of your previous year's tax liability.

This means that in your second year of trading, you could face a tax bill of up to 150% of your first year's liability — the balancing payment for year one, plus two payments on account for year two. Setting aside 25–30% of your course income throughout the year is a sensible buffer.

Keep it simple from the start

The biggest favour you can do for yourself as a course creator is to set up proper bookkeeping from day one. Open a separate business bank account, connect it to Accounted, and let Penny help you categorise transactions as they come in. When January rolls around, you will have clean records ready to go rather than a shoebox full of confusion.

More on Starting a Business

Starting a Business

Online Course Creators — How to Handle Tax

When does course creation become taxable?

Income tax and National Insurance

What expenses can course creators claim?

VAT — the digital services question

Revenue recognition — when do you report the income?

Platform-specific considerations

Payments on account — plan for the tax bill

Keep it simple from the start

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