Business Expenses with a Private Element: What Can the Self-Employed Claim?

Business Expenses with a Private Element: What Can You Claim?

For self-employed individuals, claiming allowable business expenses is an important way to reduce taxable profits. However, many everyday costs are used for both business and personal purposes, which means only the business-related element can usually be deducted.

Understanding where HMRC draws the line can help ensure you're claiming correctly while avoiding potential issues should your records ever be reviewed.

Separating Business and Personal Use

The general rule is straightforward: expenses incurred wholly and exclusively for business purposes are allowable. Where an expense has both a business and private element, only the business proportion can be claimed.

For example, if your annual mobile phone bill is £200 and analysis of your usage shows that £70 relates to business calls, only the £70 business element would generally qualify as an allowable business expense.

This principle also applies to:

• Mobile and landline telephone costs
• Internet and broadband bills
• Travel expenses
• Vehicle running costs
• Equipment used for both business and personal purposes

Maintaining accurate records can help support your calculations and provide evidence should HMRC request further information.

Claiming Expenses When Working from Home

With many sole traders and freelancers continuing to work from home, understanding home office expenses is particularly important.

Subject to the circumstances, a reasonable proportion of household costs may be claimed, including:

• Heating and electricity
• Broadband and telephone costs
• Council Tax
• Rent
• Mortgage interest (where applicable)
• The allocation should be fair and reasonable, taking account of factors such as:
• The number of rooms used for business
• How often those rooms are used for work
• The amount of time spent working from home

Simplified Expenses May Be Available

Some self-employed individuals may choose to use HMRC's simplified expenses scheme instead of calculating actual costs. This provides flat-rate allowances for certain expenses, including working from home, business vehicles and living at business premises.

Whether simplified expenses or actual cost calculations provide the best outcome will depend on your individual circumstances.

Getting Your Business Expense Claims Right

Claiming legitimate tax deductions can make a significant difference to your tax position, but it's important to ensure calculations are accurate and properly supported.

At Charlton Baker, we regularly help self-employed individuals, contractors and business owners identify allowable business expenses, improve record-keeping processes and ensure they remain compliant with HMRC requirements. Our tax advisory and accounting services can help you maximise available tax reliefs while giving you confidence that your claims are correct.

Call our expert team now on 01380 723692 or email here.