HMRC Targets Personal Expenditure In Business Accounts This Tax Year

CREATED BY ROGER EDDOWES Published: 04/09/2025 @ 09:00AM #HMRC targets personal expenditure #SelfAssessment #TaxCompliance #SoleTraders #Landlords #BusinessExpenses

HMRC will be targeting personal expenditure in business accounts with a new digital campaign and will make more enquiries. It wants clear, consistent apportionment and strong records. You should review your accounts before submitting your tax return if needed ...

HMRC targets, Personal expenditure, Inspection awaits

HMRC ran a successful 2024 trial, which raised over £27m and proved that private costs can creep into business claims. The new digital campaign means more nudges, more checks, and more enquiries for sole traders, partners and landlords who blur the line between personal and business expenditure.

The core rules have not changed!

An expense must be incurred wholly and exclusively for it to be deductible. Where there's a clear business element within a mixed cost, that business portion can still be claimed, provided the apportionment is fair, backed by evidence and applied consistently year on year.

What HMRC wants to see is simple, reliable proof. Mileage logs that reconcile to journeys, phone bills split on a sensible basis, and home office claims that reflect actual business use across the tax year.

When HMRC targets personal expenditure, weak records are the first domino to fall, so contemporaneous notes and receipts matter.

It also pays to remember that routine repairs to premises are generally allowable, but improvements are capital and must be excluded from revenue deductions. For plant and machinery, capital allowances may be ok, but personal use of assets such as vehicles requires a restriction so that only the business element attracts relief.

Don't forget flat rates!

Some taxpayers may prefer the simplified expenses route for vehicles, home working and private use of business premises. The flat rates are designed to be practical, reduce judgment calls, and lower enquiry risk when used consistently and supported by basic records.

I strongly recommend you review your 2024/25 returns with fresh eyes and revisit earlier years if necessary. If a method of apportionment has drifted, or if evidence is light, tightening the approach now is wise, especially as HMRC targets personal expenditure with data-led prompts and follow-up enquiries.

Typical flashpoints include motoring, phones and broadband, use of the home, mixed-purpose travel, and property-related costs. The question is not whether an item has any personal benefit, but whether the business part can be identified, measured and defended. A credible, repeatable method - explained in working papers - goes a long way.

This is not about disallowing genuine business
costs; it is about clarity!

Anyone who shows how a claim was calculated, why the basis is reasonable, and how it has been applied over time will usually be on firm ground. In contrast, round-sum estimates without evidence invite challenge when HMRC targets personal expenditure in routine risk reviews.

The message from HMRC is friendly, but firm: claim what is due, prove it sensibly, and keep the approach steady from one year to the next. That blend of accuracy and evidence is precisely what HMRC's personal expenditure campaign is designed to test.

Well-prepared taxpayers can readily demonstrate all of their claims.

Until next time ...

ROGER EDDOWES
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About Roger Eddowes ...
Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach. Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.

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