HMRC has recently announced a campaign aimed at Self-Assessment taxpayers (sole traders, partnerships and landlords) to discourage claims for personal expenditure disguised as business costs on tax returns for the 2024/25 tax year. This follows a trial in 2024 that generated over £27 million in additional revenue and flagged widespread issue with personal use being misclassified as business expenditure.

The campaign signals HMRC’s intention to ramp up enquiries and investigations into reported personal expenditure, ensuring only wholly and exclusively business-related deductions are claimed.

The crux of HMRC’s stance stems from the long-established “wholly and exclusively” rule, which mandates that expenses must be incurred purely for business purposes to be deductible. Even partial personal benefit can render the claim disallowable unless a clear, separable business-only portion exists.

For example, if a self-employed individual uses a vehicle partly for personal and partly for business purposes, they must adjust their taxable profit by adding back any personal-use portion.

There are some cost categories which are more likely have a personal element:

• Travel and subsistence - you can only claim business related travel to a temporary workplace, your normal commute to work and lunch in the office is personal - you should keep a mileage log and other evidence of the business purpose for the costs.
• Home office - you would typically apportion this based on the number of rooms or floor area, and time spent working - see our separate blog on this here.
• Phone and internet - if this is a mobile or home phone/internet, you should split between personal and business use.
• Subscriptions - there might be a personal element to subscriptions and things like streaming services and gym memberships accepted by HMRC as business expenses.

We’ll help ensure your expenses genuinely satisfy the wholly and exclusively test, including:

• Identifying and separating personal vs business costs (e.g. motoring, heating, phone use)
• Making necessary add-back adjustments to taxable profits

• Maintain clear, auditable documentation for all claims
• Show evidence of business purpose and usage splits where applicable

We’ll review your draft Self-Assessments ahead of submission to flag potential issues. Where mixed-use expenses exist, we'll discuss apportionment strategies with you.

If HMRC contacts you, we'll manage communications and provide guidance, and assist in voluntary disclosures if errors are discovered.