HMRC will run a digital campaign to ensure that self assessment taxpayers do not claim tax relief for personal expenditure on 2025/25 tax returns, according to the Institute of Chartered Accountants in England and Wales (ICAEW).
HMRC has told the ICAEW that the digital campaign follows a trial in 2024.
This trial generated over £27 million in tax revenue and ‘highlighted reporting of disallowable private use in business expenditure’.
HMRC says that it will be opening more enquiries to check that sole traders, partners and landlords only claim deductions for business-related expenses. This includes ensuring that mixed-use expenses are apportioned correctly between business and personal use, which considers the circumstances of the particular tax year.
The legislation states that in order for an expense to be deductible, it must be ‘incurred wholly and exclusively for the purposes of the trade’.
Where an identifiable part of an expense is incurred for trade purposes, that part of the expense is an allowable deduction. It is important that the method of apportionment used is:
- supported by records (e.g., mileage records); and
- applied consistently from one tax year to the next.
It must also be the case that the expense is not capital in nature. Capital allowances are available for qualifying expenditure on plant and machinery.
Taxpayers have the option to use flat rate ‘simplified expenses’ to work out allowable expenses on motor costs, use of home and private use of business premises.
Internet link: ICAEW website
