What To Do When You Get Personal Gain From A Business Expense

When it comes to claiming business expenses, things can get complicated once there’s a personal element involved.

Not every cost that benefits your business is fully deductible, especially if it also benefits you personally. These are known as mixed-use expenses, and knowing how to handle them correctly is important if you want to stay compliant with HMRC.

Let’s break down how to deal with expenses that also have a personal benefit, and a few common examples that often cause confusion.

Understanding Personal Benefit

HMRC’s rule is simple in theory: you can only claim an expense if it is incurred wholly and exclusively for business purposes.

In practice, though, some expenses serve both business and personal purposes. You might be able to claim part of the cost, but not all of it. This is where proportioning comes in — splitting the expense between business and private use.

If you try to claim the full amount of a mixed-use expense, you risk HMRC rejecting it or, worse, treating it as a taxable benefit, which could increase your personal tax bill.

Common Examples Of Expenses With Personal Benefit

Here are a few situations where business expenses can create a personal gain, and how to approach them.

1. Mobile Phone Bills

If you use your personal phone for both business and personal calls, you can only claim the portion that relates to business use.
For example, if around 60 percent of your usage is business-related, you can claim 60 percent of the total bill as a business expense.

However, if your company provides you with a dedicated business phone contract in its name, the full cost is usually allowable.

2. Use Of Home As Office

If you work from home, part of your household costs can be claimed for business purposes. This could include heating, electricity, water, rent, and internet.

You can either use HMRC’s flat rate allowance or calculate the actual costs based on the time and space used for work.

For example, if you use one room in a five-room house for business 20 percent of the time, you could claim 4 percent of your household bills.

3. Company Car

Company cars are one of the most common areas where personal benefit applies.

If you use a company car for personal travel, such as commuting or leisure, it counts as a taxable benefit in kind. You’ll need to pay income tax on the value of the benefit, and your company will also pay Class 1A National Insurance.

If you want to avoid this, consider using your personal car for business journeys instead and claiming mileage at HMRC’s approved rates.

4. Meals And Entertainment

Meals are only claimable when they’re directly related to business activities, such as meeting a client or attending a business trip.

Lunch bought during a regular working day doesn’t count, as you would have eaten regardless of work. However, a meal while travelling for business or during a client meeting is allowable.

The same applies to entertainment. Taking clients out socially may help build relationships, but it’s not tax-deductible for corporation tax purposes.

5. Training And Courses

Training that directly improves skills used in your current business is generally allowable.
However, courses that develop new skills or qualifications outside your existing work are not.

For instance, a marketing consultant attending a digital advertising course could claim the cost. But if the same consultant took a course in property management, HMRC would class that as personal development, not a business expense.

Why This Matters

Misunderstanding mixed-use expenses can lead to unexpected tax bills or penalties if HMRC decides an expense was claimed incorrectly.

Taking the time to record which expenses are partly personal and working out a fair business proportion can save you money and keep your accounts accurate.

A good accountant can also help identify which costs are safe to claim, which should be split, and which are best avoided altogether.

The Bottom Line

Expenses that come with a personal benefit can be tricky, but they’re manageable if you know the rules.

The key is to be fair, consistent, and well-documented. Keep clear records, calculate your business proportion honestly, and get advice before claiming anything that could be seen as personal.

At Rhombus Accounting, we help business owners navigate these grey areas and ensure every claim is accurate, compliant, and tax-efficient.

Meet Lewis

Lewis is a professional accountant and founder of Rhombus Accounting. He regularly shares his knowledge and best advice here on his blog and on other channels such as LinkedIn.

Book a call today to learn more about what Lewis and Rhombus Accounting can do for you.