Mixed Income Expenses in MTD: How to Split Between Self-Employment and Property

The Problem With Having Both Types of Income

If you earn money from self-employment and from renting out a property, you already know that keeping the two separate can feel fiddly. MTD makes that separation official. Under Making Tax Digital for Income Tax, you report self-employment income and property income in two distinct sets of quarterly updates - and the expenses for each go in completely different places on the form.

That sounds straightforward until you hit a bill that covers both. Your broadband. Your mileage. Your accountant's fee. Your home office costs. Suddenly you have to decide: which box does this go in, and how much of it?

This guide is about the operational mechanics of that decision - not just which expenses are allowable in principle, but exactly which field on your quarterly update form gets the figure, and how to split costs that straddle both businesses. We will work through real examples.

Two Businesses, Two Sets of Fields

When you sign up for MTD with both types of income, HMRC treats your self-employment and your property as two separate income sources. You file quarterly updates for each one independently. Think of them as two parallel sets of books that run at the same time.

Your self-employment quarterly update has its own income and expense fields. Your property quarterly update has a completely separate set of income and expense fields. Figures entered in one do not carry across to the other. If you put a self-employment expense into your property update by mistake, it will reduce your property profit instead of your self-employment profit - which will produce the wrong tax position and could attract HMRC attention.

So the golden rule is: every expense must be entered in the quarterly update that belongs to the income it supports.

For a more detailed breakdown of what each income type covers, see How to Calculate Your MTD Quarterly Update Income: Self-Employment and Rental.

Expenses That Are Easy to Allocate

Some expenses belong clearly to one side or the other. These are not the ones that cause trouble, but it helps to confirm them explicitly.

Clearly self-employment expenses

• Materials you buy to complete a job for a client
• Professional subscriptions related to your trade
• Tools or equipment used only in your self-employment work
• Advertising for your freelance or sole trader services
• Software you use only for client work
• Business mileage driven to visit clients (not to your properties)

All of these go in the expense fields of your self-employment quarterly update.

Clearly property expenses

• Letting agent fees for managing your rental
• Repairs and maintenance at the rental property
• Buildings insurance for the rental property
• Mortgage interest on the rental property (entered via the finance costs field, not the standard expense fields - see Landlord Mortgage Interest in MTD: What You Can Claim)
• Service charges and ground rent at the rental property
• Mileage driven specifically to visit or inspect your rental property

All of these go in the expense fields of your property quarterly update.

The Tricky Category: Shared Expenses

This is where most mixed-income filers get stuck. Some costs genuinely serve both businesses. HMRC expects you to split these and apportion them fairly between the two quarterly updates. There is no single formula for every situation - the split must reflect actual use.

How to think about apportionment

Apportionment means dividing a shared cost in proportion to how much each business actually uses or benefits from it. You need a defensible basis for the split - one you could explain to HMRC if asked. Common bases include:

• Time - what proportion of time did you spend on each activity?
• Rooms - if you use a home office, how many rooms does it represent?
• Floor area - for home working calculations
• Proportion of income - used sometimes for professional fees

Once you have calculated each portion, you enter the self-employment share into your self-employment quarterly update and the property share into your property quarterly update. The two figures will be different fields in different forms.

Worked Examples

Here is how this works in practice for the expenses that come up most often.

Example 1: Accountant or bookkeeper fees

You pay a bookkeeper £600 per year. They spend roughly two-thirds of their time sorting your freelance invoices and one-third dealing with your rental statements.

• Self-employment quarterly update - "Other allowable expenses" field: £400 (two-thirds of £600)
• Property quarterly update - "Professional fees" or "Other expenses" field: £200 (one-third of £600)

If you pay quarterly, you divide each quarterly bill by the same ratio before entering it in that quarter's update.

Example 2: Home broadband

You pay £50 per month for broadband. You use it for your freelance work and also to manage your rental property - responding to tenant emails, checking maintenance quotes, logging expenses. You estimate 70% of your broadband use relates to self-employment and 30% to property management.

• In a quarter where you pay £150 in broadband bills:
• Self-employment quarterly update - "Office, property and equipment" or "Other allowable expenses": £105
• Property quarterly update - "Other expenses": £45

Keep a note of how you calculated the split. You do not have to send this to HMRC with the quarterly update, but you should keep it in your records. For more on what records to keep, see What Sole Traders Actually Need to Keep: MTD Records in Plain English.

Example 3: Mileage

You are a self-employed consultant and you also own a rental flat. During Q1 (6 April to 5 July) you drove to visit clients (business mileage) and you also drove to the flat twice to oversee repairs (property mileage). These are different trips with different purposes.

• Client visit mileage: 320 miles - goes in the self-employment quarterly update under "Car, van and travel expenses" at 55p per mile (using simplified mileage rates)
• Property visit mileage: 80 miles - goes in the property quarterly update under "Travel costs" or "Other expenses" at 55p per mile

Do not lump all your mileage into one update. Keep a mileage log that records the purpose of each journey. See Mileage Allowances for MTD: Claiming Simplified Rates in Q1 for how the rate works.

Example 4: Mobile phone

You use your personal mobile phone for both. You estimate 60% of calls and data relate to your self-employment and 40% to managing your rental property. Your quarterly bill is £90.

• First, strip out personal use. If 20% is personal, the business total is £72.
• Of that £72: £43.20 goes to the self-employment quarterly update (60%), and £28.80 goes to the property quarterly update (40%).

For a broader guide on handling mixed personal and business use, see Mixed-Use Expenses and MTD: Claiming the Business Percentage.

Example 5: Home office costs

You work from home and use a dedicated room as your office. You use that room for your freelance work and to manage your rental. HMRC allows you to claim a proportion of household running costs for working from home.

The calculation has two stages. First, work out the home office portion of your household costs (heating, electricity, council tax) using floor area or number of rooms. Then split that office cost between self-employment and property in proportion to how you actually use the office for each.

For example: your home office represents 10% of your home's floor area. Your quarterly household running costs total £600. So the office portion is £60. You spend 75% of your office time on client work and 25% managing the rental. Therefore:

• Self-employment quarterly update - "Office, property and equipment": £45
• Property quarterly update - "Other expenses": £15

Which Field Does Each Expense Go In?

The field names in your quarterly update form are not always obvious. Here is a quick reference for where shared expenses typically land once you have calculated each portion.

In the self-employment quarterly update

• Broadband, phone, postage: "Office, property and equipment" or "Other allowable expenses"
• Accountant/bookkeeper fees: "Legal and financial costs" or "Other allowable expenses"
• Mileage: "Car, van and travel expenses" (using simplified rates or actual costs)
• Home office running costs: "Office, property and equipment"
• Bank charges on a business account: "Legal and financial costs"

In the property quarterly update

• Accountant/bookkeeper fees (property portion): "Professional fees"
• Broadband, phone (property portion): "Other expenses"
• Mileage to visit properties: "Travel costs" or "Other expenses"
• Home office running costs (property portion): "Other expenses"
• Advertising for tenants: "Rent, rates, insurance, ground rents" or "Other expenses" depending on your software's field mapping

The exact field labels can vary slightly depending on which MTD software or bridging tool you use. If you are unsure how a field maps to HMRC's underlying category, Your MTD Quarterly Update Form Explained: Field by Field goes through each one in detail.

What If You Cannot Split an Expense Precisely?

Some bills are hard to apportion with precision. That is normal. HMRC does not require scientific accuracy - it requires a reasonable, consistent method. If you have estimated the split, write down your reasoning at the time and keep that note with your records. A brief note like "broadband split 70/30 self-employment/property based on estimated usage" is sufficient.

What you must not do is guess differently every quarter. Pick a method, stick to it for the year, and only revise it if your circumstances genuinely change. Consistency matters more than perfection.

For expenses that sit in genuinely grey territory, Grey-Area MTD Expenses: 10 Things You're Probably Wondering About covers some of the most common uncertain cases.

A Practical Workflow for Each Quarter

When you sit down to prepare your quarterly update, work through shared expenses in this order:

1. List every expense for the quarter, including shared ones.
2. Mark each as "self-employment only", "property only", or "shared".
3. For each shared expense, calculate the split using your chosen basis (time, floor area, etc.).
4. Record the split in a simple note or spreadsheet column alongside the bill.
5. Enter the self-employment portions into your self-employment quarterly update fields.
6. Enter the property portions into your property quarterly update fields.
7. Cross-check that no single bill has been entered in full in both updates.

If you use a spreadsheet to prepare your figures before importing them, you can add a column for each income source and flag the split there. See How to Prepare Your Expense Spreadsheet for MTD Import for a practical format that works with bridging software.

What About the Property Allowance and Trading Allowance?

Both allowances work differently and interact with expense claims in a specific way. If you claim the property allowance (£1,000 per year), you cannot also claim property expenses - it is one or the other. The same logic applies to the trading allowance for self-employment. You cannot use the allowance and claim actual expenses for the same income stream.

This matters for mixed-income filers because you can use the allowance for one income stream and actual expenses for the other. For example, you might claim actual expenses for your self-employment and take the property allowance against your rental income if your rental costs are very low. The allowances are applied at the final declaration stage, not in the quarterly updates themselves - but you should keep this in mind when deciding how much detail to track during the year.

See Trading Allowance for Sole Traders: MTD Q1 Explained for how the trading allowance works in practice.

Keep Your Records Separate From the Start

The single biggest thing you can do to make mixed income expense allocation easier is to keep two clearly separate records from day one of each quarter - one for self-employment and one for property. That does not mean two bank accounts (though that helps). It means two sections in your spreadsheet, two folders in your files, or two categories in whatever system you use.

When a shared bill arrives, process it immediately: note the split, file the receipt once, and log both portions against the right category. If you leave shared expenses in a single pile to deal with later, the quarterly update becomes a significant job rather than a short one.

For record-keeping systems that work for people in this position, How to Set Up a Record-Keeping System for MTD Quarterly Updates is a good starting point.

Summary

Mixed income expense allocation in MTD comes down to one discipline: every expense goes into the quarterly update for the income it supports, and shared expenses must be split before they are entered. Calculate your apportionment using a consistent, documented method. Enter the self-employment portion into your self-employment quarterly update fields and the property portion into your property quarterly update fields - never the full amount in both. Keep a note of how you calculated each split. Do that consistently every quarter and the process becomes straightforward, even when the underlying bills are messy.