Mixed-Use Expenses and MTD: Claiming the Business Percentage

Why Mixed-Use Expenses Catch So Many People Out

Your phone bill is not just a business expense. Neither is your broadband, your car, or the spare room you work from. If you use any of these for both personal and business purposes, you can only claim the business portion as an expense in your MTD quarterly update. Claiming the full amount is one of the most common filing errors HMRC sees - and with the first quarterly deadline on 7 August 2026 now less than 15 days away, it is worth fixing this before you file.

This guide walks through the most common mixed-use expenses, how to estimate a fair and defensible business percentage, and how to enter the right figure in your quarterly update. It applies whether you are a sole trader, a freelancer, or a landlord.

What "Mixed-Use" Actually Means

A mixed-use expense is any cost you pay that serves both your business and your personal life. HMRC says you can only deduct the portion that is "wholly and exclusively" for business. For costs that are genuinely shared, you are allowed to make a reasonable apportionment - that is, an honest split based on actual use.

You do not need a perfect calculation. You need a reasonable and consistent method you could explain to HMRC if asked. Keep a short note of how you arrived at your percentage. That note is part of your record-keeping obligation under MTD - see HMRC Record-Keeping Standards for MTD: What You Must Keep.

The Four Most Common Mixed-Use Expenses

1. Mobile Phone

Most people use one phone for everything. You can claim the business percentage of your monthly contract or pay-as-you-go costs.

How to estimate the split:

• Look at one month of call and data records.
• Count the calls or time spent on business calls versus personal calls.
• If your phone provider shows app-by-app data usage, include that too.
• Round to a practical percentage: 20%, 30%, 50% - whatever honestly reflects your use.

Worked example: Priya is a freelance graphic designer. She checks her last bill and estimates she spends about 40% of her phone time on client calls, emails, and project management apps. Her monthly contract is £35. She claims £14 per month (40% of £35) as a business expense.

If you use a second phone exclusively for work, you can claim 100% of that cost with no apportionment needed.

2. Home Broadband

If you work from home at all, part of your broadband bill can be a business expense. The question is: how much of it is for work?

How to estimate the split:

• Think about how many hours per day or week you use the internet for work versus personal use (streaming, social media, gaming, and so on).
• A common approach is to divide business hours by total internet hours across a typical week.
• Alternatively, use a headcount method: if there are three people in the house and only you use it for work, one third is a reasonable starting point.

Worked example: Marcus runs a small plumbing business from home. He uses broadband to manage invoices, emails, and supplier orders for roughly 15 hours a week. The rest of the household uses it for about 45 hours a week between three people. He estimates 25% business use. His broadband bill is £40 per month. He claims £10 per month.

3. Vehicle Costs

This one needs its own section because there are two completely different methods, and you cannot mix them.

Method 1: Simplified Mileage Rate (the easier option for most people)

Instead of splitting actual vehicle costs, you claim a flat rate per business mile driven. For cars, this is 45p per mile for the first 10,000 miles and 25p per mile after that (HMRC's approved rates for 2025-26). You keep a mileage log and multiply business miles by the rate. That is your expense. No need to apportion fuel, insurance, or servicing separately.

This method is simpler and works well for most sole traders who do not drive heavily for work. See our full guide on this: Mileage Allowances for MTD: Claiming Simplified Rates in Q1.

Method 2: Actual Cost Apportionment

If you do not use the mileage rate, you can claim actual running costs - fuel, insurance, MOT, servicing, road tax - but only the business proportion.

How to calculate:

• Keep a mileage log for at least one representative period.
• Divide business miles by total miles to get a percentage.
• Apply that percentage to your total vehicle running costs.

Worked example: Sandra is a landlord who drives to inspect and manage her five properties. She drives 8,000 miles in a year, of which 3,200 relate to property management. That is 40% business use. Her annual running costs (fuel, insurance, servicing) total £3,600. She claims £1,440 (40% of £3,600).

4. Home Office (Use of Home)

If you work from home, you can claim a proportion of certain household running costs: rent or mortgage interest (for landlords in some circumstances), council tax, utilities, and cleaning. You cannot claim capital costs such as the purchase price of your home.

Again, there are two approaches.

Simplified Flat Rate (sole traders only)

HMRC allows sole traders to use a fixed monthly amount based on hours worked at home per month. This avoids any calculation:

• 25 to 50 hours per month: £10
• 51 to 100 hours per month: £18
• 101 or more hours per month: £26

These are the HMRC approved rates. They are modest, but they require no record-keeping beyond tracking your hours.

Actual Cost Method

Work out the proportion of your home used for business, then apply that to your qualifying running costs.

How to calculate:

• Count the number of rooms in your home (excluding bathrooms).
• Divide the number of rooms used for business by total rooms.
• Also factor in the proportion of time that room is used for business (not personal use).

Worked example: David is a sole trader web developer. He has a five-room house (excluding bathroom). He works in one dedicated room five days a week, roughly 50% of the room's total use across seven days. His room proportion is 1/5 = 20%. Time proportion is 50%. Combined: 20% x 50% = 10%. His annual household running costs (gas, electricity, council tax, rent) are £14,400. He claims £1,440 per year, or £360 per quarter.

Landlords cannot use the simplified flat rate for use of home - that method is only available to sole traders. Landlords must use the actual cost method if they want to claim home office costs against rental income.

How to Enter Mixed-Use Expenses in Your MTD Quarterly Update

When you file your quarterly update, you enter expenses by category. You do not need to show HMRC your workings in the update itself. You simply enter the business portion only in the relevant expense category.

So if your total phone bill for the quarter was £105 and your business use is 40%, you enter £42 - not £105. The full bill never appears in your quarterly update.

Your records (the calculation showing how you reached 40%) stay in your own files. HMRC can ask to see them, so keep them. A simple spreadsheet or even a notes file works fine.

For a full walkthrough of which expense categories appear in a quarterly update, see What to Include in Your MTD Quarterly Update: The Bare Essentials.

Keeping It Consistent Quarter to Quarter

Once you settle on a business percentage for an expense, stick with it through the year unless something genuinely changes. Jumping from 40% to 70% in Q2 with no explanation looks odd and could trigger questions.

If your usage genuinely changes - for example, you take on significantly more clients in Q2 - note the reason and adjust from that point forward. Consistency with a documented reason for changes is exactly what HMRC expects.

When Q2 starts (from 6 July 2026), it is worth reviewing your percentages as part of your opening records check. See Q2 Week One: Setting Up Clean Records Now Prevents Chaos Later.

What Landlords Should Know About Mixed-Use Expenses

The same principles apply to landlords, but the expense categories differ slightly. For a full list of what qualifies, see What Counts as a Landlord Expense in Your Q1 MTD Quarterly Update.

Some things specific to landlords:

• If you manage your own properties and use your car to do so, you can claim the business mileage - but only the journeys that relate to the rental business, not personal trips.
• If you use a phone to deal with tenants, repairs, and agents, the business proportion of that phone bill is allowable.
• If you use a room at home to manage your rental accounts and correspondence, you can claim a proportion of running costs using the actual cost method (not the flat rate).
• If you have a mortgage on a property you rent out, the rules on mortgage interest deductions for landlords are separate and more restricted - they do not follow the same apportionment logic as other expenses. Check HMRC's guidance on rental income and expenses for the current rules on finance costs.

Common Mistakes to Avoid

• Claiming 100% of a bill you use personally. If your phone is not 100% for business, do not claim 100%.
• Guessing without any basis. A percentage needs to be based on something - hours, call records, mileage. "I just said 50%" is not a record.
• Mixing mileage rate and actual costs for the same vehicle. Pick one method and stay with it.
• Forgetting to document the calculation. Your quarterly update does not show the working, but HMRC can ask for it. Keep a note in a folder or spreadsheet.
• Changing percentages each quarter without reason. Pick a consistent figure unless circumstances genuinely change.

If you have already submitted Q1 with the wrong amounts, it is not too late to correct it before the deadline. See Amend Your MTD Quarterly Update After Submission: Step-by-Step.

A Simple Percentage-Estimation Method That Works

If you are not sure where to start, this three-step method works for most shared expenses:

1. Track one representative period. For a phone, look at one month of bills. For a car, track mileage for two to four weeks. For home broadband, estimate a typical week.
2. Count business use versus total use. Business hours divided by total hours. Business miles divided by total miles. Be honest.
3. Round to a clean percentage and note it down. 25%, 30%, 40%. Keep the note with your expense records. Apply the same percentage going forward.

Review the percentage at the start of each tax year or when your working pattern changes significantly.

Summary

Mixed-use expenses are one of the most frequent sources of errors in MTD quarterly updates. The fix is straightforward: estimate a fair business percentage, apply it consistently, write down how you calculated it, and enter only the business portion in your quarterly update. Whether you are dealing with a phone bill, broadband, a car, or your home office, the principle is the same. Keep your method simple enough that you could explain it to HMRC in plain English. With the 7 August deadline approaching, now is the time to check your figures, correct anything that needs adjusting, and file with confidence.