Making Tax Digital · Sole traders
How to split phone and broadband bills between personal and business use
ONLY£15A MONTHThe same phone can handle a client call, a school message and an evening film.
The same phone can handle a client call, a school message and an evening film. The business can claim the appropriate business cost, but a recurring direct debit is not automatically wholly deductible. A reasonable, documented split is more useful than an arbitrary percentage.
Base the split on actual use
For a dedicated business service with no private element, a full business claim may be appropriate. For a mixed service, consider call records, data usage, working patterns and the service actually purchased. Review the evidence when your routine changes.
HMRC's expenses guide explains the business-only principle for phones and office resources. It does not require every mixed household to use the same percentage.
Home broadband often serves several people and devices. Time spent at home is not necessarily time spent using the connection for business. Conversely, a genuine business upgrade may need its own analysis rather than the same split as the underlying household package.
Simplified home-working flat rates exclude phone and internet. You can consider their business share separately, while avoiding duplication in an actual household-cost calculation.
Worked example: two separate calculations
Rosa's phone contract costs £40 a month. Her supported business-use estimate is 60%, giving £24 monthly and £288 annually. Broadband costs £35 a month with a supported 30% business allocation, giving £10.50 monthly and £126 annually.
The combined illustrative claim is £414. Rosa keeps the basis for each percentage. Using 60% for broadband merely because it was reasonable for the phone would not explain the household's different use.
Start with the business purpose
An expense category describes a cost; it does not decide whether the cost qualifies for relief. The starting point is whether the spending was for the trade. Where an identifiable part was private, keep that part out of the claim. A personal withdrawal is not an expense simply because it leaves the business bank account.
HMRC's self-employed expenses guide explains the distinction between running costs, capital expenditure and private use. For example, a supplier may sell both equipment and household products. The shop's name is useful evidence, but the invoice tells you what you bought.
Record the full transaction and the business calculation clearly. If a £120 bill has £30 of identifiable private spending, a £90 business claim is easier to explain when both amounts and the reason for the split are retained. Do not delete the private part merely to force the bookkeeping total to resemble the tax deduction.
Nor is a deduction a reimbursement. Spending £100 to save a fraction of that amount in tax still leaves you with a real cost. Buy what the business needs, keep appropriate evidence and claim the relief available under the correct rules.
Keep the evidence connected to the figures
Your digital record should explain the amount, date and nature of the transaction. Keep the invoice, receipt, statement or other evidence that supports it. A photograph can make a paper document easier to retain, but a folder of photographs alone does not create complete transaction records.
For sole traders, HMRC normally requires business records to be kept for at least five years after the relevant 31 January filing deadline. Keep them longer where the rules for a late return, enquiry or other circumstances require it. Check the record-retention guidance.
Make the records usable by your future self. Include a short explanation where a bank description is vague, retain the calculation behind a business-use split and make corrections traceable. For a missing receipt, try the supplier account, email confirmation or a replacement invoice before relying on incomplete evidence.
At review time, compare your records with the bank or payment account and investigate differences. Equal totals are useful, but two errors can cancel each other out. A sample of individual transactions can reveal a duplicated purchase or an omitted customer receipt that a totals-only check misses.
Where this fits into Making Tax Digital
For 2026/27, the first mandatory phase generally covers individuals whose combined qualifying self-employment and property income was more than £50,000 in 2024/25, subject to exemptions. Qualifying income normally means income before expenses. It is a different figure from taxable profit. Check the qualifying-income rules.
Once within MTD, keep the required digital records and send quarterly summaries for each relevant business. The summaries are cumulative from the start of the reporting year. They do not contain your entire personal tax position, and sending one does not itself create a quarterly tax-payment demand.
HMRC does not require accounting or tax adjustments before each quarterly update. Those adjustments and the other information needed for the annual return still have to be completed at the appropriate stage. Keep a review list so a matter deferred until year end is not forgotten. Read HMRC's quarterly-update guidance.
Software can organise the information, but the business facts remain essential. Review the figures you approve rather than assuming that a successful import has also settled every tax question.
Keep the rule under review
Store the bills and calculation, separate handset purchases where needed and review any automated split periodically. If the contract changes or the business gains a dedicated line, update the treatment from the appropriate date.
Take the next step
Avona.app offers a self-service route from £15/month. Bring your records together, review the figures and choose a workflow that fits your business. For professional help, discuss the scope and total price of Avona Concierge, managed by chartered accountants, before choosing a service.