If you are a partner in a law firm or LLP, you will already be familiar with the difference between drawings and taxable profit. What is often less clear is how expenses paid personally should be dealt with for tax purposes.
We regularly speak with solicitors who assume that if a cost has not gone through the firm, no tax relief is available. That is not always the case.
Where a partner meets qualifying business costs personally, relief may still be available. However, the treatment needs care. In practice, expenditure incurred by a partner on behalf of the partnership should be reflected in the partnership’s tax computation and returns, rather than treated as a personal claim by the individual partner. The correct treatment will depend on the facts and the firm’s arrangements.
When might relief be available?
The starting point is that business expenses should usually be recorded through the partnership accounts and partnership tax computations. In this regard a partner will generally need to submit an expense claim to the partnership for the expenses to be recorded through the partnership accounts.
Where a partner incurs costs personally, tax relief will then be due provided the expense was incurred wholly and exclusively for the purposes of the business. Therefore, care is needed to distinguish between personal expenditure and expenditure that is wholly and exclusively for business purposes. This may require private use adjustments to be made in the partnership tax computations and return.
Common examples in practice
While each case turns on its own facts, there are several areas that come up regularly.
Use of a personal vehicle
Where a partner uses their own car for business travel, tax relief may be available for the business proportion of qualifying running costs and where relevant, capital allowances on the cost of the car. For cars bought and used in an Income Tax business from 6 April 2026, a car with CO₂ emissions over 50g/km falls into the special rate pool, which attracts writing down allowances at 6%. Any claim must be restricted for private use.
For example, if a car cost £50,000, has CO₂ emissions over 50g/km and 25% of its use is for business, the annual figures could look like this:
- Writing down allowance on cost: 6% of £50,000 = £3,000, restricted to 25% business use = £750
- Running costs of £2,000, restricted to 25% business use = £500
On those facts, the total deduction would be £1,250. For a taxpayer paying income tax at 45%, that would reduce the tax bill by £562.50.
Use of home as office
Where part of the home is used for business purposes, relief may be available for an appropriate proportion of certain costs.
Examples may include:
- business calls and an appropriate proportion of telephone line rental
- broadband, to the extent there is business use
- heat, light and power, where there is business use of the room
- metered water charges, although this is less likely to be allowable where business use at home is only minor
- mortgage interest and insurance
Any apportionment should be reasonable and consistent. The apportionment is usually applied by looking at the number of rooms you use for business and the amount of time you spend working from home. HMRC also allows a simplified flat rate for use of home in some cases, based on hours worked at home, but that is a separate method and should not be mixed in casually with actual cost claims.
Professional subscriptions and fees
Professional subscriptions and fees may be allowable where they are incurred for business purposes and are not already dealt with through the partnership. The facts matter here, particularly where an expense has mixed business and personal elements.
Other unreimbursed business costs
Other costs met personally may also qualify, but only where there is a clear business purpose, the normal tax rules are satisfied and the expense is dealt with correctly through the partnership’s accounts and tax return.
Where care is needed
This is an area where a cautious and consistent approach matters. It is important to keep clear records of the expenditure in order to support the position.
Common issues include costs that should have been recorded through the partnership in the first place, expenses with an unclear business purpose, inconsistent treatment between partners and weak records to support business use. HMRC’s guidance is clear that expenses incurred by a partner on behalf of the partnership should be reflected in the partnership tax computation, not as a separate personal claim.
Having a clear understanding of the principles can help identify when specialist tax input is needed.
How we support
We work with partners across professional firms, including solicitors, where personal expenditure and partnership tax often overlap. We can help review your personal tax position and how costs should be treated, whether relief may be available and how the position should be reflected in the partnership returns.
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