Private use adjustment: What is it and how do I calculate?

Private use adjustment: What is it and how do I calculate?

What is it?

Where there is private use of an asset by an owner, sole trader or partner in a partnership, the asset should are restricted on the business to private-use ratio. The most common example of the private-use restriction is in relation to cars but can also apply to Furnished Holiday Lets (use of the property) and other expenses.

Furnished Holiday Lets
The issue here is that it is common for FHL properties to be made available to friends and family for their own use during the course of the year. In practice there tend to be two types of properties – those that are only ever used as commercial FHLs and those that are both an FHL property and a second family home. In the latter case it is important to consider very carefully the appropriate tax deductions to be made when preparing the property income and expenditure statement of the FHL business.

HMRC Helpsheet 253 states that where a property is not available for letting for part of the year, as it is closed for part of the year, the owner can still deduct the whole of the expenses for the year such as insurance, interest and utilities provided that there is no private use of the property. Where there is private use of the property then an apportionment of these expenses is required.

This apportionment is often overlooked and as such it is a common source of HMRC enquiries into FHL businesses. Even where the point is picked up the adjustments are not always as well considered as they should be. The difficulty is how to deal with the period when a property is neither let to holiday-makers nor occupied by the family for their own use. The legislation requires that only the ‘identifiable proportion’ is claimed as a deduction. 

The key point is to consider the appropriate adjustment fully and to ensure that it has been documented accordingly as part of the preparation of the income and expenditure account and the appropriate self-assessment tax return.

HMRC manual on this can be found on this link:

Example 1

Jen owns a Furnished Holiday Let property in Cornwall and uses it for 4 weeks each year. It is available to let for 45 weeks.

Where a property is available throughout the entire year, and there is a very high level of occupation of the property by holiday-makers, but there is also two weeks’ occupation by the family, it is probably entirely reasonable to reduce the deductible expenditure by just 4/52nds.

However, where the property is not available for the entire year, like the above example, and there is a much lower level of occupation by holiday-makers and it is clear that the property has been available for the family to use at other times (should they so wish) then a much larger restriction of expenses is probably required, 7/52nds.

Example 2

Polly, a sole trader, uses the tax year as his period of account. She buys a new car in 2021-22 for £24,000 with emissions of 120g/km. It is agreed that she uses the car half of the time for private purposes.

Polly’s capital allowance computation in respect of the car for 2021-22 looks like this:



Car purchase


TWDA at 6%



Private use adjustment (50%)


TWDA claimed


TWDV c/f