Can I claim expenses for business use of cloud storage services?

Can I claim expenses for business use of cloud storage services?

Cloud storage has quietly become one of those “business basics” that many people pay for without thinking too hard about the accounting. Whether you’re a freelancer backing up client work, a limited company storing design files, or a small team sharing documents, cloud storage can be a legitimate business expense in many circumstances. The more important question is usually not “Can I claim it?” but “How do I claim it correctly, and what evidence do I need?”

This article explains how business expense claims for cloud storage typically work, what “business use” really means in practice, how to handle mixed personal and business usage, and what to do if you’re paying for storage through a personal account or sharing it across a team. It also covers common mistakes that cause problems during bookkeeping reviews or tax checks, and gives practical steps for setting up your cloud storage spend so it’s easy to justify.

What “claiming an expense” actually means

When people say they want to “claim” a cloud storage expense, they generally mean one of two things:

First, they want to record the cost as a business expense so it reduces taxable profit (for example, for income tax or corporation tax). If an expense is wholly and exclusively for business purposes (or the business proportion can be clearly separated), it usually reduces your profits, which can reduce the tax you pay.

Second, if the business is registered for VAT or sales tax (depending on your jurisdiction), they may want to reclaim tax charged on the purchase. This is separate from the income/corporation tax effect and usually depends on meeting specific invoice and business-use requirements.

Even if you’re not registered for VAT/sales tax, correctly categorizing cloud storage as a business expense still matters. It helps you understand the real cost of running your business, keeps your records tidy, and supports any deductions you’re taking.

Why cloud storage is often a valid business expense

Cloud storage services support business activity in obvious ways. They store business documents, maintain backups, enable collaboration, host deliverables, protect continuity if a device fails, and help with security and access controls. Many providers also offer business-focused features such as permissions, admin accounts, audit logs, and retention policies—features that are directly linked to operating a business.

If you can show that you use the cloud storage primarily to run your business—store client files, company records, marketing assets, invoices, and working documents—then the cost is typically defensible as a business expense.

However, the strength of the claim depends on how you use the account and how well you can demonstrate that usage. Cloud storage tends to be a recurring subscription, which is usually straightforward. The complexity arises when the account is mixed-use, shared with family, bundled with other services, or purchased through a personal Apple/Google account with multiple private benefits attached.

Key principle: business purpose and necessity

Most tax systems share a similar underlying idea: a deductible business expense is one incurred to earn business income or to carry on business operations. That doesn’t mean the expense must be “essential,” but it should be reasonably connected to business activity. Cloud storage usually meets that test when it’s used for business records and workflow.

A practical way to think about it is: if you stopped running the business, would you still pay for this cloud storage plan? If the answer is “no” or “I would downgrade significantly,” that’s a sign that the business element is strong.

On the other hand, if you’d pay for the same plan regardless—because it mostly stores family photos, personal device backups, and your own media library—and business files are only a small extra, the business claim should usually reflect only a business proportion.

Wholly business use vs mixed use

The cleanest scenario is when your cloud storage subscription is used wholly for business. For example, you have a business account with a provider, you store only business data there, and the billing details are in the business name. In that case, recording the full cost as a business expense is usually straightforward.

Mixed use is the more common scenario. Many people buy a larger personal plan and use it for everything: family photos, personal backups, plus some business folders. In mixed use, you typically need to identify and claim only the business portion, unless your local rules allow a simpler approach (some regimes allow certain de minimis or simplified allocations, but you should be careful).

Mixed-use handling usually comes down to one question: can you support an allocation method that is reasonable and consistent? If yes, then you can often claim the business proportion. If no, you risk either overclaiming or ending up with a figure you can’t justify.

How to allocate cloud storage costs for mixed use

Allocations should be rational and evidence-based. For cloud storage, there are several practical methods you might use, depending on what makes sense for your situation.

Allocation by storage usage

One common method is to allocate based on how much storage is used for business compared to total storage. For instance, if your plan provides 2 TB, and your business folder uses 400 GB, you could argue 20% business use. This method is intuitive, especially if your provider shows folder sizes and storage breakdowns.

To use this method, it helps to capture periodic screenshots or reports showing storage usage. You don’t necessarily need to do this monthly forever, but having evidence that supports your allocation (such as quarterly snapshots) can be useful if anyone questions your approach.

A limitation of this method is that storage usage isn’t always a perfect proxy for business use. Some businesses generate small files but rely heavily on cloud syncing and collaboration. Conversely, a personal photo library can dominate storage, even if you spend a lot of time using the cloud for business. Still, it is often acceptable as a simple, defensible basis.

Allocation by user accounts or seats

If you pay for a family plan or multi-user bundle and only one user profile is for business, you might allocate based on the number of users or “seats.” For example, if a six-person plan is used by five family members and one business user, you might claim one-sixth. This can make sense when the cost is tied to providing multiple users access.

However, if the business user uses much more storage or advanced features, seat-based allocation might understate business use. You can still use it if it’s reasonable, but choose a method that best reflects reality.

Allocation by feature necessity

Sometimes you upgrade to a plan for a business feature—such as advanced sharing permissions, longer retention, admin controls, or increased attachment limits—while personal use remains small. In that case, it may be reasonable to claim a higher proportion than storage usage suggests, because the upgrade is driven by business need.

To support this approach, document the business rationale for the upgrade. For example, you might note that a client requires secure sharing and access controls, or that you need to keep project files available for a fixed period.

Hybrid methods and consistency

You can also use a hybrid approach, such as allocating part of the plan as “baseline personal” and claiming incremental costs for the business. For example, you might say you’d pay for 200 GB personally, but you upgraded to 2 TB for business reasons, so you claim the incremental difference between those plans as a business expense.

Whatever method you pick, the most important thing is consistency. If you claim 60% this year and 10% next year without a clear reason, that can raise questions. If your usage changes, you can adjust—but keep notes explaining why.

Bundled subscriptions: cloud storage plus other services

A common complication is that cloud storage is bundled with other services. For example, a subscription might include email, a productivity suite, conferencing tools, password management, VPN services, or additional support.

In a bundle, you still may be able to claim the expense as a whole if the overall package is for business. If it’s mixed-use, you may need to allocate. The challenge is that the cloud storage element might not have a separate price.

In practice, there are two practical ways to deal with this:

First, treat the subscription as a single business service expense (software subscription) if you use the bundle primarily for business. If personal use is minor, you might decide the whole package is business-related and keep your evidence of business use, such as business email domains, meeting usage, or shared company drives.

Second, if the bundle is clearly mixed-use and personal benefits are substantial, allocate a proportion using a reasonable basis (such as seat usage, primary purpose, or incremental upgrade cost). You can also look at provider pricing for separate components to create a reasonable split, but be cautious and make sure your method is not arbitrary.

Personal account paid by the business: is that allowed?

It’s very common for a business owner to pay for subscriptions through a personal account—especially when the subscription is tied to an Apple ID or Google account, or when the owner started using the service before the business existed. Whether that is “allowed” depends less on the account name and more on whether the cost is genuinely for business and properly recorded.

From an accounting perspective, if the business reimburses you for a cost you personally paid, you can usually record that reimbursement as an expense (provided it’s a legitimate business expense). The key is documentation: keep the receipt/invoice, show the reimbursement, and keep evidence of business use.

If you operate as a sole trader, the line between personal and business money can be less formal, but the record-keeping principle is the same: you need proof of the cost and a reasonable basis for any business-use claim.

If you operate through a limited company, it’s often cleaner to have subscriptions billed directly to the company. If you can’t, reimbursements can still work, but you should keep clear records to avoid confusion over what is a business cost versus a personal benefit.

What counts as evidence for cloud storage business use?