Upvote:4
You answer ‘Yes’ and state the Schengen country that refused you and the two reasons given for the refusal. You can add to this if you wish by explaining the contributing factors as you see them, either in the ‘other information’ section at the end of the application or in a covering letter if you’re providing one (it’s not mandatory What details should a good cover letter contain to back up a UK Visit Visa application?)
I think your interpretation of the basis on which your Schengen visa application was refused is too simplistic. It may help if you read these before applying Schengen Visa Refusal: Justification for the purpose and conditions of the intended stay was not provided and Schengen Visa Refusal: Justification for the purpose and conditions of the intended stay was not reliable