Mobile phone

Conditions

1. Sole traders: GOV.UK lists phone, mobile, fax and internet bills among the costs you can claim, but you cannot claim for any non-business use of phones. If you use something for both business and personal reasons, you can only claim allowable expenses for the business costs.
2. The statutory basis for the business share is section 34(2) ITTOIA 2005, which does not prohibit a deduction for any identifiable part or identifiable proportion of an expense incurred wholly and exclusively for the purposes of the trade.
3. Companies: no tax arises on the provision of one mobile telephone for an employee without any transfer of property in it (section 319 ITEPA 2003). HMRC says the exemption covers the phone itself, any line rental and the cost of private calls paid for by the employer on that phone (EIM21779). Because it applies only without any transfer of property, it does not cover a phone the company gives the employee to own.
4. GOV.UK says you do not have to report anything to HMRC or deduct and pay tax and National Insurance if both of these apply: you provide your employee with only one mobile phone or SIM card, and the phone contract is between you and the supplier.
5. The exemption is limited to one mobile phone provided to each employee for private use and specifically excludes the employee's family and household (EIM21779). If you provide more than one phone to an employee, GOV.UK says one is exempt and any other phones count as assets. Separately, phones provided solely for business use are exempt under section 316 ITEPA 2003 as long as any private use is not significant (EIM21779).
6. HMRC says smartphones fall within the meaning of mobile phone, and the definition covers a SIM card provided independently of a phone. Satellite navigation devices, devices that are solely PDAs, and tablet and laptop computers are not mobile phones, and devices that use VOIP to make calls will in general not satisfy the primary purpose test (EIM21779).
7. If your employee arranges the phone but you pay the supplier, GOV.UK says you must report the cost on form P11D and pay Class 1 National Insurance through payroll.
8. If your employee uses their own phone and you reimburse them, GOV.UK says you do not need to report this on form P11D but may still have to deduct and pay Class 1 National Insurance and PAYE tax through payroll. On a monthly tariff, you must deduct both if you reimburse the monthly tariff or private calls over the limit of the tariff; business calls over the limit of the tariff carry neither. On pay as you go, reimbursing business calls carries neither.
9. From 6 April 2026 a separate exemption, section 316ZA ITEPA 2003, applies where an employee incurs a cost on behalf of the employer for supplies or services and the employer pays or reimburses it, if the employer intends, when they are first provided, that they will be used in the duties and that any private use will not be significant, and, where provided away from the employer's premises, their sole purpose is to enable the employee to perform the duties (EIM21619). Whether it covers a particular phone arrangement depends on the facts, so take advice before relying on it.
10. Salary sacrifice: GOV.UK says you do have to report employees' mobile phone costs if they are part of a salary sacrifice arrangement, and that exemptions on benefits in kind do not apply to salary sacrifice schemes.
11. Employees: where an employee uses their own mobile phone for business calls, HMRC says a deduction can be permitted for the actual cost, necessarily incurred, of calls made in the performance of the duties (EIM32945). Some tariffs include free time in the rental charge, and in those cases there may be no cost to be deducted. The removal of relief for household expenses from 6 April 2026 does not affect mobile phones, as mobile phone costs are not household expenses (EIM32935).
12. A limited company deducts the costs of running its business before Corporation Tax, subject to the wholly and exclusively test in section 54 CTA 2009.

Common mistakes

• A company reimbursing an employee's own monthly phone tariff without running it through payroll. GOV.UK says tax and National Insurance must be deducted on a reimbursed monthly tariff and on private calls over the tariff limit.
• Sole traders claiming 100% of a phone that is also used personally.
• Assuming the one-phone exemption also covers a phone for the employee's partner or children. It is one phone per employee and excludes family and household.
• Treating a tablet or laptop as the exempt mobile phone. HMRC lists tablet and laptop computers as outside the definition.
• Assuming the exemption still applies when the phone is provided through a salary sacrifice arrangement. GOV.UK says those costs must be reported.
• An employee claiming part of an inclusive tariff when the business calls cost nothing extra. Where no expense is incurred in making the business calls, no deduction is permitted (EIM32951).

What to keep

• Itemised phone bills showing business and personal calls, and a note of how you worked out the business share.
• The contract, showing whether it is between the company and the supplier or in the employee's own name.
• For an employee claiming business calls, itemised bills showing which calls were for work and what they cost.

Real-world example

A director takes out a contract for one smartphone in the company's name, and the company pays the supplier. That is one phone, with the contract between the company and the supplier, so nothing is reported to HMRC and no tax or National Insurance is due, even though the director also uses it for personal calls. If the director had kept their own contract and the company reimbursed the monthly tariff, the company would have to deduct tax and National Insurance through payroll.

Frequently asked