To claim tax relief on your mobile phone or landline telephone expenses, you’ll need to ensure that a contract is set up between your business and the service provider. This way you can gain tax relief on the cost of the phone and its use.
Business phones for limited companies
If you run your business as a limited company, you’re able to claim the cost of a phone and a landline provided it’s in the business name and used for business purposes.
If your landline phone contract is only for business use, this is an allowable company expense and you won’t be taxed personally. By having a separate phone line for ‘only business’, it shows this is 100% for business.
For mobile phones, provided the contract is between the company and the mobile phone provider, the company can claim all costs as an allowable expense.
If your company pays your entire personal phone bill, you’ll have to pay a ‘benefit in kind’ (BIK) charge on the total amount of the bill, and your company will pay National Insurance Contributions at 13.8%for the 2023/24 tax year (14.73% for the 2022/23 tax year) on the same amount (minus the cost of any business calls you can identify).
If you make a claim for business only calls made on your personal mobile or landline phone bill, this is an allowable expense provided you can prove it was a business call. You can also reclaim the VAT element of the business calls (if you‘re VAT registered), but you won’t be able to reclaim any part of the line rental, as you would incur this cost anyway.
The one setback with signing a contract in the name of your limited company is that you’ll probably have to use one of your phone provider’s business tariffs, which may be more expensive – but any increase in cost will probably be covered by tax savings.
The same principles apply to a landline phone. You will need to set up a contract with your chosen provider in the name of your limited company to include such expenses in your accounts and claim tax relief.
If your limited company is an employer providing mobile phones to its employees, you have certain tax, National Insurance and reporting obligations. This includes:
- costs for phones you provide to employees
- reimbursing your employees’ own phone costs.
However, you don’t have to report anything to HM Revenue and Customs (HMRC) or deduct and pay tax and National Insurance if both of the following apply:
- You provide an employee with only one mobile phone or SIM card
- The phone contract is between your limited company and the phone provider.
If you take out a mobile phone contract in the name of your limited company, you’ll receive Corporation Tax relief on the entire cost of your phone bill.
The current rate of Corporation Tax for the 2023/24 tax year is 19-25%.
Business phones for sole traders
If you’re a self-employed sole trader, the situation is slightly different as there is no legal separation between you and your business. HMRC does allow you to claim for the business proportion of your phone use, though it may be hard to separate this from personal use.
If you’re using a home or mobile phone line for both business and personal calls, you can’t claim for line rental because there is a dual purpose, i.e. the expenses aren’t exclusively for business purposes.
However, you may claim expenses for the business phone calls used on that line, provided they can be identified on the phone bill. Alternatively, you could set up a separate phone line or mobile contract in the business name which is used 100% for business.
The same approach is taken when determining the allowable expenses associated with broadband.
Can I claim for business use on a personal phone contract?
We don’t recommend claiming for business use on a personal mobile phone contract. Most mobile phone tariffs provide ‘bundles’ of calls and data usage. It’s very difficult to evidence to HMRC how the business and personal parts of your usage are split.