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 limited company and the service provider. This way you can gain tax relief on the cost of the phone and its use.
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 employee’s 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 2020/21 tax year is 19%. So if the entire cost of a mobile phone contract is £1,000, this would be recorded as an expense, knocking £190 off your Corporation Tax bill.
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 for 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.
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 is split.
Need more advice on expenses?
This handy guide will help limited companies understand what they’re entitled to claim in business expenses, so you won’t end up paying more tax than you have to. Download now and read at your convenience!