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You can buy a mobile phone through your business. If the contract is in your business’s name and you give one phone or SIM card to each employee, there is no tax or National Insurance to pay, and you do not need to report anything to HMRC. If the contract is not in the business’s name, the phone counts as a reportable benefit.
The name on the contract is what decides how each business mobile is taxed. This guide covers the HMRC exemption, when you can reclaim VAT, and how a business contract compares to using a personal phone for work.
The HMRC one-phone exemption explained
HMRC operates an exemption that lets you give an employee a mobile phone with no tax charge, no National Insurance and no reporting. Two conditions have to be met, and both of them matter:
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You provide the employee with only one mobile phone or SIM card
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The phone contract is between your business and the supplier
Meet both, and there is nothing to report and nothing to pay. The employee can use the phone for personal and work calls without creating a benefit charge.
The second condition is where most businesses get stuck. The contract has to be in the business’s name, held directly with the network. A phone bought on a personal contract and reclaimed through expenses does not qualify, even if it is clearly used for work.
Salary sacrifice arrangements are the other exception. If the phone is provided through salary sacrifice, the exemption does not apply, and the arrangement has to be reported.
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What happens when the contract is in your employee's name
If your employee takes out the contract themselves and you pay or reimburse the supplier, the exemption is lost.
You then have to:
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Report the cost on form P11D
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Pay Class 1 National Insurance through payroll
The amount you put through payroll is the monthly tariff you reimburse, plus the cost of any private calls above the tariff if you cover those too. Business calls above the tariff do not need to be reported.
Pay-as-you-go works the same way. If you top up or reimburse an employee’s own phone, the value of what you provide is taxable.
In practice, this means a business paying employees’ personal phone bills is creating payroll admin, an annual P11D exercise and an employer NI cost, for a phone that would have been entirely tax-free on a business contract.
Can you reclaim VAT on a business mobile phone?
If your business is VAT registered, you can reclaim the VAT on business mobile costs. How much you can reclaim depends on how the phone is used.
- Line rental and standing charges: HMRC treats phone line rental as business expenditure, and the VAT on it is recoverable in full, even where you allow employees to make personal calls.
- Call charges: Where private use is banned, all the VAT on calls is recoverable. Where you allow personal calls, you need to apportion. HMRC accepts a straight percentage split based on a representative sample of usage, so you do not need to itemise every call.
- The handset: VAT on the phone itself is recoverable to the extent the phone is used for business.
Where a phone is effectively a personal phone with only incidental work use, you cannot reclaim the VAT on the private calls, though HMRC will not raise an output tax charge on the incidental business use.
You need a VAT invoice to reclaim. Business mobile contracts produce one as standard, with itemised billing across all your lines. Consumer contracts often do not, which is a common reason businesses find they cannot recover VAT they assumed they could.
Second phones and additional SIM cards
The exemption covers one device per employee. If you provide a second phone or an additional SIM to the same person, only one of them is exempt.
Any additional phones count as assets made available to the employee and are reported and taxed under the rules for assets rather than the mobile phone exemption.
There is an important distinction here. A second SIM issued to the same employee is caught. A separate SIM issued to a different employee is not; every employee gets their own one-device exemption.
This is worth checking if you run a fleet of business mobiles. Data SIMs for tablets, vehicle trackers or backup connectivity are easy to issue without anyone considering whether they have tipped an employee over the one-device line.
How the rules apply to limited company directors
If you run a limited company, you are an employee of that company for these purposes. When the company takes out the contract and provides you with one phone, the exemption applies exactly as it would to any other member of staff. The company pays the bill, reclaims the VAT on the business proportion, and there is no benefit in kind.
Buy the phone personally and invoice the company, and you get none of that. The company is reimbursing a personal contract, which is a P11D benefit with employer National Insurance due on it.
The saving is not in the handset or the tariff. It is in whose name the contract is.
Registered charities are treated the same way. A charity providing a phone to an employee gets the same one-device exemption on the same terms.
What about sole traders?
The exemption does not apply if you are a sole trader, because you cannot be your own employer. Instead, you claim the business-use proportion of your phone costs as an allowable expense. If the phone is used 70% for business, you claim 70% of the cost.
A sole trader who employs staff can still use the one-phone exemption for the phones provided to those employees.
Business mobile tariffs are generally only offered to incorporated organisations. Our plans are available to UK limited companies and registered charities.
Mobile phone allowances vs a company phone
Some businesses pay a monthly mobile phone allowance instead of providing a handset. It looks simpler, and for a small team it can be. The tax treatment is a lot less generous.
An allowance paid to an employee is treated as earnings. It goes through payroll, is subject to income tax and National Insurance, and there is no exemption to fall back on. An allowance of £30 a month costs both the business and the employee more than a £30 business tariff.
There is also no VAT recovery on an allowance, because there is no supply to your business; the contract is the employee’s.
| Tax & NI | Exempt (one per employee) | Taxable as earnings |
| Reporting | None required | Through payroll |
| VAT recovery | Yes, on business use | No |
| Number ownership | Business keeps the number | Employee keeps the number |
That last row matters more than people expect. When an employee leaves with the phone number your customers have been calling for three years, you cannot get it back, it is on their personal contract.
Personal contract vs business contract: which works out cheaper?
Comparing headline monthly prices misses most of the difference. A business contract changes the cost in four ways:
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VAT. Business tariffs are quoted excluding VAT, and consumer tariffs include it. A VAT-registered business recovers the VAT on business use, so the real cost is lower than the comparison suggests.
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Tax and NI. A business contract is exempt. A reimbursed personal contract is a P11D benefit with an employer NI cost attached.
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Corporation tax. The cost of business mobiles is an allowable business expense.
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Admin. One bill, one renewal date and one point of contact across every line, instead of chasing individual expense claims.
Business tariffs also include things consumer plans do not: shared data pools across your team, co-terminus contract end dates, and a business support line rather than a consumer one.
Frequently asked questions
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Can I buy a mobile phone as a business expense?
Yes. If your business takes out the contract and provides one phone per employee, the cost is an allowable business expense, and there is no tax or National Insurance to pay on it. The contract has to be between your business and the network for the exemption to apply.
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Can I buy a phone from my business account?
Yes, provided the purchase is genuinely for business use. For a limited company, the company buys the phone and holds the contract, and the director uses it as an employee. Buying it personally and claiming the money back from the company creates a reportable benefit instead.
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Can I buy a phone outright through my business?
Yes. You can buy the handset outright and pair it with a business SIM-only plan. VAT on the handset is recoverable to the extent it is used for business, and the one-device exemption still applies as long as the SIM is on a business contract.
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Is buying a phone a business expense?
It is, where the phone is used for business, and the contract sits with the business. What changes the tax position is not the phone but the paperwork: whose name is on the contract and how many devices that employee already has.
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Can I claim VAT back on a business mobile phone?
If you are VAT registered, yes. Line rental VAT is recoverable in full. Call charge VAT is recoverable in full where private use is not allowed, or apportioned by a representative sample where it is. You need a VAT invoice, which business contracts provide as standard.
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Does the exemption cover SIM-only plans?
Yes. HMRC treats a SIM card the same as a phone for the exemption, so a SIM-only business plan qualifies on the same one-per-employee basis.
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Can sole traders get a business mobile contract?
Business mobile tariffs are usually offered to incorporated organisations rather than sole traders. Our plans are available to UK limited companies and registered charities. If you are a sole trader, you can still claim the business-use proportion of a personal phone contract as an allowable expense.