Expenses and benefits: home phones

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1. Overview

As an employer paying your employees’ home phone expenses, you have certain tax, National Insurance and reporting obligations.

Expenses can include:

  • telephone line rental
  • business-related call charges
  • private call charges

2. What's exempt

You don’t have to report anything or deduct and pay PAYE tax or National Insurance if the phone is used for business calls only.

Salary sacrifice arrangements

You do have to report the phone if it’s part of a salary sacrifice arrangement.

3. What to report and pay

If telephone expenses aren’t exempt, you must report them to HMRC and may have to deduct and pay tax and National Insurance on them.

Some telephone expenses are covered by exemptions (which have replaced dispensations). This means you won’t have to include them in your end-of-year reports.

You arrange and pay for the phone

You must:

Your employee arranges the phone contract but you pay the supplier

You must:

Your employee arranges the phone contract but you reimburse them

This counts as earnings so you must:

  • add the amount you reimburse to the employee’s earnings
  • deduct and pay Class 1 National Insurance and PAYE tax through payroll

4. Work out the value

The value to use depends on who arranges the employee’s telephone line.

If you arrange the telephone, the value for reporting and National Insurance is the total cost of line rental and all call charges (business and private).

If your employee arranges the telephone but you pay the supplier, you must:

  • report the cost of line rental plus all call charges (private and business)
  • pay National Insurance on the cost of line rental plus private call charges only

Salary sacrifice arrangements

If the cost of the line rental and all call charges (private and business) is less than the amount of salary given up, report the salary amount instead.

These rules don’t apply to arrangements made before 6 April 2017 - check when the rules will change.

5. Technical guidance

The following guides contain more detailed information: