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  • Expenses and benefits A to Z

Telephones - employee's home phone

This guide explains your tax and National Insurance contributions (NICs) obligations if you cover the costs of an employee's home telephone.

On this page:

You arrange and pay for a landline

Definitions or restrictions

You arrange and pay for a telephone at an employee's home. The contract for the phone is between you and the phone company.

What to report, what to pay

For employees earning less than a rate of £8,500 per year, you have:

  • no reporting requirements
  • no tax or NICs to pay

Unless the exception outlined below applies, then for company directors or employees earning at a rate of £8,500 or more per year:

  • report in form P11D - section K
  • pay Class 1A NICs on the value of the benefit

Work out the value to use

The value to use is the full amount of rental and call charges.

Exceptions

If you provide the telephone for business-only use and any private use of the telephone is insignificant, then for company directors or employees earning at a rate of £8,500 or more per year you have:

  • no reporting requirements
  • no tax or NICs to pay

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Employee's own landline - you pay the supplier directly

Definitions or restrictions

You cover the costs of an employee's home telephone by paying the phone company directly. The contract for the phone is between the employee and the phone company.

What to report, what to pay

For employees earning less than a rate of £8,500 per year, unless the exception outlined below applies:

  • report on form P9D - section A(2)
  • add the value of the benefit to the employee's other earnings when deducting and paying Class 1 NICs (but not PAYE tax) through your payroll

For company directors or employees earning at a rate of £8,500 or more per year, unless the exception outlined below applies:

  • report on form P11D - section B
  • add the value of the benefit to the employee's other earnings when deducting and paying Class 1 NICs (but not PAYE tax) through your payroll

Work out the value to use

For employees earning less than a rate of £8,500 per year:

  • the value to report on form P9D and on which Class 1 NICs are due is the sum of rental and private call charges

For company directors or employees earning at a rate of £8,500 or more per year:

  • the value to report on form P11D is the sum of rental and all call charges (both business and private)
  • the value on which Class 1 NICs are due is the sum of rental and private call charges (you should exclude business call charges)

Exceptions

If the employee's phone is acquired for business purposes and is only used for business calls, then the following rules apply.

For employees earning less than a rate of £8,500 per year, you have:

  • no reporting requirements
  • no tax or NICs to pay

For company directors or employees earning at a rate of £8,500 or more per year:

  • report on form P11D - section N - unless you have a dispensation for this item
  • you have no tax or NICs to pay

How a dispensation can reduce your expenses and benefits reporting

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Employee's own landline - you reimburse the employee

Definition or restrictions

You cover the costs of an employee's home telephone by reimbursing the employee. The contract for the phone is between the employee and the phone company.

What to report, what to pay

Rental and private call charges that you reimburse count as earnings. So for all company directors and employees, regardless of earnings:

  • add the amount you reimburse to your employee's other earnings
  • deduct and pay PAYE tax and Class 1 NICs using your usual payroll procedures

The following rules apply to business call charges that you reimburse.

For employees earning less than a rate of £8,500 per year, you have:

  • no reporting requirements
  • no tax or NICs to pay

For company directors or employees earning at a rate of £8,500 or more per year:

  • report on form P11D - section N - unless you have a dispensation for this item
  • you have no tax or NICs to pay

Work out the value to use

The value to use is the amount that you reimburse to the employee.

How a dispensation can reduce your expenses and benefits reporting

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Where to report - understanding the £8,500 threshold

It's important to choose correctly between forms P11D and P9D for each employee. The form to use depends on the whether the employee is a director of your company and on whether their earnings are above or below an annual rate of £8,500. For more information - including details of what's included in the £8,500 threshold - follow the link below.

End-of-year forms at a glance

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Technical guidance

EIM32940: Telephone charges

EIM21615: Employer subscribes for telephone line in the employee's home

NIM06190: Telephone expenses

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