This guide explains your tax and National Insurance contributions (NICs) obligations if you cover the cost of an employee’s mobile phone.
Please note that the rules in this guide don’t apply to a device such as an iPhone or BlackBerry – the range of functions these devices offer means that HM Revenue & Customs (HMRC) doesn’t consider them to be primarily mobile phones. For details of the rules that apply, see the A to Z entry ‘Assets made available to an employee’.
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You make one mobile phone (or SIM card) available for use to an employee. The phone can be used for both business and private calls. The contract is between you and the mobile phone operator.
The same rules apply whether you pay for rental charges, business calls and/or private calls.
You have:
You provide an employee with more than one mobile phone. The contracts are between you and the mobile phone operator.
One of the phones qualifies for the tax and NICs exemption set out in the section ‘You provide an employee with one mobile phone’ above. You can choose which of the phones to make exempt.
You should treat any other phones that you provide to the employee according to the tax and NICs rules for assets made available to an employee. Follow the link below for details.
Assets made available to an employee
You cover the costs of an employee’s mobile phone by paying the phone company directly. The contract for the phone is between the employee and the mobile phone company.
For employees earning less than a rate of £8,500 per year, unless the exception outlined below applies:
For company directors or employees earning at a rate of £8,500 or more per year, unless the exception outlined below applies:
For employees earning less than a rate of £8,500 per year:
For company directors or employees earning at a rate of £8,500 or more per year:
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:
For company directors or employees earning at a rate of £8,500 or more per year:
How a dispensation can reduce your expenses and benefits reporting
You cover the costs of an employee’s mobile telephone by reimbursing the employee. The contract for the phone is between the employee and the phone company.
Reimbursements of an employee’s monthly mobile phone tariff count as earnings, so:
If you reimburse call charges in excess of those included in the employee’s monthly tariff, then:
How a dispensation can reduce your expenses and benefits reporting
The value to put through your payroll is any amount of the employee’s monthly tariff you reimburse plus the cost of any additional private calls you reimburse.
The value to report on form P11D is the cost of any business calls you reimburse that aren’t covered by the monthly tariff.
You reimburse the costs of identifiable business calls on an employee’s ‘pay as you go’ mobile phone, or you provide the employee with a ‘top up’ to be used only for business calls.
For employees earning less than a rate of £8,500 per year, you have:
For company directors or employees earning at a rate of £8,500 or more per year:
The value to use is the amount you reimburse or the amount of the top up you provide to the employee.
How a dispensation can reduce your expenses and benefits reporting
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.
