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Beware of the mobile phone tax trap 📱

Updated: Dec 8, 2023

It’s a well-known tax-free benefit – an employer may provide one mobile phone per employee for both business and personal use without triggering a taxable Benefit-in-Kind (Section 319 ITEPA 2003).

Mobile phone tax relief

It sounds simple enough, but there are conditions:

  • The mobile phone/sim card must remain the property of the employer.

  • One phone per employee

  • The contract must be between the employer and the mobile phone provider

It's this final condition that often catches out small companies, which might be paying for the director's mobile phone bills whilst the contract remains in the director's personal name.

Whilst a seemingly minor technicality, the tax treatment of reimbursement of mobile phone costs triggers a costly Benefit-in-Kind Income Tax and National Insurance charge.

HMRC is taking a strict stance on this matter, and when discovered, order assessments of often 4 years underpaid taxes averaging £800 before penalties and interest.

What’s the solution?

If your mobile contract isn’t in the company name – don’t overly worry – you’re not alone by a long stretch. To keep things practical (and in the real world), we suggest the following:

  • First of all, call your mobile provider to ask about their procedure for transferring the contract to the company (I found this surprisingly straightforward)

  • If there are extra charges to make the change in-contract, wait until you’re out-of-contract and try again – you'll usually be offered the same price as personal rate tariffs.

In our experience, it’s easier and cheaper than most people realise to review your mobile contracts yourself before HMRC does!

Would you like help to pay less tax? Feel free to get in touch or check out our related posts 👇

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