In short
Usually, a company mobile phone is not a taxable benefit in kind. HMRC says there is nothing to report and no tax or National Insurance to pay if you give an employee only one mobile phone or SIM card on a contract between your business and the supplier. Salary sacrifice, extra phones and paying staff contracts are treated differently.
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The short answer
HMRC's guidance for employers, "Expenses and benefits: mobile phones" on gov.uk, says you do not have to report anything to HMRC, or deduct and pay tax and National Insurance, if both of these apply:
- you provide your employee with only one mobile phone or SIM card
- the phone contract is between you and the supplier
HMRC's Employment Income Manual adds that the exemption covers the phone itself, any line rental and the cost of private calls the employer pays for on that phone. So a company phone that the employee also uses for personal calls is, in most cases, still exempt.
The exemption depends on how the phone is provided, not just on the fact that you pay for it. That is why the same monthly cost can be tax-free in one set-up and reportable in another. The rest of this page sets out the cases gov.uk describes.
This page summarises HMRC's published guidance as at November 2026. It is not tax advice: check your own circumstances with your accountant or payroll adviser.
What HMRC counts as a mobile phone
The exemption applies to mobile phones as HMRC defines them. Its Employment Income Manual explains that:
- Smartphones count. A device designed mainly for making and receiving calls is still a mobile phone even though it does much more.
- A SIM card on its own counts. A SIM provided by the employer for use in a phone the employee owns falls within the definition.
- Tablets and laptops do not count. HMRC gives tablets, laptop computers, sat navs and devices that are solely PDAs as examples of apparatus that is not a mobile phone, even if it can make calls.
- Family members are excluded. Phones provided to members of the employee's family or household are not covered by the exemption.
If you are giving staff tablets with data SIMs, or phones for family members, the mobile phone exemption does not settle the question, so ask your accountant how they should be treated.
When you do have to report or pay
Here is how gov.uk describes the common situations. Where a phone is not exempt, you must report it to HMRC and may have to deduct and pay tax and National Insurance.
| Situation | What HMRC's guidance says |
|---|---|
| One phone or SIM per employee, contract between the business and the supplier | Exempt: nothing to report, no tax or National Insurance |
| Phone provided as part of a salary sacrifice arrangement | You must report the employee's mobile phone costs |
| More than one phone for the same employee | One phone is exempt; any other phones count as assets |
| Employee arranges the phone contract, but the business pays the supplier | Report the cost on form P11D and pay Class 1 National Insurance through payroll |
| Employee uses their own phone and the business reimburses them | No P11D, but you may still have to deduct and pay Class 1 National Insurance and PAYE tax through payroll |
| Reimbursing an employee's monthly tariff, or private calls over the tariff limit | Deduct and pay National Insurance and tax |
| Reimbursing business calls over the limit of the employee's monthly tariff | No National Insurance or tax to deduct |
| Reimbursing business calls on an employee's pay as you go phone | No National Insurance or tax to deduct |
The pattern is simple: the cleanest position is one phone or SIM per employee on a contract held by the business. Arrangements where the employee holds the contract and the business pays towards it are the ones that create reporting.
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Salary sacrifice phones
Some employers offer phones through salary sacrifice, where the employee gives up part of their salary in return for the phone. HMRC is clear that these must be reported, even though a phone provided directly by the employer would normally be exempt.
How the value is worked out, and what it means for the employee's tax, depends on the arrangement. If you run or are considering a salary sacrifice scheme that includes phones, take advice from your payroll adviser before you set it up. We supply the business lines for whichever arrangement you choose.
Paying for an employee's own phone
A common arrangement in small businesses is that staff use their personal phone and contract for work, and the business pays some or all of the bill. It feels simple, but it is the set-up HMRC treats least favourably:
- If the employee holds the contract and the business pays the supplier, HMRC says you must report the cost on a P11D and pay Class 1 National Insurance through payroll.
- If the business reimburses the employee's monthly tariff, tax and National Insurance are due on the reimbursement. Only business calls over the tariff limit are free of tax and National Insurance.
Moving those people onto a company line, on a contract between your business and the network, usually brings them within the one-phone exemption. It also gives the business control of the number and the data. Employees do not have to lose their number: a personal number can be moved to the business account with a PAC (text PAC to 65075 from the phone), and our guide to getting a business mobile number explains the options, including keeping a separate personal line on a dual SIM phone.
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Second phones, tablets and data SIMs
Businesses increasingly give staff more than one device: a phone plus a tablet, or a second phone for a particular site or customer.
- A second mobile phone. HMRC says one phone is exempt and any others count as assets, which means they are treated under the rules for assets provided to employees.
- Tablets and laptops with data SIMs. These are outside HMRC's definition of a mobile phone, so the mobile phone exemption does not apply to them. Other rules for work equipment may, depending on how they are used.
- Shared phones. A duty phone or a handset that stays on site is a different case from a phone given to one person.
None of these is unusual, but each needs the right treatment. Ask your accountant, and tell us how the devices will be used so we can set the lines up in the business's name.
Is a mobile phone a business expense?
For most businesses, mobile contracts and phones bought for staff to do their jobs are business costs. How they are treated in your accounts, and how VAT on them is handled, depends on your business and is a question for your accountant.
Business contracts are often quoted without VAT, which is one reason business and personal prices are hard to compare; our guide to business vs personal mobile contracts explains the differences.
Setting up company phones the right way
If you want company phones to fall within HMRC's exemption, the practical steps are straightforward:
- Put each line on a business account, with the contract between your business and the network
- Give each employee one company phone or SIM, and keep a record of which line and handset each person has
- Decide in your company mobile phone policy whether personal use is allowed, and on what terms
- Move staff who currently claim for their own phone bills onto company lines, keeping their numbers if they want to
- Treat salary sacrifice, second phones, tablets and family members' phones separately, with your accountant's advice
We can help with the first four: quoting for business lines on the network that suits you, moving numbers across and keeping your lines organised on one account. See company mobile phones for how to run the fleet once it is in place.
Contact us to move your staff onto company lines.
How Forever Communications helps with business mobile
We help UK organisations choose, set up and run business mobile: plans, SIMs and eSIMs, phones, mobile broadband, 5G and the device management that keeps a fleet under control.
- Start with what you have: we look at your current contracts, end dates, users and devices before suggesting anything new
- Four networks, one conversation: we supply EE Business and Three Business, and can also supply O2 Business and Vodafone Business, so you can choose the network that works where your people work
- Airtime first, devices your way: we focus on getting your airtime costs down, so you can buy iPhone, Samsung Galaxy and other devices separately and set them up to enrol in your mobile device management
- Moving without losing numbers: we help you plan the switch and keep your existing business mobile numbers
- Beyond the phone: 5G for business, mobile broadband and data SIMs for sites, vehicles and backup connections
- Device management and mobile security: MDM and mobile threat defence from vendors such as IBM, Sophos, Check Point, CrowdStrike and Lookout, plus Jamf, Ivanti, Microsoft Teams Phone Mobile and Mobile Voice Recording with EE Business; see mobile device management and security
Forever Communications is part of Forever Group. Ask us for a quote and we will set out the plans and services that fit your team.
Frequently asked questions
Is a company mobile phone a taxable benefit?
Not usually. HMRC says there is nothing to report and no tax or National Insurance to pay if you provide an employee with only one mobile phone or SIM card and the contract is between you and the supplier. Salary sacrifice arrangements, extra phones and paying towards an employee's own contract are treated differently.
Can employees use a company phone for personal calls without paying tax?
Generally yes, for one phone. HMRC's Employment Income Manual says the exemption covers the phone, line rental and private calls paid for by the employer on that phone. Whether personal use is allowed is a matter for your company policy. This is not tax advice.
Do I need to put a company mobile phone on a P11D?
Not if it is the employee's only company phone or SIM and the contract is between your business and the supplier. HMRC says you must report the cost on a P11D and pay Class 1 National Insurance if the employee arranges the contract and the business pays the supplier.
Is a smartphone treated differently from a basic mobile phone?
No. HMRC's manual explains that smartphones fall within the meaning of a mobile phone, because they are designed mainly for making and receiving calls even though they do much more.
Is a company tablet a benefit in kind?
The mobile phone exemption does not cover tablets: HMRC gives tablets and laptops as examples of devices that are not mobile phones. Other rules for work equipment may apply depending on how the tablet is used, so ask your accountant.
Is paying an employee's phone bill a benefit in kind?
If the employee holds the contract and you pay the supplier, HMRC says you must report it on a P11D and pay Class 1 National Insurance. If you reimburse their monthly tariff, tax and National Insurance are due. Moving them to a company line usually avoids this.
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