Claiming mobile phone expenses: self-employed guide & tips for employers

Whether you’re using your personal mobile for work or have a company-issued smartphone, it’s likely there are expenses you can claim back.

If you take the time to crunch the numbers and follow all the necessary steps with HMRC, you’ll have reduced tax liability and an extra bit of cash in your pocket.

But the process of claiming mobile phone expenses can be quite different depending on whether you’re self-employed or an employee. The claims process can change again if you have a company-issued smartphone, or use your own device for work purposes.

Can you claim a mobile phone as a business expense?

Yes, you can claim your mobile phone as a business expense – but what you can and can’t claim will depend on your type of employment.

Self-employed

Yes, you can claim a portion of your phone costs as someone who is self-employed. However, you can only claim for the business-related usage. This means figuring out what percentage of your calls, texts, and data are for work purposes.

Although no set method exists, you can come up with a reasonable calculation from analysing your recent mobile phone statements and records. You can…

• Calculate a percentage based on past statements: analyse a few months’ worth of statements to calculate your average business use percentage and apply it to future costs.
• Have a separate business phone: get a separate phone or SIM card solely for business. You can claim tax on the handset cost if purchased outright, plus monthly contract costs.

Employers

As an employer, a small business can provide benefits including a business mobile contract, or cover certain phone expenses for its staff.

In the best case scenario, the company provides an employee with a business mobile phone or SIM card under a business contract. The business pays the bills directly, and both personal and business use may be allowed. With these criteria met, the company can claim VAT on the costs of the business usage of the phone, if they are VAT registered.

If the employee pays and the company reimburses mobile expenses, only actual business call costs can be reimbursed by the business. In these cases, the employee would need to submit itemised expense claims. The business can still claim VAT back on the business expenses it covered for the employee.

Can you claim mobile expenses if you use a phone for business and personal use?

Yes, but you can only claim the portion used strictly for business. This means separating work calls from catch-ups with friends or loved ones. To successfully claim what is owed, a strict record of all mobile activity must be kept, especially as using platforms such as WhatsApp for business is blurring the lines. Here’s how:

• Be proportionate: calculate the percentage of the mobile phone’s use that was dedicated to business. To do this, you can track the usage by breaking down the number of business calls, texts, and data from the past few months to establish a business-to-personal ratio. You can also keep records of each business-related call, text, or data session. While this might feel tedious, it gives you a precise idea of how much can be claimed.
• Document details: don’t just track the quantity of usage, but also the nature of the business activities. To do this, record the date, time, and duration of each business call. Note down the purpose of each one, and keep copies of important business emails or messages received on the mobile phone. This is crucial to keep in case there is an audit or inquiry from HMRC.
• Separate is best: if possible, consider having a separate business mobile or maintain distinct usage patterns on the current mobile phone. This simplifies record-keeping and eliminates the need for calculations.

Eligible mobile expenses for self-employed

These are the mobile expenses you can claim if you’re your own boss. Remember to keep track of all your mobile phone activities for a smoother tax refund process.

• Contract costs: you can claim the proportionate share of the monthly phone plan fee that relates to business use. If you have one plan for both work and personal calls, estimate the percentage of business calls and apply that to the monthly fee. Data charges follow the same principle.
• Calls, texts and data: you can claim the full cost of any calls, texts, or data usage that’s directly related to your business. This includes client conversations, scheduling calls, and research-related data consumption.
• Phone handset cost: if you use a personal phone for business, only a proportionate share of the cost can be claimed.
• VAT (for VAT-registered businesses only): if your business is VAT-registered, you can claim back the VAT on your business-related mobile expenses. Remember to keep any invoices when claiming VAT on both the phone and the associated charges.

How and when can you submit mobile expenses to HMRC?

Here’s a breakdown of what you need to report, how, and when:

What do you have to report and how?

• Multiple phones: if more than one phone is provided to an employee, only the first one is exempt. Others are considered benefit-in-kind and are taxable assets.
• Employer pays supplier: when an employee arranges for the phone but the business pays the supplier, report the cost on form P11D and pay Class 1 National Insurance.
• Reimbursing for personal calls: if an employee’s monthly phone tariff is reimbursed by the business, deduct and pay Class 1 National Insurance and PAYE tax through payroll. There’s no additional reporting required. However, if private calls that exceed the tariff are reimbursed, report the excess amount on form P11D.
• Business call charges: report the cost of business calls exceeding the monthly tariff on form P11D. No tax or National Insurance deductions are needed here.
• Pay as you go phones: if an employee uses a pay as you go phone and the business reimburses them for business calls, report the reimbursed amount on form P11D. No tax or National Insurance deductions are needed.

How do you calculate the value?

• If the employer pays the supplier or reimburses the employee, the value for payroll is the reimbursed monthly tariff plus the cost of private calls (if reimbursed). The value for P11D is the cost of business calls exceeding the tariff.
• If an employee uses a pay as you go phone, the reimbursement amount must be used as the value for both payroll and P11D.

Methods for recording business use of your phone

Here are some effective methods to track your business phone usage and stay prepared for potential HMRC audits:

1. Bills and receipts → whether you prefer digital versions stored securely in the cloud or neatly organised physical copies, keep every phone bill and receipt. These act as a primary proof of phone-related expenses.
2. Call logs and usage logs → go beyond simply noting down business calls. Record details like date, time, duration, and the subject of the call. Usage logs that break down business data consumption are also valuable.
3. Spreadsheets and accounting software → be organised. Use software designed for expense tracking, allowing you to categorise costs, attach receipts, and calculate totals.
4. Use specialist apps → utilise mobile apps or accounting software that is designed for expense tracking and receipt management. These can automate the process, saving you time and ensuring accuracy.
5. Retention period → HMRC generally expects you to keep records for at least six years after the relevant tax year. Play it safe and consider keeping them even longer, especially when it comes to larger expenses or potential audits.

Final tips and considerations

Mobile phone expenses are a perfectly legitimate tax claim for the self-employed. You can also claim back the VAT on the cost of the handset and the monthly contract costs if you run a small business that has issued mobile phones to staff..

However, it’s crucial to be clear with HMRC about whether a device has mixed personal and business use, and you can only claim accordingly. Above all, honesty is the best policy. Accurate records and open communication with your employer prevent unnecessary complications.

If your situation is complex or involves high-value claims, reach out to a tax advisor. Their expertise can walk you through the steps you need to follow to ensure you’re maximising your eligible deductions while staying compliant.

Stay informed, too. As with any tax-related matters, regulations can change. Stay updated on HMRC’s latest guidelines to avoid any surprises come tax season.