Last updated: 14 October 2026
Are there tax implications for providing mobile phones to employees?
Not usually. One mobile phone per employee is exempt from tax and NIC, as long as the contract is in the employer’s name and the employer pays the bills directly. Private calls on that phone are also covered. It doesn’t need to be reported on a P11D. Problems arise if the employee owns the contract and the employer pays it, or if you give more than one phone.
When the exemption applies
| Situation | Tax treatment |
| One phone, contract in employer’s name | Exempt |
| Second phone for the same employee | Benefit in kind; report on P11D |
| Employer pays employee’s own contract | Taxable as earnings; through payroll |
| Employer reimburses business calls only | Exempt if supported by itemised bills |
| Smartwatch or tablet | Not covered; may be taxable |
Salary sacrifice
If an employee gives up salary for a phone, the exemption still applies. Phones are one of the items excluded from the optional remuneration rules, so there’s no tax charge on the salary given up.
VAT
If the company is VAT registered, it can reclaim VAT on the phone and contract. If private use is significant, HMRC expects an adjustment, but it usually accepts no restriction where private calls are covered by the contract.
Company deduction
The cost of the phone and contract is deductible for corporation tax. A phone is usually treated as a capital asset and qualifies for the Annual Investment Allowance.
Example
Ruth runs a small design company. She gives each of her 5 employees an iPhone on a company contract. There’s no tax or NIC for her staff and no P11D. If she paid for her employees’ own contracts instead, she’d need to put the payments through payroll.
Directors
The exemption applies to directors too, including sole directors of their own company, as long as the contract is in the company’s name.
SIM-only and pay-as-you-go
A company SIM in an employee’s phone is covered if the SIM contract is in the employer’s name. Top-ups paid for an employee’s pay-as-you-go phone are taxable unless they’re just for business.
Records
Keep the contract in the company’s name, and a record of which employee has which phone.
Common mistakes
- Giving a second phone to an employee and not reporting it
- Putting the contract in the employee’s name, which turns an exempt benefit into taxable pay
- Providing a phone to an employee’s family member, which is a taxable benefit for the employee
- Assuming tablets and laptops are covered by the phone exemption, when they are only exempt if private use is not significant
Giving phones as gifts
If an employee keeps the phone when they leave, or you transfer ownership to them, it may become a taxable benefit at its market value at that time. Older phones often have a low value, so the charge is usually small, but it should still be reported.
Frequently asked questions
Do I need to report the phone on a P11D?
No, if exempt.
What about broadband at home?
Only exempt if it’s needed for work and the employer holds the contract.
Can the employee keep the phone when they leave?
Yes, but it may be a taxable benefit at its market value.
Does it matter if the phone is expensive?
No, the exemption has no cost limit.
Related: pay-as-you-go phones for employees, employee reward schemes and cash gifts from your employer.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with payroll and benefits in kind. See our small business accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
