Mobile Phones As A Company Expense: A Director & Shareholder Guide
An easy guide for UK directors and shareholders who want to keep things tax-smart.
New iPhone in hand? Wondering if your company can foot the bill? Before you expense it, here’s how to stay squeaky clean with HMRC.
Whether you're in Sidcup, Bexleyheath or anywhere else in the UK, here’s how to handle mobile costs through your limited company - the right way.
Contract or Pay-As-You-Go: What’s Best?
There are two choices: a company contract or a personal one (including PAYG). The cleanest setup is a company contract that is taken out in the business name, paid for directly from the business bank account, and clearly shown as a company expense. This makes the phone fully allowable for tax and avoids benefit-in-kind complications, as long as any personal use is genuinely minor.
Using a personal contract complicates things, we break this down in more detail below.
Buying the Phone Separately? That Works Too
If you prefer to buy the phone outright and pair it with a SIM-only plan, that’s absolutely fine. For the most tax-efficient outcome, the phone should still be purchased in the business name, from the company bank account, and recorded as a business purchase. Phones costing under £1,000 can usually be claimed as a straightforward expense. If the cost is higher, it may need to be treated as a capital asset and claimed via your Annual Investment Allowance (AIA).
Early upgrade or termination fees are also claimable as long as they’re for business use and paid directly by the company. Just keep the invoice. And remember, "free" phones in bundled contracts aren’t really free; the cost is baked into your monthly payment, but still allowable if the contract is under the company name.
Using a Personal Phone or Contract for Work
Using a personal mobile for business purposes is allowed, but it does come with added complexity. If your phone contract is in your own name and your company reimburses you, even if it’s for work use, it’s classed as a benefit in kind. That means extra tax and reporting. To avoid this, you’d need to show how much of your usage is genuinely business-related by keeping itemised bills or reliable usage records.
If you're using a personally owned phone for work (not just the contract), it's important that any reimbursement is only for business use. You could calculate the actual usage, highlighting specific calls or data, or opt for a monthly allowance based on a fair estimate.
Some directors adopt a BYOD (Bring Your Own Device) approach. This means you own the phone, but the company pays for business extras like data, VOIP apps or business tools. These costs should still be reimbursed from the business bank account, with clear documentation.
In all cases, the safer, cleaner option is to put the contract in the business name, pay directly from the company bank account, and record it clearly as a business expense. Whichever route you take, create a short internal policy outlining how costs are calculated and apply it consistently each month.
Working Out Business Use: Keep It Simple
If your phone is used for both personal and business reasons, HMRC expects a reasonable estimate of the business split. One option is to review a typical month’s usage and calculate the percentage used for work. For instance, if 70% of your usage is for business, you can claim 70% of the cost through the company.
Make a short note explaining how you came to the figure. Something like "mostly used for client calls and admin" can be enough. The claim should be paid directly from the business bank account and the calculation kept on file. You don’t need to send this to your accountant monthly, but retain the record for at least six years.
Is the Phone a Business Asset?
If the phone is bought by the company, paid from the business bank account, and used mainly for work, then yes, it qualifies as a business asset. Lower-cost phones are typically treated as regular expenses. More expensive models may be logged as fixed assets and claimed via AIA.
In either case, it should be clearly recorded in the company accounts and the business benefits from corporation tax relief.
What About Accessories?
Accessories are claimable if they support the running of your business. That includes things like insurance, protective phone cases, in-car mounts, headsets, and business-specific apps. These should also be purchased in the business name and paid for through the company bank account.
Avoid claiming anything that’s clearly for personal use, like novelty cases or gadgets for the kids - HMRC won’t accept those.
VAT: Can You Reclaim It?
If your business is VAT-registered, there are a few things to keep in mind. With company contracts taken out in the business name and paid from the company bank account, you can generally reclaim VAT in full.
If you're using a personal contract, you can only reclaim the portion that relates to business use, and only if your VAT scheme allows it. You must be able to prove business usage.
If you're on the Flat Rate Scheme, VAT on services like mobile bills usually can’t be reclaimed. But you might still be able to reclaim VAT on capital assets costing more than £2,000 – though few phones hit that threshold.
Record Keeping: What to Save
You’ll need to keep copies of your mobile phone contract (in the company name), monthly bills or usage estimates, receipts for accessories, and notes explaining any irregularities. These documents should clearly show that the purchases were made by and for the company.
Digital records are perfectly acceptable, as long as someone else could understand your reasoning. As with all tax records, hold onto these for at least six years.
P11D: Do I Need to Worry About This?
If the mobile phone contract is in the company’s name, paid from the business bank account, and you’re only using it minimally for personal reasons, there’s usually nothing extra to report. But if your company pays for a phone or contract that’s in your personal name, HMRC may see that as a "benefit" - a perk you’re receiving on top of your salary. When that happens, it normally needs to be reported and taxed.
Right now, those kinds of perks are reported on a form called a P11D. But from April 2026, that process is changing - everything will need to go through payroll instead. So clear records and correct setup from the start will help you avoid any surprises.
Where to Post Mobile Costs in Your Accounting Software
When recording mobile costs, most accounting software will offer categories such as "Computer and Telephone Costs" or "Telephone & Internet". Either is fine – just be consistent year after year.
If you’ve bought a high-value handset in the company’s name and paid from the business account, it may be recorded under "Fixed Assets", especially if you're claiming it through the Annual Investment Allowance (AIA).
Quick Recap
- Put mobile contracts in your company’s name.
- Pay from the business bank account, not personal funds.
- Keep clear records to show business use.
- If using a personal phone, only claim the business portion.
- Treat high-cost handsets as assets, not expenses.
- Stick to one category in your accounting software.
- Keep all supporting documents for six years.
Above all, be consistent and keep your documentation in order.
Next Steps
Still unsure what suits your setup? Don’t wing it.
Call Blue Rocket Accounting to discuss setting up your company phone the tax-smart way.
Wan To Learn More About Business Expenses?
- Can You Claim Golf as a Business Expense? [Free Guide Inside] | Blue Rocket
- Download 21 Of The Most Commonly Forgotten Business Expenses in Construction | Blue Rocket
- 22 Of The Most Forgotten About Expenses For Property Businesses | Blue Rocket
