Your phone and internet are essential to running the business, so can the company pay for them? Yes, but how the contract is set up decides whether it's tax-free or taxable.
Quick answer
- Mobile phone: one phone per employee (including you) is tax-free, if the contract is in the company's name. Private use doesn't matter.
- Contract in your name, company pays the bill: usually taxable as earnings (through payroll), unless only itemised business calls are reimbursed.
- Home broadband: tax-free if the company provides it mainly for business and private use is incidental. Otherwise only the business share is claimable.
The mobile phone exemption
The law exempts one mobile phone provided by an employer to an employee, including directors, from tax and NI. For the exemption to apply:
- The company must be the contracting party with the network (the contract is in the company's name).
- It's limited to one phone per employee. A second phone is a taxable benefit.
- Smartphones count. Tablets and laptops don't.
Private use doesn't matter. You can use the company phone for personal calls, data and apps without a tax charge.
What about SIM-only deals?
A SIM-only contract in the company's name, used in a company-owned handset, works the same way.
The contract name trap
| Set-up | Tax position |
|---|---|
| Contract in the company's name, company pays | ✅ Tax-free, deductible for the company |
| Contract in your name, company pays the provider directly | ❌ Taxable as earnings (Class 1 NI through payroll) |
| Contract in your name, company reimburses you for the whole bill | ❌ Taxable as earnings |
| Contract in your name, company reimburses itemised business calls only | ✅ Tax-free for those calls (line rental not covered) |
Fix: ask your network to transfer the contract to the company (most do this for a small business account), or start a new company contract when your current one ends.
The handset
If the company buys the handset, it claims capital allowances, normally 100% through the Annual Investment Allowance. If the handset comes bundled with a company contract, the monthly cost is deductible as normal.
Home broadband
Broadband is trickier, because most homes would have it anyway.
| Situation | Tax position |
|---|---|
| Company takes out a new broadband contract at home because you need it for the business, with only incidental private use | ✅ Generally no taxable benefit. Deductible for the company. |
| You already had broadband for personal use, and the company pays or reimburses the whole bill | ⚠️ Taxable benefit / earnings, except for the business proportion |
| Company reimburses the business proportion of your existing broadband | ✅ Deductible. Tax-free if the proportion is reasonable and evidenced. |
If you use a use-of-home licence arrangement, a share of broadband can be included in the calculation instead. See Working from home expenses.
VAT
- Company contract: the company can reclaim VAT on the monthly charge. With significant private use, HMRC may expect an apportionment for calls and data, but line rental VAT is usually fully reclaimable on a business contract.
- Your personal contract: no VAT reclaim, because the invoice isn't addressed to the company.
Worked example
| Company contract | Your contract, company pays | |
|---|---|---|
| Annual cost (incl. VAT) | £480 | £480 |
| VAT reclaimed (if VAT-registered) | £80 | £0 |
| Corporation tax relief (19%) | £76 | ≈ £105 (on £480 + employer NI) |
| Tax and NI on you as earnings (higher rate, 40% + 2%) | £0 | ≈ £202 |
| Employer NI (15%) | £0 | ≈ £72 |
| Total cost to you and the company | ≈ £324 | ≈ £649 |
Illustrative. Assumes the company is VAT-registered and the director is a higher-rate taxpayer.
The same phone costs twice as much when the contract is in your name.
Common mistakes
- Leaving the contract in your personal name.
- Providing a second phone (e.g. a "personal" one), which is taxable.
- Treating a tablet as the exempt mobile phone.
- Claiming full broadband you already had before the business.
- Reclaiming VAT on a personal contract.
Part of our series: Limited company director expenses: the complete 2026/27 guide
Related: Working from home expenses · Trivial benefits
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General information for 2026/27, not personal advice.