HMRC Mobile Phone Expenses: How to Buy a Mobile Phone through Your Business and Claim VAT (2025)

If you use your mobile for work, you may be missing out on legitimate tax savings. In 2025, more UK business owners than ever are asking how to claim mobile phone expenses correctly, and how to do it without triggering extra tax or VAT issues.

Whether you’re a limited company director, self-employed, or running a small business, understanding HMRC mobile phone expenses can make a big difference to your bottom line. The right approach can help you:

• Claim back tax on your business phone bills
• Reclaim VAT where possible
• Avoid common mistakes that could raise HMRC questions

In this guide, we explain exactly how to buy a mobile phone through your business, what you can claim, and how to stay compliant with HMRC’s latest 2025 guidance.

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Can I Buy a Mobile Phone Through My Business?

Yes, you can. Both limited companies and self-employed professionals can buy a mobile phone through their business, but the tax treatment is slightly different.

If your company pays for a mobile phone and contract directly (and the phone is used for business purposes), it can be treated as a legitimate business expense. This means you can claim tax relief and often reclaim VAT, depending on your setup.

The key is understanding how HMRC defines “business use” and ensuring your phone plan and invoices meet the correct criteria.

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HMRC Mobile Phone Expenses: The Rules Explained

HMRC’s rules on mobile phone expenses depend on how your business is structured. This typically boils down to employees and limited company directors to self-employed and sole traders.

1. Limited Company Directors

If you run a limited company, HMRC allows one mobile phone per employee (including directors) to be provided as a tax-free benefit, provided the following conditions are met:

• The phone contract is in the company’s name, not yours personally.
• The company pays the bill directly.
• The phone is used for business purposes, with only incidental personal use allowed.

Under these conditions, there is no Benefit in Kind (BIK) charge. The company can also reclaim VAT on the purchase and ongoing bills, provided it is VAT-registered.

If you buy additional phones or pay for family members’ phones through the business, those will likely be treated as taxable benefits.

2. Self-Employed and Sole Traders

If you are self-employed, HMRC treats mobile phone expenses differently. Because you and your business are legally the same entity, you must apportion costs between business and personal use.

To stay compliant:

• Keep detailed records of call logs and data use to justify the business portion.
• Only claim the business percentage of your phone bill as a tax-deductible expense.
• You cannot claim VAT back on personal use portions of the bill.

If you purchase a new handset that you use for both personal and business purposes, you can only claim tax relief on the percentage used for business.

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Is There VAT on Mobile Phone Bills?

Yes, mobile phone bills include VAT at the standard rate (currently 20%). However, your ability to reclaim VAT depends on your business structure and how the phone is used.

• Limited companies can generally reclaim VAT on business-related mobile bills, provided the invoices are in the company’s name.
• Self-employed individuals can reclaim VAT only on the proportion used for business, not personal calls or data.

If your business is not VAT-registered, you cannot reclaim VAT, but you can still claim the business cost as an expense against income tax.

VAT on Business Mobiles: How to Avoid Overpaying

Understanding VAT on mobile phone bills is key to claiming the right amount and keeping costs down. In most cases, VAT can be reclaimed on business use, but not on personal calls or contracts in an employee’s name. Knowing what qualifies as a business expense helps you avoid errors and overpayments.

To reclaim VAT:

• The invoice must be in the company’s name.
• The phone must be used mainly for business purposes.
• The contract should not be in an employee’s personal name.

If you are reimbursing employees for using their own mobiles, VAT can only be reclaimed on business-related call charges, not on line rental or personal usage.

Using a business mobile contract rather than personal contracts makes VAT recovery cleaner and easier to justify to HMRC.

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How Much of My Phone Bill Can I Claim on Tax in the UK?

How much you can claim depends on your business type and how the phone is used. HMRC only allows you to expense the part of your bill used for business purposes, not personal calls or data. The rules differ slightly for self-employed workers, sole traders and limited company directors, as shown below.

Business Type	Claimable Portion	Notes
Limited Company	100% (if in company’s name and mainly business use)	No BIK if personal use is minor
Self-Employed	Business-use percentage only	Must keep usage records
Partnerships	Business-use percentage per partner	Each partner claims their share

For example, if you use your phone 70% for business and 30% for personal use, you can claim 70% of your total bill as a deductible expense.

Keeping accurate records and using itemised bills can help support your claim in case of an HMRC review.

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Buying a Phone as a Limited Company Director

As a limited company director, you can buy a mobile phone directly through the company. The process is straightforward:

1. Purchase the handset and contract in the company’s name.
2. Use it primarily for business activities.
3. Keep the invoices and VAT receipts as part of your company accounts.
4. Claim corporation tax relief on the full cost and reclaim VAT if applicable.

This method allows you to enjoy a company-provided phone without triggering extra tax charges, as long as it’s used mainly for work.

However, if the company reimburses you for a phone contract that’s in your own name, HMRC will usually class that as a taxable benefit. To avoid this, make sure all phone-related costs are paid directly by the company.

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Mobile Phones for the Self-Employed: What You Can and Can’t Claim

If you’re self-employed or a freelancer, you can still save on tax through your mobile phone expenses.

You can claim:

• A proportion of your monthly mobile bills based on business use.
• A portion of the handset cost if purchased outright for both personal and business use.
• Accessories like chargers, hands-free kits and cases if used for business.

You cannot claim:

• Costs for personal calls or entertainment.
• Phones or plans paid for family members unless they also work for your business.

Keep receipts, contracts and a record of your business calls. HMRC may ask for evidence of your claims, especially if they appear excessive.

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Best Practice: Separate Business and Personal Use

The simplest way to stay compliant with HMRC rules is to keep business and personal phone use separate. Having a dedicated business device makes it easier to manage costs, claim VAT correctly and prove legitimate use if HMRC ever reviews your accounts.

For limited companies, a phone contract in the company’s name allows you to:

• Reclaim VAT on bills and handset costs
• Avoid Benefit in Kind (BIK) tax charges, provided personal use is minimal
• Keep records clean and compliant

If you are self-employed, separating your mobile use helps you calculate exactly what portion of your bill is business-related. It avoids guesswork and ensures your claims remain fair and defensible.

The easiest way to achieve this without multiple devices is either a dual-SIM phone paired with or dedicated business SIM only contract or virtual number for calls and messages

Both options allow clear separation between business and personal use, without the need for multiple devices.

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Quick Tips for Managing Mobile Phone Expenses

Good record keeping is essential if you want to claim mobile phone expenses confidently and maximise your tax efficiency. Start by keeping all contracts, receipts and invoices organised, ideally with digital backups. This ensures you have everything to hand if HMRC requests evidence of your claims.

To make managing expenses easier:

• Use itemised billing to identify business calls and data use
• Review your claims every few months to ensure they reflect actual use
• Record any changes in business usage, such as taking on new clients or roles
• Ask your accountant to confirm that your approach aligns with current HMRC guidance

If your mobile is used mostly for business, your accountant can help you claim the full eligible allowance. If personal use is significant, adjusting your claims early prevents issues later.

HMRC guidance can change over time, so it is worth checking the latest updates at the start of each tax year. Staying proactive with your records and claims keeps you compliant and ensures you are not missing out on legitimate savings.

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FAQs: HMRC Mobile Phone Expenses (2025)

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Final Thoughts

Understanding HMRC mobile phone expenses can help you reduce your tax bill and make smarter business purchases. Whether you’re a limited company director or self-employed, separating your mobile costs and following the right process ensures compliance and maximum tax efficiency.

For an even simpler solution, consider a business mobile contract that keeps costs transparent and invoices clearly in your company’s name. It’s often the easiest way to stay compliant while keeping your team connected.

Need a new device but unsure what to pick? See our list of the Best Mobile Phones for Business of 2025 now.