Mobile Phones, Broadband & Tax: What Trade Businesses Can Claim (2026)

The Big One: Limited Company Mobile Phones

If you run your trade through a limited company, there is a specific and generous exemption for mobile phones in the tax legislation. A company can provide one mobile phone to a director or employee with no benefit-in-kind (BIK) charge, even where there is significant private use. The company gets full corporation tax relief on the cost of the handset and the monthly bills, and — if VAT registered — can recover the VAT.

There is one critical condition, and it is the part everyone gets wrong: the contract must be in the company's name. The company must be the customer of the network provider. The phone is provided by the employer to the employee. When that is the case, the exemption for one mobile phone applies and there is nothing to report on a P11D, no Class 1A National Insurance, and no income tax for you personally — regardless of how much you use it for WhatsApping your mates at the weekend.

The Trap: A Phone in the Director's Personal Name

Now the flip side. Suppose the contract is in your personal name — as it is for the vast majority of people, because you signed up for the phone years before you incorporated. The company pays the bill directly to the network, or reimburses you for it. People assume this is fine because "it's a business phone." It is not fine, and the treatment is completely different.

Where the contract is personal and the company settles the bill, HMRC treats this as the company paying a personal liability of the director. That makes it taxable. The full amount the company pays counts as earnings (or a benefit-in-kind), subject to income tax and Class 1 National Insurance. The mobile phone exemption does not apply because the exemption only covers a phone provided by the employer — and a contract in your own name is not provided by the employer.

On the corporation tax side, only the business-call element of a personal-name contract is allowable. With most modern bundled tariffs (unlimited minutes, fixed monthly price) it is very hard to isolate a business-call cost at all, so in practice the deductible amount is often tiny or nil. You end up taxed personally on the whole bill and getting almost no relief for the company. It is genuinely the worst of both worlds.

Company Contract vs Personal Contract — At a Glance

Note: this table is for limited companies. Sole traders are dealt with separately below — there is no benefit-in-kind concept for a sole trader because you and the business are the same legal person.

Why a Second Phone IS a Benefit-in-Kind

The exemption covers one mobile phone per employee. If your company provides you with a second phone — say a personal handset and a dedicated work handset, both on company contracts — the second one falls outside the exemption and becomes a taxable benefit-in-kind. You report it on a P11D, the company pays Class 1A National Insurance on the cash equivalent, and you pay income tax on it through your tax code.

There is a sensible exception: if the second phone is used wholly and exclusively for business with no private use, there is no taxable benefit because there is no private benefit to tax. The catch is the "wholly and exclusively" standard is strict — even occasional private use breaks it. If you genuinely need two phones, the cleanest approach is one personal phone on the exemption and one work-only phone that you never use privately, with usage you can evidence if asked.

Sole Traders: A Different and Simpler World

If you trade as a sole trader (or in a partnership), the benefit-in-kind rules do not apply to you at all — they exist to tax things an employer gives an employee, and you are not your own employee. Instead, you simply claim the business-use proportion of your phone and your bills as an allowable expense against your self-employment profits.

The principle is "wholly and exclusively for the purposes of the trade," but for mixed-use costs HMRC accepts a fair and reasonable apportionment. So if your phone is 70% business and 30% personal, you claim 70% of the line rental, 70% of any call charges, and 70% of the handset cost. You apply the same logic to your home broadband.

Home Broadband: The Rules That Catch People Out

Broadband is where most trade businesses over-claim. The starting question HMRC asks is: would you have this broadband connection anyway? For the overwhelming majority of households the answer is yes — you would have home internet whether or not you ran a business. Because the cost is not incurred because of the trade, you generally cannot claim the whole bill.

What you can claim is the genuinely additional cost caused by business use. If your existing broadband package costs the same whether you use it for business or not — which is normal with unlimited fixed-price packages — then the additional cost is, strictly, nil. In that situation HMRC's position is that there is nothing extra to claim, because the business use did not increase the bill.

In practice many sole traders claim a modest, defensible business proportion of the broadband bill where they genuinely work from home (doing quotes, invoicing, ordering materials, customer email). The key is to be reasonable and consistent. A plumber who spends a few hours a week on admin at home is not running a 50% business broadband line — a small percentage that reflects real usage is defensible; a large one invites questions.

For a limited company the position is tighter. If the company pays a director's home broadband bill, that is normally a taxable benefit-in-kind, because the connection serves the household and there is private use. The only way it escapes a BIK is if the broadband was installed specifically for work, there is genuinely no significant private use, and the company is the contracting party — a rare set of facts for a typical trade business. The safer route for most company directors is to claim broadband through the "use of home" allowance or a reasonable apportionment rather than putting the full household bill through the company.

Mobile Broadband, Dongles and Landlines

A dedicated mobile broadband dongle or data SIM bought purely to get you online on site — a separate device you don't use personally — is much cleaner than home broadband. If it is used wholly for business, it is fully allowable for a sole trader and, for a company on a company contract, fully deductible with no BIK because there is no private benefit. This is often the most tax-efficient way for a company director to fund on-site connectivity without the broadband BIK headache.

A landline follows the same logic as broadband. The line rental of a home landline you would have anyway is not generally claimable; the cost of identifiable business calls is. A separate business landline installed for the trade — or a VoIP business number — is fully allowable because it exists only for the business. If you use a VoIP service (a business number that rings on your mobile), the subscription is a clean, fully deductible business cost.

How to Apportion Mixed-Use Bills Sensibly

When a cost is genuinely part business and part private, HMRC expects a method, not a guess. You don't need a stopwatch, but you do need a basis you could explain in a sentence. Sensible approaches include:

• Call/data analysis: take a representative month's itemised bill or usage report and work out what proportion of calls, texts or data were business. Apply that percentage going forward.
• Time-of-use: if your phone is on all day for work and used personally only in evenings and weekends, a business-weighted split reflects reality.
• Consistency: pick a percentage, document how you arrived at it, and apply it consistently across the year and across line rental, calls and handset.

Whatever method you use, keep the evidence. Save the bills (digital copies are fine), keep a short note of how you calculated the business percentage, and retain it for at least six years. If HMRC ever asks, a one-paragraph explanation backed by a sample bill closes the question quickly. No evidence, and a round-number "80% business" with nothing behind it, is exactly what an enquiry feeds on.

VAT Recovery on the Business Element

If you are VAT registered, you can reclaim the VAT on the business proportion of phone and broadband costs. For a company-contract mobile under the BIK exemption, you can recover VAT on the business-use element of the bills and the handset. For a sole trader, recover VAT on the same business percentage you use for income tax.

Two practical points. First, the VAT invoice should be in the name of the business — another reason a company-name contract matters, since a bill addressed to you personally is not a valid input-VAT document for the company. Second, if you are on the Flat Rate Scheme, you generally cannot reclaim input VAT on these costs separately (they are baked into your flat rate percentage), so the recovery point only applies on standard VAT accounting.

Common Mistakes to Avoid

• Company paying a personal-name phone contract. The single most expensive mistake — it creates a taxable benefit and loses most of the relief. Transfer the contract to the company.
• Putting the whole household broadband bill through the company. Almost always a BIK and rarely justifiable. Use an apportionment or the use-of-home allowance instead.
• Claiming 100% business use of a single phone you obviously use personally. If you have one phone, you use it privately — claim a realistic proportion, not all of it.
• Forgetting the second phone is a benefit. Two company phones means the second one needs reporting unless it is genuinely work-only.
• Reclaiming VAT on a bill addressed to you, not the business. Get the invoice in the business name first.
• No evidence behind the percentage. A defensible split with a sample bill beats a confident guess every time.

Frequently Asked Questions

Can my limited company pay for my mobile phone with no tax?

Yes — for one phone, provided the contract is in the company's name. Then there is no benefit-in-kind even with private use, the cost is fully deductible for corporation tax, and the VAT is recoverable. If the contract is in your personal name, the exemption does not apply and the bill is taxed as earnings.

I'm a sole trader — what proportion of my phone can I claim?

The business-use proportion. Work out a fair percentage based on how you actually use the phone — for example from an itemised bill — and apply it to the line rental, calls and handset cost. Keep a note of how you reached the figure.

Can I claim my home broadband?

Only the genuinely additional cost caused by business use. If you would have the broadband anyway and the bill doesn't change, there is strictly nothing extra to claim. A small, defensible business proportion is usually acceptable for a sole trader who works from home; for a company, paying the full bill is normally a benefit-in-kind.

Is a second company phone taxable?

Yes, unless it is used wholly and exclusively for business. The exemption covers one phone; a second phone with any private use is a reportable benefit-in-kind with Class 1A National Insurance for the company and income tax for you.

Can I reclaim VAT on my phone bill?

If you are VAT registered and not on the Flat Rate Scheme, you can reclaim VAT on the business proportion — provided the invoice is in the business name. That is another reason to hold the contract in the company's name rather than your own.