Claiming Mobile Phone Expenses When Self Employed

"Can I claim my smartphone as an expense?" is a simple, but a common question for first-time contractors.

That's because HMRC's expenses rules can be confusing, and while you want to be sure that you're running your business as tax-efficiently as possible, it's just as important to be in the good books of HMRC.

We've put together a short guide so you can get a quick overview of the basics. If there are any areas you're unsure about, you may check in with our Contractor accountants at GoForma so you can be sure that you're claiming your limited company expenses correctly.

According to HMRC, a company can provide staff with one mobile phone for business use.

As such, you're not required to report to HMRC, or make tax or National Insurance deductions if you're using one mobile phone or SIM card, and the phone contract is between your limited company and the phone supplier.

If you're using more than one mobile phone, one of the phones will be tax-free, but the remaining mobile phones will be considered a benefit in kind, and taxed accordingly. 

Both conditions need to apply for the exemption to be valid.

Keep in mind that the contract must be made in your company's name, and not in your name as the contractor. The exemption isn't valid if you're only just adding your company name and address to the monthly invoice.  

What to Claim Under Mobile Phone Expenses? 

• Expenses relating to the purchase of the mobile phone: This includes the cost of the mobile phone, contract and call costs. 
• Additional call costs: This can be charged if you obtain an itemised bill. If you've used up your inclusive minutes, and the additional call costs incurred are for both business and personal calls, the costs for your business calls can be claimed as an expense.
• Pay as you go (PAYG) mobile: These are considered marginal costs, and can be claimed as an expense.
• VAT: If you're VAT registered, you may claim the VAT portion related to your mobile phone expenses.

If your mobile phone purchase and the contract is made in your name, you won't be able to claim the cost of the mobile phone or the monthly tariff.

This also applies if you've purchased a PAYG mobile.

The following will apply: 

• The costs incurred for business calls made using your personal mobile can be claimed as an expense. This can be charged if you receive an itemised bill. You're also able to reclaim the VAT element of the business calls. 
• If your personal phone bills are paid for by your company, you're required to pay a benefit in kind charge on the total bill. Your company will also pay Class 1 National Insurance Contributions on the total bill (after the costs incurred for business calls have been deducted). 

Yes, you can claim mobile phone expenses if you use your mobile phone for both business and personal purposes. However, it's important to note that you can only claim the portion of the expenses that directly relates to your business use. Here are some key points to consider:

1. Proportionate Claim: Determine the percentage of your mobile phone use that is business-related versus personal. For example, if 60% of your phone usage is for business and 40% for personal use, you can claim 60% of the total expenses.
2. Detailed Records: Keep detailed records of your phone usage, highlighting the business-related activities. This documentation is crucial in case of any audits or inquiries from HMRC.
3. Fair and Justifiable Allocation: Ensure that your allocation of expenses is fair and justifiable. Avoid making claims that seem unreasonable or excessive, as this could raise questions during an audit.
4. Separate Bills or Usage Patterns: If possible, consider having a separate business mobile phone or maintaining distinct usage patterns for business and personal activities. This can simplify the process of determining the business-related expenses.
5. Consult with a Tax Professional: If you are unsure about the proportion to claim or have specific questions related to your situation, it's advisable to consult with contractor accountants. They can provide personalized advice based on your individual circumstances.

To book a call with one of our certified accountants, you can visit our calendar to book a FREE consultation here.

‍