You are allowed to provide your employees with one tax free mobile phone each. But you have to do it the right way otherwise it could cost you and your employee tax and national insurance.

The tax free mobile phone

• The contract must be between the employer and the mobile phone company.
• There are no reporting requirements
• There is no tax or NI to pay
• Tablets are not included but smartphones are.

Employee’s own phone – employer pays supplier direct

• The contract is between the employee and the phone company
• You have to report on a P11D
• Add the value of the benefit to earnings through the payroll
• Employer pays class 1 NI
• Employee pays NI, but no tax
• No NI is payable if it was acquired for business use only but still have to report

Employee’s own phone – employer reimburses monthly contract

• The contract is between the employee and the phone company
• You reimburse the monthly tariff so this is just earnings.
• Employer pays NI
• Employee pays NI and tax.

Employee’s own phone – pay as you go

• You only reimburse identified business calls
• You must report on a P11D unless you have a dispensation or the employee earns less than £8,500
• There is no tax or NI to pay.