We can’t run our businesses without our mobile phones, but are you claiming the right amount from your business?
The rules for claiming the cost of your mobile phone from your business are different depending on whether you are a sole trader or a limited company.
For a sole trader – it’s relatively straight forward.
You can claim a percentage of your phone bill, or new phone, depending on the percentage that you use it for your business. You don’t need to analyse all your calls, but it is a good idea to keep track of your business usage for 2-3 months, and then apply that percentage to the full year. HMRC may ask you one day how you came to the percentage that you did, and you may find it hard to justify that you use your phone 90% for business, when you actually only work one day a week -so just be sensible!
For a limited company, as with most things, it’s more complicated.
If your phone contract is in your personal name, and the company pays the bill, or reimburses you for it, you have a benefit-in-kind – and this should be disclosed on a form called a P11D at the end of each tax year. Both you and the company will have tax to pay on this amount.
The logic behind this, is that with contracts nowadays, we all get so many free minutes and texts etc, that there is actually no additional cost to you for using your phone for business. You would be paying your phone bill anyway, and so getting the company to pay it, is really the same as paying yourself additional money from the company. If you can separate additional business calls, eg they are overseas calls, then you can claim these from the business as a legitimate expense.
If you can put your phone contract in the company name, then HMRC will accept that private use of your “company” phone is minor, and the company can pay the whole bill, without any personal tax problems.
The same rules will apply for broadband costs in your home.
So if you have a limited company, you basically have a choice:
- If your phone contract is in your personal name, don’t put any of the cost through the business (unless you have costs over and above your standard package cost that you can identify as relating to the business – such as overseas calls.)
- Put your contract into the limited company name – and then you can claim the full cost of your monthly bill ( but no prizes for guessing that a business contract is usually more expensive than a private one)
It’s a really common mistake to think that the company can just pay your personal mobile phone bill, as you use it for business, but get it wrong and you could land yourself and the company further unexpected tax bills!
For any further information, please contact Rosie Forsyth at Wilkins & Co.