Company Mobile Phone vs Personal Phone Reimbursement UK 2026
A subtle payroll distinction with a big tax consequence: providing an employee a phone under a contract in the company's name is entirely tax-free, while reimbursing an employee's own personal phone bill is normally taxed as earnings. Here is the difference for 2026/27.
The key distinction: who holds the contract?
HMRC's exemption for one mobile phone per employee only applies where the employer is the contracting party with the network provider -- the SIM and airtime contract, and typically the handset, are legally the company's, simply made available to the employee.
If instead the phone contract is in the employee's own name and the employer reimburses the monthly bill, this is not covered by the exemption at all -- it is taxed as ordinary earnings through PAYE, with Income Tax and Class 1 National Insurance (both employee and employer) applying to the full reimbursed amount.
Side-by-side: company phone vs reimbursed personal bill
| Feature | Company-provided phone | Reimbursed personal bill |
|---|---|---|
| Contract holder | Employer | Employee |
| Income Tax on employee | None (one phone exempt) | Yes -- taxed as earnings |
| National Insurance | None | Class 1 (employee + employer) |
| P11D entry required | No | n/a -- taxed via payroll instead |
| Limit | One phone per employee | n/a -- fully taxable regardless of amount |
| Admin setup | Company must hold the contract | Simple -- pay via expenses/payroll |
Worked example on a GBP 40/month phone bill
If the company takes out the contract directly (GBP 480/year), the employee receives full use of the phone with zero tax impact -- the entire GBP 480 is deductible for the company and tax-free for the employee.
If instead the employee holds the contract personally and the employer reimburses GBP 480/year through payroll, a basic-rate employee effectively loses 20% Income Tax plus 8% employee NI (28% combined) from the reimbursement, receiving roughly GBP 346 of net value from the same GBP 480 employer cost -- and the employer additionally pays 15% employer NI on top. Simply switching the contract into the company's name from the outset avoids this entirely.