Mobile Phone Tax UK 2026/27: Employer Phones and SIMs

For 2026/27, one mobile phone or SIM provided by an employer can usually be tax-free if the employer contracts with the supplier and provides only one phone or SIM to the employee. HMRC's exemption can cover the phone, line rental and private use of that phone.

That does not make every work-phone arrangement exempt. Salary sacrifice, a second phone, a cash allowance, an employee-owned phone or a contract arranged by the employee can follow different rules.

Is an employer-provided mobile phone tax-free?

The usual exemption applies when both of these conditions are met:

1. the employer provides the employee with only one mobile phone or SIM card; and
2. the phone contract is between the employer and the supplier.

When the conditions are met, the employer does not normally need to report the benefit to HMRC or deduct and pay tax and National Insurance on the phone. The exemption can include the line rental and private calls on that employer-provided phone.

The contract condition matters. An employer paying money to an employee is not automatically the same as an employer providing a phone. Check the supplier contract, the ownership or responsibility for the handset and how the amount appears in payroll.

What counts as one phone?

One exempt phone is a limit per employee, not a limit per household or per employer department. HMRC treats a second phone as a separate benefit rather than extending the one-phone exemption to every device.

Two connections can sometimes relate to the same number, such as a handset and a hands-free connection in a car. Two different numbers generally represent two mobile phones. The exact equipment and contract arrangement should be checked where there are multiple SIMs or devices.

What if the phone is part of salary sacrifice?

HMRC's mobile-phone exemption does not apply where the phone is provided as part of a salary sacrifice arrangement. The fact that the item is a mobile phone does not override the salary-sacrifice rule.

The employer should identify the arrangement before payroll is run. A salary reduction in exchange for a phone is different from an employer providing a phone under an ordinary employment benefit policy. If the arrangement is taxable, the employer must use the relevant reporting and payroll process rather than treating it as the standard exempt phone.

Do not assume that calling a package a “technology benefit” or “flexible benefit” makes it exempt. The legal form of the arrangement and the supplier contract still matter.

What if the employee arranges the phone?

If the employee arranges the phone contract and the employer pays the supplier, HMRC's reporting guidance treats that differently from an employer-held contract. The cost may need to be reported on form P11D, and the employer may have National Insurance obligations.

The payroll team should check who is the customer under the contract, who owns or controls the handset and whether the payment is a reimbursement of the employee's personal bill. A direct payment to a supplier does not by itself prove that the employer provided the phone for exemption purposes.

What if I use my own phone for work?

If you use your own phone and the employer reimburses you, the treatment depends on what is reimbursed.

Monthly tariff

HMRC says tax and National Insurance may be due when the employer reimburses the cost of an employee's monthly phone tariff, or private calls above the tariff limit. This is separate from the exemption for one employer-provided phone.

Business calls above the tariff limit

Where the employee's own phone has a monthly tariff, business calls above the tariff limit can be reimbursed without tax and National Insurance when the conditions for business-use reimbursement are met. Private calls are not treated in the same way.

Pay-as-you-go business calls

Reimbursement of business calls on a pay-as-you-go mobile can be made without tax and National Insurance under HMRC's guidance. Keep a record that shows the business calls and the amount reimbursed.

The evidence should distinguish business calls from private use. A flat monthly amount that does not identify the business cost may not receive the same treatment.

Does the employer pay tax on the phone?

For an exempt employer-provided phone, the employer normally has no benefit to report and no tax or National Insurance deduction for the employee's use of that phone. If an exemption does not apply, the employer may need to report the benefit or process the payment through payroll, depending on the arrangement.

The reporting route is not a decision the employee should reverse-engineer from the net payslip. Ask the employer whether the phone is being treated as an exempt phone, a salary-sacrifice benefit, a taxable asset or a reimbursement of a personal contract.

Use the UK Salary Calculator→ to model the effect of a taxable benefit or cash allowance on an indicative net-pay scenario. It does not decide whether the mobile-phone exemption applies.

Employer checklist

Frequently Asked Questions

Mobile devices: ownership, cash and private use

Document whether the employer owns the handset, pays the network contract, supplies one device or several, and permits private use. A qualifying employer-provided phone is a different arrangement from a cash allowance or reimbursement. Do not apply the device treatment automatically to broadband, accessories, a personal handset or a payment made directly to the employee.

Keep invoices, the device register, the business-use policy, employee contributions and any transfer or disposal record. If the device is replaced or employment ends, record what happened to the old equipment. Payroll should reconcile any taxable cash allowance and year-end reporting to the underlying contract rather than relying on a generic “phone” code.

Review the arrangement when the provider changes, a salary-sacrifice agreement starts, the employee works abroad or private use becomes unrestricted. The facts and the tax year both matter.

Cash allowances need separate payroll treatment from employer-provided equipment.

A business-use policy should state who owns the device and what happens to it when employment ends; that evidence supports the payroll treatment.

Mobile-phone and device evidence

Employers should record who owns the handset, who contracts with the network, whether the device is provided mainly for work, and whether more than one device is supplied. A company-paid phone and a cash allowance are not interchangeable: transferring cash to the employee can produce a different tax result from providing a qualifying employer-owned device.

Keep the contract, invoices, business-use policy and any employee contribution. If the device is sold, transferred, replaced or used under a salary-sacrifice arrangement, document the date and consideration. Private use, roaming, broadband and equipment provided with the phone may need separate review. Do not assume that a tax treatment for a handset automatically covers every accessory or cash reimbursement.

Payroll should reconcile the benefit or exemption with the employee's tax code and year-end records. Employees should check whether a cash allowance has been included in taxable pay and should not simply remove it from a return because the underlying phone is used for work. Review the arrangement when the employer changes provider or the employee leaves.

Device changes, leavers and multiple users

Review the treatment when a handset is replaced, a number is moved between contracts, a second SIM is issued or a device is handed to another employee. Record the old and new supplier contracts, the effective dates, the number of devices and who owns each handset. The one-phone exemption is assessed against the actual arrangement, not just the employer's written policy title.

When an employee leaves, the employer should collect or dispose of an employer-owned phone under a documented process. If the employee keeps the handset, buys it at a discount or receives a cash settlement, check the relevant benefit and asset rules. A device that was exempt while supplied for employment does not automatically remain exempt after ownership changes. Keep the invoice, market-value evidence, consideration and payroll treatment together.

A family member's use also needs care. Private use of the employee's one qualifying employer phone can remain within the exemption, but providing a separate phone or SIM to a non-employee is a different arrangement. Do not add household devices to the employee's exempt-phone count without checking the contract, user and reason for provision.

Reimbursements and payroll corrections

For an employee-owned phone, separate the tariff, handset cost, business calls, private calls, roaming and accessories. A business-call reimbursement supported by records is not the same as paying the personal monthly contract. The employer should state the evidence required, the calculation period and the date from which a reimbursement is approved. A flat amount that does not reconcile to business use may need to be treated as pay or a reportable benefit.

If payroll later finds that a reimbursement was classified incorrectly, preserve the original payment and correct the affected period through the employer's process. Record whether the correction changes Income Tax, National Insurance, P11D reporting or future payments. The employee should not amend a tax return by removing a payment without checking the corrected payroll information. Keep the phone bill, business-call schedule, correspondence and corrected payslip together.

Security and evidence

Tax evidence should not require collecting the content of private messages or personal call details. A business-use policy, contract, itemised invoice, number of devices, reimbursement calculation and approval record may be enough for the payroll review. Limit access to the records and remove personal data that is not needed. When a device is returned, confirm that company accounts and data are removed without destroying the tax evidence.

Before approving a new arrangement, ask five questions: who contracts with the supplier, how many phones or SIMs are supplied, who owns the handset, whether salary sacrifice or cash is involved, and how private or business use will be evidenced. Save the answers with the payroll decision. This prevents a standard one-phone rule being copied to a second device, personal tariff or flexible-benefit package.

For related employee-benefit rules, see Private Medical Insurance Tax UK 2026/27 and Workplace Parking Tax UK 2026/27.

Official sources

• HMRC — Mobile phones: what is exempt — one-phone exemption and conditions.
• HMRC — Mobile phones: what to report and pay — taxable and reimbursed arrangements.
• HMRC Employment Income Manual — mobile phones — detailed mobile-phone treatment.
• HMRC Employment Income Manual — hands-free mobile telephone kit — related equipment context.

This guide is general educational information for UK employer mobile phones and SIMs in 2026/27. The supplier contract, device count, ownership, salary-sacrifice terms, reimbursement evidence and payroll treatment control the outcome. It is not a P11D determination or personal tax advice.