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Reimbursing UK Employees for Private Mobile Phone or Broadband Costs

If your UK-based employees are using their own mobile phones or home broadband to support their work, it may feel reasonable to reimburse these costs. However, UK tax rules are strict—and unless these services are provided directly by the employer, reimbursements are not tax-free.

This page explains how the UK tax authority – HM Revenue & Customs (HMRC) views these payments, and how a PAYE Settlement Agreement (PSA) can offer a compliant way to cover the tax and National Insurance (NIC) costs on behalf of your employee.

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The UK Tax Position on Mobile and Broadband Reimbursements

In the UK, if the mobile phone or broadband contract is in the employee’s personal name, and the company reimburses the cost, this is a taxable benefit.

Reimbursed private costs are treated as if you’ve given your employee extra pay:

  • The reimbursement must go through payroll.
  • It is subject to income tax and employee NIC.
  • You, as the employer, must pay employer NIC too.

This applies even if:

  • The reimbursement covers only a portion of the total cost.
  • You’re doing this to avoid the admin of setting up a corporate phone or broadband plan.

Mobile Phones: When Is It Tax-Free?

A mobile phone can only be provided tax-free if:

  • The mobile phone contract is in the employer’s name, and
  • The phone is provided for business use.


This only applies to one phone per employee. If the phone contract is in the employee’s name and you reimburse the cost, it is taxable, except in very limited cases.

Exception: Second Phone, Work-Only Use

The only time a reimbursement may be tax-free when the mobile phone contract is in the employee’s name is:

  • If the employee has a second mobile phone and a separate contract, which is used purely for work purposes.
  • The employee must be able to show there is no private use of the second phone.

This is rare in practice. In most cases, an employee will have a single phone for both personal and business use. In such cases, the entire contract is treated as a mixed-use benefit, and any reimbursement is taxable.

Reimbursing Call Charges Only

Before bundled mobile packages became the norm, it was possible to reimburse the cost of specific work-related calls tax-free. Now, most phone contracts do not itemise individual calls, so it’s difficult to separate business use—meaning tax-free reimbursement is rarely possible today.

Broadband: The UK Rules

If the employee already has home broadband in place and continues using it while working from home, reimbursing any portion of the cost is taxable.

However, if:

  • The employee did not previously have broadband, and
  • It is installed specifically because the job requires it,
    then reimbursement may be tax-free—but only if:
  • There is no significant private use, and
  • The reimbursement is limited to business use.


In practice, HMRC closely scrutinises this, and for most employees working from home using an existing connection, reimbursement will be taxable.

The Solution: Use a PAYE Settlement Agreement (PSA)

A PAYE Settlement Agreement allows your business to:

  • Cover the tax and NIC costs on behalf of the employee.
  • Avoid putting these reimbursements through the payroll.
  • Keep things simple for your UK staff while staying compliant.

This is particularly helpful if you want to:

  • Avoid tax reporting on P11Ds.
  • Ensure your employees aren’t financially penalised for supporting the business from home.
  • Reimburse home working costs without creating a payroll headache.
 

How Türner & Co Can Help

We support overseas businesses to:

  • Review how mobile phone and broadband costs are handled for UK employees.
  • Determine whether a PSA is appropriate for your business.
  • Apply for and manage your PSA with HMRC.
  • Implement compliant processes that keep you in control and avoid surprises.
 

FAQs

Only if the service is contracted and paid for by the employer. If the employee pays the bill and you reimburse them, it is taxable unless handled via a PSA.
Not usually. If the phone is used for both personal and work purposes (as most are), any reimbursement is taxable. A rare exception is if the employee has a second phone and separate contract used solely for business.
No. HMRC will treat this as a taxable benefit. The only exception is where the broadband was installed solely for business use, and the employee did not already have it.
Even then, it’s still taxable unless they have a separate, work-only contract and phone.
A P11D reports the benefit on the employee’s personal tax record, and the employee may owe tax. A PSA shifts the tax burden to the employer—so your employee isn’t impacted.
You apply to HMRC in advance of the tax year. We can manage this process for you and help determine what should be included.
We can help you assess your exposure and correct it—either through payroll or by including it in your next PSA application.

Contact Our Experts

Reimbursing employees for mobile phones or broadband costs—no matter how well-intentioned—can lead to UK tax issues if not handled correctly. A PAYE Settlement Agreement is often the best way to manage this while protecting your team from unexpected tax bills.

Contact us now to explore how we can support your business.

Sarah English

Senior Manager

Head of Direct Taxes

sarah.english@tuerner.com
+44 (0) 1636 526 075

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