Mobile Phone Expenses for the Self-Employed: What You Can Claim
Self-employed people in the UK can claim the business part of their mobile phone costs as an allowable expense. A phone used only for work can be claimed in full. A phone used for both work and private life can be claimed in proportion to its business use. Work clothes are treated differently: HMRC allows protective clothing and specialist uniforms, but not everyday clothing.
TL;DR
- Phone bills count as office costs. HMRC lists phone bills among the costs a self-employed person can claim.
- A mixed-use phone is claimed by business share only. If bills total £200 and £70 relates to business calls, the claim is £70.
- The £1,000 trading allowance and expense claims cannot be combined. A person who uses the allowance cannot also claim expenses.
- Everyday clothing is not allowable, even if it is only worn for work. Protective clothing, specialist clothing and qualifying uniforms are allowable.
- A short record of how the business share was worked out supports the claim if HMRC asks.
Table of Contents
- What HMRC says about phone costs
- Working out the business share
- A phone used only for business
- Buying the handset
- The trading allowance and phone costs
- Records that support a phone claim
- Phone costs under quarterly reporting
- Work clothes and tax
- Our perspective
- Keeping phone and clothing records with Ledgery
- FAQ
- Sources
What HMRC says about phone costs
HMRC’s guidance on expenses if you are self-employed says that sole traders and individuals in a business partnership can deduct allowable business expenses from their turnover to work out taxable profit. Office costs are one of the listed categories, and phone bills are named as an example of an office cost.
The cost of a business phone therefore reduces taxable profit. It does not reduce tax pound for pound. The saving depends on the rate of tax and National Insurance that applies to the profit, so the benefit of a £70 claim is a fraction of £70.
The main condition is that the expense is incurred for the business. Costs that serve a private purpose are not allowable. When one phone serves both purposes, the cost has to be split.
The claim covers the running costs of the phone. These normally include:
- the monthly plan or line rental
- call, text and data charges
- voicemail and similar services that are part of the contract
- phone insurance, where it is part of the business cost
The handset itself is treated separately and is covered further down.
Working out the business share
HMRC gives a simple example on the same page. If annual mobile bills total £200, made up of £130 of personal calls and £70 of business calls, the business expense is £70.
The calculation has three steps:
- Add up the total cost of the phone for the tax year.
- Estimate the share that relates to business use.
- Multiply the total by that share and claim the result.
A person who uses the phone about 60% for business and pays £600 a year in total would claim £360. A person who uses it about 25% for business and pays £480 would claim £120.
How to estimate the share
There is no fixed HMRC percentage for splitting phone and internet costs. ByteStart’s guide to phone and internet expenses for sole traders says the method used must be justifiable if HMRC asks. It also says HMRC is generally not concerned about the difference between, for example, 53% and 57%. The concern is whether the claim looks fair and not inflated.
Common ways to reach a reasonable figure include:
- Itemised bills. Where the provider lists calls and texts, business calls can be identified and counted.
- A sample period. Business and private use is logged for a few typical weeks, and the result is applied to the year.
- Time or call counts. A person who spends most weekday working hours on client calls can base the share on this pattern.
With unlimited calls and data plans, a precise split is harder. The same ByteStart article says the safest approach is to apply a reasonable percentage, keep a note of how it was reached, and avoid rounding everything up to 100%, unless there is a separate business-only contract.
Where claims go wrong
The same source points to the extremes as the main risk. Examples are claiming 100% of a household broadband package that serves the whole family, or writing off the full cost of a top-end smartphone that is partly used for personal calls. A claim that matches real use is the most straightforward to defend.
Paying the bill from a business bank account does not change the rule. The business share is still the only part that can be claimed. A separate account makes records tidier, and Ledgery’s article on separate bank accounts for sole traders covers how that works.
A phone used only for business
Where a phone is used only for business, the whole running cost is a business expense. This usually means a second handset and a separate contract that is never used for private calls, messages or apps.
A second line is a clean way to keep records. The monthly bill is simple to treat, and there is no apportionment to explain. It only works if the phone really is used for business alone. A business-only phone that is regularly used for family calls is a mixed-use phone, and the claim should reflect that.
HMRC’s guidance on working from home follows the same logic for household costs. A proportion of costs such as heating, electricity, and internet and telephone use may be claimed, using a reasonable method of dividing the costs.
Buying the handset
The handset is a one-off purchase and is usually treated differently from the monthly bill. The service charge is a revenue expense. The device itself is generally a capital item, which is normally claimed through capital allowances rather than as a running cost. Some people on the cash basis can deduct the cost of a phone as an ordinary expense instead. The accounting basis in use decides which route applies, and Ledgery’s guide to cash versus accruals for sole traders explains the difference.
The same business-share rule applies to the handset. A phone used half for business supports a claim for half of its cost. Where a contract bundles the handset and the service into one monthly payment, the bill is best treated as a whole and the business share applied to it. An accountant or HMRC’s own guidance can confirm the correct treatment for a particular contract.
A handset bought before the business started may fall under pre-trading costs. Ledgery’s guide to pre-trading expenses sets out what can be claimed for items bought before the first day of trading.
The trading allowance and phone costs
HMRC offers a £1,000 tax-free trading allowance for small amounts of self-employed income. Its guidance states that a person who uses the trading allowance cannot claim expenses. The two options are alternatives.
This matters for anyone with low turnover and a large phone bill. For turnover under the allowance, the allowance may leave no tax to pay on that income without any expense claim. A person whose real business costs, phone included, are higher than the allowance may be better off claiming expenses. The better route depends on the actual figures, and either way the choice applies to the whole tax year, not to individual costs.
Records that support a phone claim
HMRC can ask how a claim was calculated. A short, consistent record is enough for most situations. Useful items to keep are:
- the contract or monthly bills, in the name of the person claiming
- itemised call and data records, where the provider supplies them
- a note of the method used, such as a sample month and the percentage it gave
- the date of any change in use, for example when a second phone replaced the first
Records should be kept for several years after the tax return is filed. HMRC’s guidance on record keeping sets the exact period, and it is worth checking the current wording on GOV.UK.
A photo of each bill taken when it arrives is simpler than searching for it months later. Ledgery’s article on OCR for receipts describes how scanned receipts and bills turn into usable records.
Phone costs under quarterly reporting
Under Making Tax Digital for Income Tax, self-employed people and landlords above the income threshold send HMRC updates every quarter, instead of one annual summary. Expenses such as phone costs are therefore sorted into categories throughout the year. The monthly bill is usually reported under office or phone costs, and the business share is the figure that goes in.
Setting the business percentage once at the start of the year and applying it each month keeps the quarterly figures consistent. If use changes, for example after taking on a new client, the percentage can be revised from that date and the reason noted.
Ledgery’s guide to personal and business expenses covers the wider line between the two for sole traders.
Work clothes and tax
The other query that often comes with phone costs is clothing. The rule here is stricter than for phones.
HMRC’s page on clothing expenses for the self-employed says everyday clothing cannot be claimed. Suits, shirts, dresses and ordinary shoes are named as examples, and this holds even when they are worn only for work.
HMRC says a self-employed person can claim the cost of buying, cleaning or repairing:
- protective clothing needed for the job
- clothing that protects everyday clothes while working, if it is used only for work
- specialist clothing or uniforms that are not everyday clothing
- costumes, where they qualify
In practice, steel-toe boots, hi-vis jackets, overalls, hard hats, gloves and safety glasses fit these categories. Plain jeans, a jumper or a business suit do not.
Why everyday clothing is excluded
HMRC’s Business Income Manual entry BIM37910 explains the reason. Expenditure on ordinary clothing worn by a trader in the course of the trade should be disallowed, even where a professional body requires a particular standard of dress. This follows the House of Lords ruling in Mallalieu v Drummond. The test is whether the clothing might suitably be worn as part of an everyday wardrobe. It does not matter whether the person actually wears it outside work.
A branded item can fall on the allowable side, since a permanent logo takes a garment out of the everyday category. Cleaning follows the same rule as buying: laundry for allowable protective clothing can be claimed, and laundry for ordinary clothes cannot.
Our perspective
Phone costs are one of the most common small claims for sole traders and landlords, and one of the most often missed. The rule is not complicated. The difficulty is keeping a record of the business share across twelve months and, now, four quarterly updates.
We built Ledgery so that receipts, bills and expenses are captured as they arise. Scanning a receipt turns it into a stored record. Expenses are grouped for quarterly HMRC updates, and deadline alerts reduce the risk of missing a submission. Because bookkeeping, receipt scanning, Open Banking feeds and filing sit in one platform, the phone bill, the handset receipt and the protective boots all end up in the same place.
The filing stays under the user’s control, and accountants can be given access to review the figures. We think a claim is easiest to defend when the evidence was collected at the time, and that is the problem the platform is designed to solve.
The Ledgery Team
Keeping phone and clothing records with Ledgery
Ledgery is income tax software for UK self-employed people and property owners. A photo of a phone bill, a handset receipt or a workwear purchase is scanned, stored and organised into the quarterly updates for HMRC. The first quarter is free, and the Simple, Grow and Pro plans are described on the Ledgery site.
The platform supports sole trader and property income. It also includes invoice creation, deadline reminders and export of records.
FAQ
Can a sole trader claim the whole phone bill?
Only if the phone is used solely for business. When it is also used privately, only the business share can be claimed. HMRC’s example is annual bills of £200 with £70 of business calls, which gives a £70 claim.
Is there a set percentage HMRC accepts for a mixed-use phone?
No fixed percentage is published. The share should be fair, reasonable and explainable. A note of how it was worked out, such as a sample month of itemised calls, is the usual support.
Can the phone be claimed if the trading allowance is used?
No. HMRC states that a person using the £1,000 trading allowance cannot claim expenses. The allowance and expense claims are alternatives for the same tax year.
Are work clothes tax deductible for the self-employed?
Some are. Protective clothing, specialist clothing and qualifying uniforms can be claimed. Everyday clothing such as suits, shirts and ordinary shoes cannot, even if it is worn only at work.
Is a phone contract in a personal name still claimable?
Yes, for the business share. The contract holder does not decide the claim. Business use of the phone does, and the claim should cover that part only.
Sources
- Expenses if you’re self-employed: Overview, GOV.UK
- Expenses if you’re self-employed: Clothing expenses, GOV.UK
- BIM37910, HMRC Business Income Manual
- Phone and internet expenses for sole traders, ByteStart
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