How Mobile Phone Benefit in Kind Works for UK Businesses

What is a benefit in kind?

If your company has employees, you can offer them additional benefits outside of the pay packet. The most flexible option is benefit in kind (BIK). These benefits can take many different forms and many give the business and employee tax benefits.

Some BIKs incur National Insurance (NI) or tax charges, but many are tax-free.

Are mobile phones a benefit in kind?

Yes. Mobile phones can be a tax-free benefit in kind if conditions are met. An employer can give an employee a mobile phone without triggering additional tax rules as long as:

• The mobile phone contract is between your company and the supplier
• Your company gives the employee only one mobile or SIM card

If you meet these criteria, then mobile phones are a tax-free benefit. You won’t have to pay any extra tax or alter National Insurance (NI) payments in this case.

How benefit in kind mobile phones work

To make sure you’re not giving yourself more tax obligations, make sure the phone contract is in your company name and stays that way.

The rules for the self employed work a little differently! See our guide to sole trader mobile phone contracts to find out more.

If the phone contract is transferred to the employee, it counts as a transfer of an asset and tax comes into play.

There are a few ways of arranging a benefit in kind mobile phone for your employee. Each method has its own benefits for you. Here’s how it works.

Providing a mobile phone for the employee’s use

If you give your employee a mobile phone for them to use, you don’t have to pay tax or National Insurance. This BIK is excellent for:

• Executive level employees
• Hybrid or remote workers
• To retain talent

If you pay the phone bill on their behalf

If you pay an employee’s business phone bill on their behalf, you have to tell HMRC. It’s called a ‘pecuniary liability’.

In other words, you have to report the BIK on the employee’s P11D. From there, a deduction in NI may be needed.

This method does take a little more paperwork, but works well for:

• Employees of all seniority levels
• Short term or contract employees
• To help cover business costs

iCompario tip: VoIP may reduce your communication budget

For employers with many customer service or call centre workers, using VoIP can help to bring costs down. Using business mobiles and office landlines can quickly get expensive.

VoIP uses the internet, so it’s much cheaper to run and has no hardware to replace. You don’t have to worry about adding minutes to your employees’ phones – all they need is internet.

If you reimburse your employee for their mobile phone

If your employee buys a phone for work but you reimburse them, you have to deduct Class 1 NI and tax through the payroll. This method can work well in niche circumstances.

What mobile phones are benefit in kind?

All basic phones and smartphones can be benefit in kind. Most businesses prefer to have up to date top of the range smartphone models.

Which phone you choose depends on the employee’s situation. If your employee often travels or visits building sites, a sturdier smartphone can be useful.

Otherwise, an iPhone or Samsung Galaxy S is always a popular choice.

How much are business mobiles?

The cost of the phone depends on the contract and the phone. If the contract includes phone insurance, a modern phone model, and has additional benefits, then you do have to pay more.

The cheapest business mobiles tend to have limited data and/or minutes. You could choose a Pay As You Go contract to control your budget or choose a SIM-only plan.

Are SIM-only contracts benefit in kind?

Yes. According to HMRC, SIM-only contracts count as a mobile phone benefit in kind. This is often the cheapest way for you to offer employees a business mobile contract.

Business SIM-only contracts are also more flexible as you’re not locked into using just one phone type for your contracted agreement. You can switch out whenever you’d like.

What if I give an employee two phones?

If you give an employee two or more phones, only one of them is exempt from needing to be reported and taxed. The others count as assets and will affect your tax payments.

Why should I get employees a mobile phone benefit in kind?

Thinking about including mobile phones in your employee perks? You’re not the only one. Discounts, private healthcare, and remote working are all becoming more common.

But mobile phones are beneficial to employees and employers in many ways! They help you get new talent through the door, make your business expense claims more accurate, and can improve security.

1. Attract and keep talent

Making a good benefits package can help your business attract new talent to the field. To get top talent, offering a business smartphone can be the cherry on top of your job role offer compared to a competitor.

2. Ensure accurate business call claims

Every business gets to claim business call expenses, but few do so with high accuracy. The common method of calculating business call times is to make an average. This average is usually based on a few months use.

However, if employees are using their personal phones for business use then calculating this accurately quickly gets complicated.

Having business phones makes calculating your claims much easier! Read our guide on how mobile phone as business expense works to find out more.

3. Improve your mobile security strategy

If employees use their personal phones for business communications, including emails or calls, then they are at higher risk of hacking and spyware.

A business mobile contract can include extra security features and safeguarding to reduce those risks. Many also include mobile phone insurance for even more peace of mind.

How to get business mobile phone benefit in kind

1. Compare offers based on your business needs
2. Choose from a range of mobile phone contracts
3. Give your employees their new business mobiles

But where should you compare? Many sites favour one mobile supplier. We don’t. Compare now and get your quotes in just 30 seconds.