Tax Free Mobile Phone – FoneTaxSavings4U

On the way to the office (AKA the fun factory) with DB, my car share buddy, she explained that her mobile phone had been destroyed by her six month old little monkey. It doesn’t appear that Nokias are toddler proof tested so the warranty was no good.

Fisher Price Phone

My two year old on the other hand (nicknamed after the Orient great Jabo Ibehre) is a whizz on my iPad. It does amaze me how children who, six months ago, were dribbling into the microphone are capable of using the latest technology. Pinch to zoom seems to be genetically implanted in the womb and is a testament to brilliance of the late great Steve Jobs. I hope that the access to tablets and their ease of use will increase Jabo’s education. I did however discover him watching a gaelic cartoon on BBC iPlayer. I’m not sure how much use learning an additional language will be!

Now I’m a sucker for a new bit of tech and therefore advised DB that the iPhone 5 (probably renamed the new iPhone) will be released shortly. This would mean the iPhone 4S would have a price drop or she could hold on and get a shiny new top of the range handset.

Being a sensible mother of three and not wanting her children to go hungry she opted for the former. But is there a cheaper way to obtain an iPhone 5 using the power of tax relief?

The Tax Bit

It has been possible or an employee to supply its employee with a mobile phone free from income tax and national insurance since 1999. As with all tax reliefs there are conditions attached including:

Only one phone per employee
The contract must be in the name of the employer
The bill must be paid directly by your employer

So if you haven’t already done so go and have a chat with your employer and see if you can swap (salary sacrifice) some of your salary for a mobile phone contract. A higher rate tax payer on a £35 per month contract could save £176 a year.

The above is pretty standard but an interesting point arose recently because HMRC did not previously consider smart phones i.e. blackberries and iPhones to be mobile phones. Instead they were considered computers and therefore taxable. This approach was obviously ridiculous in the 21st century and eventually they came to their senses. This decision not only helps those who want to save tax on a new smart phone such as DB but the decision has a retrospective effect.

This means people previously supplied with either iPhones or blackberries by their employers maybe in the position to obtain a refund from previous years if their employer correctly included the smart phone to their P11D. So if you have suffered tax in the past then you could be subject to a repayment of 40% of these payments. If you want some brownie points bring this to your employers attention as they will be due 13.8% back in class 1A NIC. Which for a number of employees could be a tidy wedge!

So if you are/were supplied with a phone check your tax code and meannrchd! (my son informs me this is good luck in Gaelic….)

By Peter Cross

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