The importance of claiming phone and internet expenses correctly
For digital marketing agency owners, phone and internet are not just utilities—they are the lifeblood of your business. From client video calls and social media management to analytics reporting and email campaigns, these tools are essential. However, many owners are unsure about exactly what they can claim, leading to either missed deductions or potential compliance issues with HMRC. Understanding what digital marketing agency owners can claim for phone and internet is a fundamental aspect of effective tax planning. Getting it right can save you thousands of pounds annually, while getting it wrong can trigger an enquiry. This guide breaks down the HMRC rules and provides a clear framework for making accurate, defensible claims.
The core principle from HMRC is that you can only claim the business proportion of any expense. This is particularly relevant for digital marketing agency owners, whose work often blurs the line between professional and personal device usage. The key is to establish a robust and consistent method for apportioning costs. This is where the question of what digital marketing agency owners can claim for phone and internet becomes a matter of record-keeping and calculation, not guesswork. Using a dedicated tax planning platform can automate this process, tracking usage and applying the correct percentages to your tax return.
Understanding the different types of claims
HMRC recognises several scenarios for claiming phone and internet costs, each with its own evidence requirements. The most straightforward claim is for a contract that is used exclusively for business. If you have a dedicated mobile phone and broadband line that are never used for personal purposes, you can claim 100% of the cost. This is often the cleanest approach for a limited company, where the company can pay the bill directly.
However, the reality for most small agency owners is a single contract used for both business and personal purposes. This is the most common situation when considering what digital marketing agency owners can claim for phone and internet. In this case, you must make a fair and reasonable apportionment. You cannot simply claim the entire bill. HMRC will expect you to demonstrate how you arrived at the business percentage. Common methods include:
- Analysing itemised bills to identify business calls and data usage.
- Keeping a mileage-style log of usage over a representative period (e.g., one month).
- Using a flat-rate percentage based on a reasonable estimate of business use.
For a digital marketing agency, where remote work and online communication are standard, a business use percentage of 60-80% for a mobile phone and 70-90% for home broadband is often justifiable, provided you can explain the basis for your claim.
Calculating your claim with real numbers
Let's put some 2024/25 numbers to the test. Imagine your monthly costs are £40 for a mobile phone contract and £35 for home broadband. If you determine your business use is 70% for the phone and 80% for the internet, your annual claim would be:
- Mobile Phone: (£40 x 12 months) x 70% = £336 claimable expense
- Home Broadband: (£35 x 12 months) x 80% = £336 claimable expense
This totals £672 in deductible expenses. If you are a sole trader paying income tax at the 40% higher rate, this claim could save you £268.80 in tax (£672 x 40%). For a limited company paying the 25% main rate of Corporation Tax (on profits over £250,000), the saving would be £168. This clearly shows why understanding what digital marketing agency owners can claim for phone and internet is so valuable. Manually tracking this can be tedious, which is why our tax calculator feature is designed to handle these apportionments automatically, giving you real-time tax calculations.
Handling handsets, hardware, and capital allowances
The rules extend beyond monthly bills. If you purchase a smartphone, laptop, or router for your business, you can also claim tax relief. For sole traders and partnerships, these are typically treated as capital allowances. The Annual Investment Allowance (AIA) for 2024/25 is £1 million, meaning you can deduct the full cost of most equipment (like a new £800 smartphone) from your profits before tax. If the item has significant personal use, you must again apportion the cost.
For limited companies, the company can purchase the asset directly. If there is any personal use by the director or an employee, this may give rise to a Benefit-in-Kind (BIK) charge, which must be reported on a P11D form. This is another critical layer to the question of what digital marketing agency owners can claim for phone and internet. Properly accounting for the asset and its usage is essential for full HMRC compliance.
Best practices for record-keeping and evidence
If HMRC ever enquires into your tax return, your claims for phone and internet will need to be substantiated. "Because it seemed about right" is not a sufficient defence. You need contemporaneous evidence. Best practices include:
- Keeping all bills and invoices for at least 6 years.
- Maintaining a usage log for a sample period to establish your business percentage.
- Using business banking to pay for contracts to create a clear audit trail.
- Documenting your apportionment method in your accounting records.
This is precisely the kind of administrative burden that modern technology alleviates. A comprehensive tax planning software can store digital copies of your bills, help you track usage, and permanently record the methodology for your claims, making tax season far less stressful.
Using technology to simplify your expense claims
Manually calculating what digital marketing agency owners can claim for phone and internet is time-consuming and prone to error. This is where technology transforms the process. A sophisticated tax planning platform allows you to input your monthly contract costs and set a custom business-use percentage. The software then automatically calculates the deductible portion for each tax year and integrates it directly into your tax computation.
This approach provides consistency and accuracy. It also enables powerful tax scenario planning. You can model different apportionment percentages to see the impact on your tax liability, ensuring you are claiming the maximum legitimate amount without stepping over the line. For a busy agency owner, this automated approach to understanding what you can claim for phone and internet is not just a convenience—it's a strategic tool for optimizing your tax position.
Conclusion: Claim with confidence
So, what can digital marketing agency owners claim for phone and internet? The answer is: a significant portion of these essential costs, provided you have a logical and documented method for separating business from personal use. By moving away from rough estimates and adopting a structured, evidence-based approach, you can ensure you are not overpaying your tax. Leveraging a dedicated tax planning platform removes the guesswork and administrative headache, allowing you to focus on what you do best—growing your digital marketing agency—with the confidence that your tax affairs are handled efficiently and correctly.
