Millions of individuals compelled to work remotely will lose the option to claim tax relief starting April 2026. Currently, HMRC allows individuals to seek tax relief for additional home-working expenses like utilities and internet if their workplace lacks a designated office space. The UK’s work from home allowance stands at a flat rate of £6 per week, but it is not applicable if working from home is a personal choice.
During the pandemic, tax relief was available to anyone working remotely, even for a single day. However, as of 2022, individuals cannot claim tax relief if they opt for hybrid working arrangements offered by their employers. Chancellor Rachel Reeves announced the discontinuation of work from home tax relief in the Budget 2025, effective this April.
Nevertheless, employers can still provide non-taxable assistance to employees for home-working expenses. Additionally, the freeze on tax thresholds has been extended for three more years, affecting the income tax personal allowance, which will now remain fixed until the end of the 2030/31 financial year. This freeze, known as fiscal drag, gradually moves individuals into higher tax brackets as their incomes rise, acting as a form of stealth tax to increase government revenue without altering tax rates directly.
The Office for Budget Responsibility anticipates that the freeze in tax thresholds will lead to a rise in income tax payers across various brackets in the upcoming years. The personal allowance determines the threshold before income tax kicks in, with rates of 20%, 40%, and 45% applicable based on income levels. Similarly, National Insurance contributions commence at £12,570, with rates of 8% on earnings above this threshold and 2% on incomes exceeding £50,270.