Millions of individuals compelled to work remotely will lose the option to claim tax relief starting in April 2026. Currently, workers can seek tax relief from HMRC for extra household expenses related to remote work, such as utilities and internet, if their workplace lacks a designated office space. The UK’s work from home allowance stands at a fixed rate of £6 per week, with the stipulation that individuals who voluntarily choose to work remotely do not qualify for this tax relief.
During the pandemic, the rules were temporarily altered, allowing anyone who worked from home, even for a single day, to claim tax relief. However, in 2022, the regulations were updated to exclude individuals who opt for hybrid working arrangements from claiming tax relief for home office expenses.
Chancellor Rachel Reeves announced in Budget 2025 the discontinuation of work from home tax relief for all workers starting in April. Nonetheless, employers can still provide financial assistance to employees for work-from-home costs without facing taxation. Additionally, the freeze on tax thresholds will be extended for another three years, affecting the income tax personal allowance, which was slated to remain static until April 2028 but will now be frozen until the end of the 2030/31 fiscal year.
This freezing of tax brackets, termed fiscal drag, gradually pushes more individuals into higher tax brackets as their incomes rise. Described as a stealth tax, this mechanism enables the government to increase tax revenue without officially raising tax rates. Projections by the Office for Budget Responsibility indicate that the freeze in tax thresholds will lead to an increase in the number of basic-rate, higher-rate, and additional-rate income tax payers by 2029/30.
The personal allowance denotes the earnings threshold before tax obligations commence. Individuals are subject to a 20% income tax rate on income exceeding this threshold, with a higher rate of 40% applicable to earnings above £50,270, and an additional rate of 45% triggered when earnings surpass £125,140. The National Insurance payment threshold is also set at £12,570, with an 8% contribution rate on income exceeding this amount, followed by a 2% rate on earnings over £50,270.