Millions of individuals who have been required to work remotely will lose the opportunity to claim tax relief starting in April 2026.
Currently, individuals can seek tax relief from HMRC for additional household expenses incurred while working from home, such as energy or broadband, if their workplace lacks a designated office space.
In the UK, the work from home allowance stands at a fixed rate of £6 per week. It is important to note that individuals are not eligible for work from home tax relief if they opt to work remotely.
During the COVID-19 pandemic, the policy was different as anyone working from home for even a single day could claim tax relief.
Subsequently, in 2022, the rules were updated to disallow tax relief claims for those choosing to work from home part-time due to employers offering hybrid work arrangements.
Chancellor Rachel Reeves announced in the Budget 2025 that the work from home tax relief would be discontinued for all employees starting April this year.
Nevertheless, employers retain the option to provide financial assistance to employees for home-working expenditures without incurring tax implications. Additionally, the Chancellor disclosed an extension of the freeze on tax thresholds for an additional three years.
The freeze on the income tax personal allowance at £12,570, initially set until April 2028, will now persist until the conclusion of the 2030/31 fiscal year.
Termed as fiscal drag, the freezing of tax brackets gradually pushes more individuals into higher tax brackets as their incomes rise. This mechanism is also referred to as a stealth tax, allowing the government to increase tax revenue without adjusting tax rates.
The Office for Budget Responsibility (OBR) estimates that the freeze in tax thresholds will lead to an increase in the number of basic-rate, higher-rate, and additional-rate taxpayers in the upcoming years.
The personal allowance signifies the threshold before individuals commence paying income tax. Income above this threshold incurs a 20% basic rate of income tax, while the 40% rate applies to earnings exceeding £50,270, and the 45% rate triggers for incomes surpassing £125,140.
Moreover, the threshold for National Insurance contributions initiation is set at £12,570, with an 8% contribution rate for earnings at this level, followed by a 2% rate for incomes exceeding £50,270.