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 additional home-related expenses incurred due 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, but individuals are ineligible for this tax relief if they voluntarily choose to work from home.
During the pandemic, the rules were more lenient, allowing anyone who worked remotely, even for a day, to claim tax relief. However, as of 2022, individuals cannot claim tax relief for choosing to work from home part-time due to hybrid work arrangements offered by their employers.
Chancellor Rachel Reeves announced in Budget 2025 that the work from home tax relief will be discontinued for all workers starting April. Nevertheless, employers can still provide financial assistance to employees for home office expenses without incurring tax implications. Additionally, the freeze on tax thresholds has been extended for another three years, with the income tax personal allowance frozen at £12,570 until the end of the 2030/31 fiscal year.
The practice of freezing tax brackets, termed fiscal drag, gradually pushes more individuals into higher tax brackets as their incomes rise. This approach, often referred to as a stealth tax, allows the government to collect higher tax revenues without directly increasing tax rates. The Office for Budget Responsibility projects that the freeze in tax thresholds will lead to an increase in the number of income tax payers across different brackets in the upcoming years.
The personal allowance denotes the income threshold before tax obligations kick in, with a basic rate of 20% applying to earnings above that amount. Higher rates of 40% and 45% are imposed on incomes exceeding £50,270 and £125,140 respectively. The National Insurance payment threshold is also set at £12,570, with an 8% contribution rate for earnings above this threshold, and a 2% rate for earnings surpassing £50,270.