Millions of individuals who have transitioned to remote work will lose the opportunity to claim tax relief starting April 2026. Currently, HMRC allows individuals to request tax relief for additional household expenses incurred while working from home, such as energy and broadband costs, if their workplace lacks a designated office space. The work from home allowance in the UK is a fixed rate of £6 per week, but individuals who voluntarily opt to work from home are not eligible for this tax relief.
During the pandemic, the rules were more lenient, granting tax relief to anyone who worked remotely, even for a single day. However, as of 2022, individuals cannot claim tax relief if they choose to work from home part-time due to hybrid working arrangements offered by their employers.
Chancellor Rachel Reeves announced in Budget 2025 the discontinuation of work from home tax relief for all workers from the upcoming April. Nevertheless, employers can still provide financial assistance to employees for home office expenses without incurring taxes. In another tax update, the Chancellor disclosed an extension of the freeze on tax thresholds for an additional three years.
The freeze on the income tax personal allowance, currently set at £12,570, was initially projected to last until April 2028 but will now continue until the end of the 2030/31 fiscal year. This practice, known as fiscal drag, gradually pushes more individuals into higher tax brackets as their incomes rise. Described as a stealth tax, it allows the government to increase tax revenue without officially raising tax rates.
The Office for Budget Responsibility estimates 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 signifies the income threshold before tax liability kicks in, with a 20% basic rate applying to earnings exceeding this amount. The 40% higher rate applies to incomes surpassing £50,270, while the 45% additional rate is triggered when earnings exceed £125,140.
The National Insurance threshold, set at £12,570, marks the point at which individuals start contributing. Contributions begin at 8% on earnings above £12,570 and shift to 2% for incomes exceeding £50,270.