Millions of individuals currently working remotely will lose the option to request tax relief starting from April 2026. Working from home tax relief, which allows for reimbursement of additional household expenses like energy and broadband, will no longer be available through HMRC if a dedicated office space is not provided by the employer. The standard work from home allowance in the UK stands at £6 per week, but individuals opting to work from home voluntarily are ineligible for this tax relief.
During the pandemic, even a single day of remote work qualified individuals for tax relief, but the rules have since been updated. Specifically, as of 2022, individuals who choose to work from home part-time due to hybrid working arrangements provided by their employer are not eligible for tax relief.
Chancellor Rachel Reeves announced the discontinuation of work from home tax relief in the Budget 2025, effective this April. Despite this change, employers can still offer financial support to employees for home office expenses without incurring taxes. Additionally, the freeze on tax thresholds has been extended for another three years, with the income tax personal allowance remaining at £12,570 until the end of the 2030/31 financial year.
The freeze on tax brackets, also known as fiscal drag, gradually pushes individuals into higher tax brackets as their income rises. Described as a stealth tax, this mechanism enables the government to increase tax revenue without directly raising tax rates. The Office for Budget Responsibility (OBR) estimates that the freeze in tax thresholds will result in a higher number of income tax payers in various brackets by 2029/30.
The personal allowance signifies the income threshold before tax payment begins, with the basic 20% income tax rate applied to earnings above this threshold. The higher 40% rate becomes applicable for earnings over £50,270, while the additional 45% rate is triggered when earnings surpass £125,140. The National Insurance payment threshold is also set at £12,570, with an 8% contribution on earnings above this threshold and a 2% contribution on earnings exceeding £50,270.