Starting April 2026, millions of individuals working remotely will lose the option to claim tax relief. Currently, HMRC allows individuals to claim tax relief for additional household expenses incurred while working from home if their workplace lacks a designated office space. The UK work-from-home allowance stands at a fixed rate of £6 per week, but individuals who voluntarily choose to work from home do not qualify for this tax relief benefit.
During the pandemic, individuals working remotely for even a single day were eligible for tax relief. However, the rules changed in 2022, disqualifying individuals from claiming tax relief if they opt for hybrid working arrangements where working from home is part of the schedule.
Chancellor Rachel Reeves announced in Budget 2025 the discontinuation of work-from-home tax relief for all workers from April. Nonetheless, employers can still provide financial assistance to employees for home working expenses without incurring taxes. Additionally, the freeze on tax thresholds will be extended for another three years, keeping the income tax personal allowance at £12,570 until the end of the 2030/31 financial year.
The freezing of tax brackets, known as fiscal drag, gradually moves individuals into higher tax brackets as their income rises. This strategy, considered a stealth tax, enables the government to increase tax revenue without directly raising tax rates. The Office for Budget Responsibility estimates that by 2029/30, the freeze in tax thresholds will lead to an increase in basic-rate, higher-rate, and additional-rate taxpayers.
The personal allowance determines the income threshold before tax payment begins, with a basic rate of 20% applied to earnings exceeding this amount. Higher rates of 40% and 45% are applicable to incomes above £50,270 and £125,140, respectively. The National Insurance payment threshold is also set at £12,570, with a rate of 8% on earnings at this level and 2% on income exceeding £50,270.