Millions of individuals currently working remotely will lose the option to claim tax relief starting in April 2026. Under existing regulations, HMRC allows individuals to seek tax relief for additional household expenses related to remote work, such as utilities and internet, if their workplace lacks a designated office space. The work from home allowance in the UK stands at a fixed rate of £6 per week, but individuals who voluntarily choose to work from home are ineligible for this relief.
During the COVID-19 pandemic, tax relief was available to anyone who worked remotely, even for a single day. However, recent changes prevent individuals from claiming tax relief if they opt for hybrid working arrangements where they split their work between home and the office.
Chancellor Rachel Reeves announced in Budget 2025 the discontinuation of work from home tax relief for all workers starting this April. Nevertheless, employers can still provide financial assistance for remote working expenses without facing taxation. Additionally, the freeze on tax thresholds has been extended for another three years, delaying any increases until the end of the 2030/31 financial year.
This freeze, referred to as fiscal drag, gradually pushes individuals into higher tax brackets as their incomes rise. It is considered a stealth tax strategy, allowing the government to collect more taxes without adjusting the tax rates. The Office for Budget Responsibility estimates that this freeze will lead to an increase in the number of income tax payers across various brackets by 2029/30.
The personal allowance, currently set at £12,570, is the income threshold before tax liability begins. Income above this amount is subject to the basic 20% income tax rate. The higher 40% rate applies to earnings exceeding £50,270, while the additional 45% rate is triggered when income surpasses £125,140. National Insurance contributions start at £12,570, with an 8% rate for this threshold and a 2% rate for earnings over £50,270.