Millions of individuals who have transitioned to remote work will lose the option to claim tax relief starting in April 2026. Currently, HMRC allows individuals to seek tax relief for additional household expenses incurred while working from home, 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 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 single day to qualify for tax relief. However, as of 2022, individuals cannot claim this relief if they opt for hybrid working arrangements that involve working from home part-time due to their employer’s policies.
Chancellor Rachel Reeves announced in Budget 2025 the discontinuation of work from home tax relief for all workers from April. Nevertheless, employers can still provide financial assistance to employees for home working expenses without incurring taxes. Furthermore, the freeze on tax thresholds has been extended for an additional three years, affecting the income tax personal allowance, which was initially slated to remain unchanged until April 2028 but will now be frozen until the end of the 2030/31 financial year.
The freezing of tax brackets, known as fiscal drag, gradually pushes more individuals into higher tax brackets as their incomes rise. This mechanism is considered a stealth tax, allowing the government to collect more revenue without overtly increasing tax rates. The Office for Budget Responsibility estimates that by 2029/30, the freeze in tax thresholds will lead to a higher number of basic-rate, higher-rate, and additional-rate income tax payers.
The personal allowance serves as the threshold before individuals begin paying income tax, with the basic 20% rate applying once earnings exceed this threshold. Higher tax rates of 40% and 45% are triggered at specific income levels. The National Insurance payment threshold stands at £12,570, with contributions starting at 8% for earnings at this level and increasing to 2% for income surpassing £50,270.