Millions of individuals compelled to work remotely will lose the ability to claim tax relief starting April 2026. Currently, HMRC allows individuals to seek 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 UK’s work from home allowance stands at a flat rate of £6 per week, but individuals are ineligible for this relief if they opt to work remotely.
During the pandemic, the rules were more lenient, allowing anyone working from home, even for a single day, to qualify for tax relief. However, as of 2022, claiming tax relief is restricted if individuals choose to work from home part-time due to hybrid working arrangements offered by their employers.
Chancellor Rachel Reeves announced in the 2025 Budget that work from home tax relief would be discontinued for all workers from April. Nevertheless, employers can still provide financial assistance to cover work from home expenses without incurring taxes. Additionally, the freeze on tax thresholds has been extended for another three years, affecting the income tax personal allowance, which was initially set to remain frozen until April 2028 but will now continue until the end of the 2030/31 financial year.
The freezing of tax brackets, referred to as fiscal drag, gradually pushes more individuals into higher tax brackets as their incomes rise. Seen as a stealth tax, this method allows the government to collect more taxes without directly increasing tax rates. The Office for Budget Responsibility (OBR) predicts 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 in the coming years.
The personal allowance defines the threshold at which individuals start paying income tax, with the basic 20% rate applicable to earnings beyond this amount. Higher rates of 40% and 45% apply to incomes exceeding £50,270 and £125,140, respectively. Similarly, the National Insurance payment threshold is set at £12,570, with an 8% contribution rate for earnings over this amount, increasing to 2% for earnings surpassing £50,270.