Millions of individuals compelled to work remotely will lose the option to claim tax relief starting in April 2026. Currently, workers can seek tax relief through HMRC for additional household expenses related to remote work, such as utilities and internet, 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 benefit.
During the pandemic, anyone working remotely, even for a day, was eligible for tax relief. However, the regulations changed in 2022 to exclude individuals opting for hybrid working arrangements from claiming tax relief for home office expenses.
Chancellor Rachel Reeves announced in Budget 2025 the discontinuation of work from home tax relief for all workers starting April. Nevertheless, employers can still provide untaxed financial assistance to employees for remote work-related costs. Additionally, the freeze on tax thresholds will be extended for another three years, with the income tax personal allowance, originally set at £12,570 until April 2028, now frozen until the end of the 2030/31 fiscal year.
The prolonged freeze on tax brackets, known as fiscal drag, gradually shifts more individuals into higher tax brackets as their incomes rise. This tactic is considered a stealth tax, enabling the government to collect more taxes without increasing tax rates. The Office for Budget Responsibility predicts that the freeze in tax thresholds will lead to an increase in the number of basic-rate, higher-rate, and additional-rate taxpayers in the upcoming years.
The personal allowance determines the income threshold before tax liability begins. Earnings exceeding this threshold are subject to the basic 20% income tax rate, with the higher 40% rate applicable to incomes over £50,270 and the additional 45% rate triggered by earnings exceeding £125,140. Similarly, the National Insurance payment threshold is set at £12,570, with an 8% contribution rate for incomes above this threshold and a 2% rate for earnings surpassing £50,270.
