Millions of employees across the UK are set to lose a valuable tax break on their household expenses, as the government confirms it will scrap the work from home tax relief from April 2026.
What is Changing for Home Workers?
Currently, workers can claim tax relief from HM Revenue and Customs (HMRC) for extra costs incurred by working from home, such as increased energy or broadband bills. This applies specifically to individuals whose employer does not provide them with an office to work from.
The relief is offered at a flat rate of £6 per week. It is crucial to note that you cannot claim this relief if you choose to work from home, for example, as part of a hybrid working arrangement offered by your company.
Chancellor Rachel Reeves used her Budget 2025 announcement to confirm the allowance will be axed for all workers from April 2026. This marks the final step in a tightening of rules that began after the pandemic. During the coronavirus crisis, anyone who worked from home for even one day could claim, but this changed in 2022 to exclude those opting for hybrid work.
Broader Tax Landscape: Threshold Freezes Extended
While removing one form of relief, the Chancellor revealed a significant extension to existing tax policies that will pull more people into higher tax brackets. The freeze on income tax thresholds, which was due to end in April 2028, will now continue until the end of the 2030/31 financial year.
This policy, known as fiscal drag or a stealth tax, means that as wages rise over time, more earners will be pushed into higher tax bands without the government explicitly raising tax rates.
The key thresholds affected are:
- The personal allowance (the amount you can earn before paying income tax), frozen at £12,570.
- The higher-rate threshold of 40%, which applies to earnings above £50,270.
- The additional-rate threshold of 45%, kicking in on income over £125,140.
The Office for Budget Responsibility (OBR) estimates this prolonged freeze will result in 780,000 more basic-rate, 920,000 more higher-rate, and 4,000 more additional-rate income tax payers by the 2029/30 tax year.
What Does This Mean for You?
From April 2026, employees required to work from home will no longer be able to reduce their tax bill to offset their increased utility costs. However, it is important to note that employers will still be permitted to make tax-free contributions towards an employee's additional home working expenses if they choose to do so.
Combined with the extended threshold freezes, the net effect for many households will be a higher overall tax burden. The National Insurance starting threshold is also aligned with the personal allowance at £12,570, with contributions at 8% up to £50,270 and 2% above that.
These changes represent a significant shift in the tax treatment of remote work, effectively ending a support measure introduced during the pandemic and cementing a policy of fiscal drag for the rest of the decade.
