Millions of individuals who have shifted to remote work will lose the option to claim tax relief starting in April 2026. Currently, workers can seek tax relief from HMRC for additional home office expenses like 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 opting to work from home do not qualify for this relief.
During the pandemic, even a single day of remote work made employees eligible for tax relief, but the rules changed in 2022. Workers cannot claim tax relief if they choose to work from home part-time due to hybrid work policies offered by their employers.
Chancellor Rachel Reeves announced in Budget 2025 the discontinuation of work from home tax relief for all employees starting April. However, employers can still provide tax-free assistance for remote work expenses. Additionally, the freeze on tax thresholds will be extended for another three years, affecting the income tax personal allowance, which was initially set at £12,570 and now frozen until the 2030/31 fiscal year.
The freeze on tax brackets, known as fiscal drag, gradually moves individuals into higher tax brackets as their incomes rise. Described as a stealth tax, this mechanism allows the government to increase tax revenues without raising tax rates. The Office for Budget Responsibility estimates that the freeze in tax thresholds will lead to more individuals paying basic-rate, higher-rate, and additional-rate income tax in the future.
The personal allowance dictates the income threshold before tax obligations begin, with the basic 20% rate applying thereafter. The higher 40% rate kicks in for earnings over £50,270, while the additional 45% rate starts at incomes exceeding £125,140. The National Insurance payment threshold is also set at £12,570, with an 8% contribution on earnings above this amount and a 2% contribution on income surpassing £50,270.