Millions of individuals compelled to work remotely will no longer be eligible for tax relief starting in April 2026. Currently, individuals can claim tax relief through HMRC for additional household expenses incurred while working from home if their workplace lacks a designated office space. The UK’s work from home allowance stands at a fixed rate of £6 per week, and individuals are ineligible for tax relief if they opt to work from home voluntarily.
During the pandemic, the criteria were different, allowing anyone working remotely even for a single day to qualify for tax relief. However, the rules changed in 2022, disqualifying individuals from tax relief if they choose to work from home part-time due to hybrid working arrangements offered by their employers.
Chancellor Rachel Reeves confirmed in the Budget 2025 that work from home tax relief would be discontinued for all workers from April. Nevertheless, employers can still provide financial assistance to employees for home working expenses without taxation. Moreover, the freeze on tax thresholds will be extended for an additional three years. The income tax personal allowance, originally set at £12,570 until April 2028, will now remain frozen until the end of the 2030/31 financial year.
The freezing of tax brackets, known as fiscal drag, leads to more individuals being pushed into higher tax brackets as their incomes rise. Described as a stealth tax, it enables the government to collect more tax without officially increasing tax rates. The Office for Budget Responsibility estimates that the freeze in tax thresholds will result in an additional 780,000 basic-rate, 920,000 higher-rate, and 4,000 additional-rate income tax payers by 2029/30.
The personal allowance denotes the income threshold before individuals begin paying tax. Earnings above this threshold incur a 20% basic income tax rate, with a higher 40% rate applicable on incomes surpassing £50,270 and an additional 45% rate triggered when earnings exceed £125,140. The National Insurance payment threshold is also set at £12,570, with an 8% contribution rate on earnings starting at this level and a 2% rate on incomes over £50,270.
