Millions of individuals compelled to work remotely will lose the ability to claim tax relief starting April 2026. Currently, HMRC allows individuals to claim 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 work from home allowance stands at a fixed rate of £6 per week, but individuals who opt to work from home are ineligible for this tax relief benefit.
During the COVID-19 pandemic, all individuals who worked remotely for even a day were eligible for tax relief, but the rules changed in 2022. Chancellor Rachel Reeves announced in Budget 2025 that work from home tax relief would be terminated for all workers from April. However, employers can still provide untaxed financial assistance for remote work expenses. Additionally, the freeze on tax thresholds has been extended for three more years, affecting the income tax personal allowance, which will remain stagnant until the end of the 2030/31 financial year.
The prolonged freeze on tax brackets, referred to as fiscal drag, gradually pushes more individuals into higher tax brackets as their incomes rise. This tactic, often labeled as a stealth tax, allows the government to increase tax revenue without officially raising tax rates. The Office for Budget Responsibility predicts that by 2029/30, the freeze in tax thresholds will lead to an increase in basic-rate, higher-rate, and additional-rate taxpayers.
The personal allowance determines the earnings threshold before tax liability begins. Income above this threshold incurs a 20% basic rate, with the 40% higher rate applying to earnings exceeding £50,270 and the 45% additional rate triggered when earnings surpass £125,140. The National Insurance payment threshold is also set at £12,570, with an 8% contribution rate on earnings above this threshold and a 2% rate on income exceeding £50,270.