Starting April 2026, millions of individuals working remotely will lose the ability to claim tax relief. Currently, HMRC allows for tax relief on additional household expenses related to remote work if no official office space is provided by the employer. The work from home allowance in the UK stands at a fixed rate of £6 per week, but it is not applicable if remote work is a personal choice.
During the pandemic, tax relief was available to anyone working from home, even for a single day. However, the rules changed in 2022, disqualifying individuals from claiming tax relief if they opt for part-time remote work due to hybrid working arrangements provided by their employers.
Chancellor Rachel Reeves announced in Budget 2025 the discontinuation of work from home tax relief for all employees starting this April. Nevertheless, employers retain the option to financially support staff with remote work expenses without incurring taxes. Additionally, the freeze on tax thresholds is extended for another three years, impacting the income tax personal allowance, which will remain fixed until the end of the 2030/31 fiscal year.
The freeze on tax brackets, known as fiscal drag, gradually moves individuals into higher tax brackets as their earnings increase. It is considered a stealth tax method by the government to accumulate more tax revenue without changing the tax rate. The Office for Budget Responsibility predicts an increase in the number of income tax payers across different brackets due to the threshold freeze in 2029/30.
The personal allowance dictates the income level before tax obligations kick in, with the basic 20% income tax rate applying above this threshold. Higher earnings trigger the 40% and 45% tax rates at specific income levels. The National Insurance payment threshold is also set at £12,570, with an 8% contribution for earnings above this amount and a 2% contribution on income exceeding £50,270.
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