Millions of individuals compelled to telecommute will lose the ability to seek tax relief starting in April 2026. Currently, individuals can claim tax relief from HMRC for additional household expenses incurred due to remote work if their workplace lacks a designated office space. The UK’s work from home allowance stands at a fixed rate of £6 per week, but individuals are ineligible for tax relief if they opt to work from home. Notably, during the pandemic, anyone working remotely, even for a single day, qualified for tax relief. However, the rules changed in 2022, disallowing tax relief for those choosing to work from home part-time due to hybrid work arrangements offered by their employers.
Chancellor Rachel Reeves announced the discontinuation of work from home tax relief for all workers from April in the Budget 2025. Nevertheless, employers can still provide untaxed financial assistance to cover work-from-home expenses. Additionally, the freeze on tax thresholds has been extended for another three years, affecting the income tax personal allowance, which was initially set to be frozen until April 2028 but will now remain unchanged until the end of the 2030/31 fiscal year. This tax bracket freeze, known as fiscal drag, gradually pushes individuals into higher tax brackets as their income rises, acting as a stealth tax mechanism for the government to increase tax revenue without altering tax rates. The Office for Budget Responsibility estimates that the freeze will lead to a significant increase in the number of basic-rate, higher-rate, and additional-rate taxpayers in the upcoming years.
The personal allowance defines the threshold before individuals start paying income tax, with the basic rate at 20%. Earnings above £50,270 trigger the higher 40% rate, while the additional 45% rate applies to income exceeding £125,140. Similarly, the National Insurance payment threshold is set at £12,570, with an 8% contribution rate for earnings above this level and a 2% rate for income surpassing £50,270.