Millions of individuals, currently mandated to work remotely, will lose the option to claim tax relief starting in April 2026. In the UK, employees can seek tax relief through HMRC for extra expenses related to working from home, like utilities and internet, if their workplace lacks a designated office space for their use.
The UK work from home allowance stands at a fixed rate of £6 per week. Notably, individuals are ineligible for this tax relief if they voluntarily opt to work from home. During the pandemic, the rules were more lenient, allowing anyone who worked remotely, even for a single day, to claim tax relief.
In a recent announcement, Chancellor Rachel Reeves confirmed the discontinuation of work from home tax relief, effective April. However, employers retain the ability to provide financial assistance to cover work-from-home expenses without incurring taxation. Additionally, the freeze on tax thresholds has been extended for another three years, affecting the income tax personal allowance, which will now remain frozen until the end of the 2030/31 financial year.
This move, known as fiscal drag, gradually pushes more individuals into higher tax brackets as their incomes rise. Described as a stealth tax, it enables the government to collect more revenue without officially increasing tax rates. The Office for Budget Responsibility predicts that the freeze in tax thresholds will lead to a significant increase in income tax payers across different brackets in the coming years.
The personal allowance signifies the income level at which taxation begins for most individuals. Earnings exceeding this threshold incur a basic 20% income tax rate, with higher rates of 40% and 45% applying to incomes over £50,270 and £125,140, respectively. Moreover, the National Insurance payment threshold is also set at £12,570, with an 8% contribution rate for this level, followed by a 2% rate on earnings surpassing £50,270.
