It’s worth as much as £124
A rule change means many UK workers will lose an HMRC allowance from Monday. Approximately 300,000 home workers across the UK are set to lose their annual home working allowance from Monday, April 6.
Research conducted by Azets, an accountancy and business advisory firm, reveals that HMRC estimates the scrapping of this allowance for home workers will save £115 million over five years from April 2026.
However, the removal of tax relief on non-reimbursed homeworking expenses could deliver a significant financial blow to many, according to Azets’ head of employment tax, Clair Williams.
She said: “This tax relief, in place for many years, covers an estimated 300,000 people who incur additional household expenses, such as heating, electricity and business phone calls, in their employment duties. Claimants currently receive tax relief on up to £6 a week and receipts are not required by HMRC.
“Removal of this tax relief will mean basic rate taxpayers see a tax increase of £62 and, at the higher rate, £124. However, employers can still reimburse employees for these costs, if eligible, without deducting income tax and National Insurance contributions.”
Eligibility for homeworking expenses was broadened in 2020 to 2021 and 2021 to 2022 to incorporate employees who were required to work from home due to the pandemic, rather than as a result of their specific job responsibilities.
Clair said: “Citing concerns about non-compliance, which is shorthand for fake claims, the government is moving the cost responsibility to the private sector, where the business tax burden this year, at 32 per cent, is already the highest in 28 years.
“It is also worth bearing in mind that local employers may come under pressure to change their policies on reimbursement to provide WFH staff with financial reassurance, and some staff don’t have workplaces to go to because their employer doesn’t actually have physical premises. Getting rid of the measure will, based on HMRC’s own calculations, save the Treasury £115 million over five years from introduction.”
The scrapping of the tax relief was confirmed by Chancellor Rachel Reeves in last year’s Autumn Budget.
“With so many policy announcements made then, this one perhaps fell through the cracks of general awareness,” Clair said.
“The estimated 300,000 people currently claiming for the tax relief can do so for tax year 2025-2026 and retrospectively for up to four previous tax years, but this will no longer be possible for the new tax year starting this April. The deadline for claiming tax relief in relation to the 2021-22 tax year is April 5, 2026.”
Clair also cautioned that some workers could unknowingly find themselves pushed into a higher income tax bracket owing to the continuing freeze on tax bands, a phenomenon known as fiscal drag.
She continued: “While the abolition of home working tax relief spells good news for the nation’s coffers, it could well mean administrative headaches for businesses and a financial hit to WFH staff.”
