Working From Home Tax Relief To Be Scrapped.
The Autumn Budget contained a nasty surprise in the small print.
Employees who are required to work from home are currently able to claim tax relief at a flat rate of £6 per week. That's changing from 6 April 2026. What's happening and why?
Current rules. If employees are required to work from home, and incur additional household costs such as higher electricity bills, they can claim tax relief for those costs. A flat rate of £6 per week can be claimed without providing receipts. Higher amounts can be claimed but need to be proved to HMRC, which can be tricky. Many employees claimed the £312 annual allowance if they worked from home.
In the small print of the budget it was announced that such claims would no longer be allowed.
Why the change? During the Covid lockdowns many people were required to work at home. In response, eligibility for tax relief was widened for 2020/21 and 2021/22 to include those who had to work from home due to the pandemic. Since then, "hybrid" working or permanent remote working has become common. However, a strict reading of the rules limits such tax claims to employees REQUIRED to work from home by their employer, not those who CHOOSE to work from home. During a check, HMRC found that over half of the employees who made claims were not actually eligible for the relief.
What's changing? As so often, the government has seen a tax ‘nut’ it does not like and taken a hammer to it. From 6 April 2026 (so the 2026-27 tax return onwards) it will no longer be possible to claim such tax relief on homeworking expenses in your tax return. HOWEVER, if your employer reimburses you (i.e. pays you) such amounts, they will not be taxable and the employer can claim a deduction in their accounts.
If you own your own company (or have an understanding employer) and have to work from home, it should be possible to be paid an extra £312 p.a. without being taxed on it.
But it does mean that there will be some employees who are genuinely entitled to the relief under the current rules but will no longer be able to claim. This will mean a tax increase of £62.40 for basic rate taxpayers or £124.80 for higher rate taxpayers.
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