Working from home tax relief scrapped in Budget

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. Where the costs can be evidenced, the full amount is deductible. However, a flat rate of £6 per week can be claimed without providing receipts. 

What went wrong?

During the pandemic many people were required to work at home during the various lockdowns. 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 in some industries, permanent remote working has become the norm. During a check, the government found that over half of the employees who made claims were not actually eligible for the relief. This is perhaps due to relief in PAYE codes being carried over from 2021/22 combined with a misunderstanding of the rules. Hybrid workers who have a choice as to whether they work from home for a certain number of days don't qualify, only employees who are contractually required to work from home. 

What's changing?

Tax relief on homeworking expenses for employees will no longer be allowed from 6 April 2026 if the expenses are not reimbursed by their employer. This means that employees who are genuinely entitled to the relief under current rules will see a tax increase of £62 for basic rate taxpayers or £124 for higher rate taxpayers. Employers can still reimburse eligible employees for these costs tax free.