HMRC has scrapped a widely used money-saving method for Brits who work from home, costing them up to £124 a year. The Working From Home Allowance, introduced during the Covid-19 pandemic, has been discontinued for the current tax year.
What Was the Working From Home Allowance?
Employees who had to work from home and were not reimbursed by their employer could previously claim a flat-rate tax relief of £6 per week. This equated to about £62 per year for basic-rate taxpayers and £124 per year for higher-rate taxpayers earning more than £50,270. Workers could also claim relief for the exact amount spent on additional household expenses, such as heating, electricity, and business phone calls, by using HMRC’s online service or submitting a P87 form.
Who Is Affected?
Around 300,000 households currently receive tax relief for homeworking costs, down from nearly 3 million at the pandemic peak. Clair Williams, head of employment tax at Azets, explained: “This tax relief, in place for many years, covers an estimated 300,000 people who incur additional household expenses in their employment duties.”
What Has Changed?
From 6 April 2026, the government has discontinued the income tax relief available to individuals who work from home and are not reimbursed by their employer. The Chartered Institute of Taxation (CIOT) confirmed: “Previously, the standard flat-rate claim was £6 per week, resulting in an annual tax saving of approximately £62 for basic rate taxpayers (£124 for higher rate taxpayers). Around 300,000 people currently receive tax relief for homeworking costs.”
Can Employers Still Help?
Employers can still reimburse employees for these costs without deducting income tax and National Insurance contributions, if eligible. Williams added: “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.”
Why Was the Allowance Scrapped?
Getting rid of the measure will, based on HMRC’s own calculations, save the Treasury £115 million over five years from introduction. The Labour Party government has faced criticism for cutting the perk, which was widely used during the pandemic and supported those incurring additional costs while working from home.
