Rachel Reeves has confirmed a significant change to working from home tax rules, just as she prepares to step down as Chancellor. With Sir Keir Starmer's resignation, Reeves is widely expected to be replaced by Andy Burnham at No 11 Downing Street.
Home Working Allowance Axed for 300,000 Workers
From April 6, 2026, the annual home working allowance will be eliminated for the vast majority of employees. This move affects approximately 300,000 people across the UK who currently claim tax relief on up to £6 per week for additional household expenses such as heating, electricity, and business phone calls.
For basic-rate taxpayers, the loss equates to around £62 per year, while higher-rate taxpayers will see their tax bills increase by approximately £124 annually. The relief had been in place for many years and did not require receipts to be submitted to HMRC.
Expert Analysis on the Impact
Clair Williams, head of employment tax at Azets, commented: "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."
Williams added: "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."
Government Cites Non-Compliance Concerns
According to Williams, the government is concerned about non-compliance, which it describes as "fake claims." She stated: "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."
Williams also noted potential pressure on employers: "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."
Treasury Savings and Claim Deadlines
The Treasury is expected to save £115 million over five years from the introduction of this measure, based on HMRC's own calculations. Williams remarked: "With so many policy announcements made then, this one perhaps fell through the cracks of general awareness."
Employees who currently claim the tax relief can still do so for the 2025-2026 tax year and retrospectively for up to four previous tax years. However, this will no longer be possible for the new tax year starting this April. The deadline for claiming tax relief for the 2021-22 tax year is April 5, 2026.
