A tax relief that has supported hundreds of thousands of home-based workers for more than a decade will be abolished from April 2026, removing a benefit widely used during the pandemic and expected to raise tens of millions of pounds for the Treasury.
The measure currently allows employees who are required to work from home — and who do not receive reimbursement from their employer — to claim tax relief on additional household costs. Workers can either claim their actual extra expenses or a flat rate of £6 per week without providing receipts. From 6 April 2026, this entitlement will be withdrawn entirely.
The change will cut support worth £62 a year for basic-rate taxpayers and £124 a year for higher-rate taxpayers. According to officials, the decision is intended to address widespread misuse, with HMRC reporting that more than half of claims fail verification checks.
HMRC says claims rose sharply during the pandemic as millions shifted to home working. Although eligibility rules were eased during that period, many workers continued to submit claims even after returning to offices or hybrid arrangements. Ministers say the abolition is part of a wider effort to restore fairness and reduce improper claims.
While employers will retain the option to reimburse home-working expenses on a tax-free basis, the government acknowledges the shift may lead to added pressure on businesses. Companies already managing tight budgets may face higher expectations from staff who will no longer be able to claim relief directly.
The allowance was first introduced in 2011–12 at £4 per week to help workers cover heating, electricity and other household costs incurred because of mandatory home working. The rate was increased to £6 during the pandemic to reflect rising costs and the scale of remote work at the time.
Budget documents indicate the Treasury expects to raise £10 million in the first year of the change, rising to £30 million in 2027–28 before settling at around £25 million annually. Officials maintain the measure will have “no significant macroeconomic impact”, though for many households it represents another small but unwelcome increase in day-to-day expenses.
HMRC says the policy has no direct financial consequences for employers because it applies to individual taxpayers, though it accepts some companies may feel obliged to support employees in the absence of the relief.
The decision comes as the government continues a broader review of tax reliefs, deductions and allowances in an effort to boost revenues while maintaining what ministers describe as a balanced and fair tax system.
