Hundreds of thousands of employees across the UK are set to lose a valuable tax break, resulting in an annual financial hit of up to £124 per person.
The move, confirmed in the recent Budget, will see HM Revenue and Customs (HMRC) abolish the entitlement to claim tax relief on unreimbursed home-working expenses from 6 April 2026.
The End of a Long-Standing Perk
This change strips away a financial perk that has been in place for over a decade and was widely used during the COVID-19 pandemic. It specifically targets the estimated 300,000 employees who work from home at their employer's request but do not receive any compensation for their increased household costs, such as higher heating and electricity bills or business-related phone calls.
Currently, these workers can claim tax relief either by providing evidence of the actual extra costs incurred or by using a simple, receipt-free flat rate of £6 per week.
Treasury to Gain Tens of Millions
The Treasury is poised for a significant financial gain from this policy shift. Official Budget documents reveal that the Exchequer is forecast to raise an additional £10 million in the 2026–27 tax year. This figure is projected to jump to £30 million in 2027–28, before settling at around £25 million each subsequent year.
The government's justification for the clampdown centres on claims of widespread non-compliance. Treasury officials state that more than half of all claims were found to be invalid upon inspection, prompting the decision to scrap the relief entirely in the name of fairness.
Financial Impact on Workers and Businesses
The direct consequence for employees will be a noticeable increase in their tax burden. A typical basic-rate taxpayer will be £62 worse off each year, while higher-rate taxpayers will face a larger tax increase of £124 annually.
Although employers retain the option to reimburse their homeworking staff tax-free for these extra costs, the government has acknowledged that this move could place new pressure on businesses. Firms, many of which are already managing tight budgets, may feel compelled to pick up the tab to support their remote workers.
This relief was initially introduced as an administrative convenience worth £4 a week in the 2011–12 tax year. Its value was increased to £6 a week from 2020–21, and eligibility was dramatically expanded during the pandemic lockdowns. HMRC argues that this period led to a surge in claims, including many from people who were no longer eligible after offices reopened, ultimately triggering the decision to end the scheme.
