The quiet end of working from home tax relief and what it means

From 6 April, around 300,000 people working from home have lost access to tax relief on unreimbursed household expenses, following changes announced in last year’s Autumn Budget.

The change removes a long‑standing income tax relief for employees who incur additional household costs - such as heating, electricity and business phone calls - as part of their employment duties but are not reimbursed by their employer.

While the abolition is expected to generate savings for the Exchequer, it also shifts both cost and responsibility elsewhere, creating potential challenges for employers and a financial impact for some remote and hybrid workers.

What has changed?

Until the end of the 2025–26 tax year, eligible employees were able to claim tax relief on up to £6 per week for additional household expenses without needing to provide receipts to HMRC. This relief applied to an estimated 300,000 people and had been in place for many years.

From 6 April, that relief is no longer available. Employees can still submit claims for the 2025–26 tax year, and may make retrospective claims for up to four earlier tax years, but no new claims will be possible going forward.

HMRC estimates that removing the relief will save the Treasury £115 million over five years from April 2026.

Who is most affected?

The impact will be felt most by:

• Employees who work from home and incur household costs that are not reimbursed
• Remote staff whose employer does not operate a physical workplace
• Individuals already caught by fiscal drag, where frozen tax thresholds push more income into higher tax bands

For affected employees, the loss of relief equates to an annual tax increase of:

• £62 for basic rate taxpayers
• £124 for higher rate taxpayers

While these amounts may appear modest in isolation, they come at a time when many households are already under pressure from rising living costs.

The implications for employers

Although the relief has been removed for individuals, it is important to note that employers can still reimburse eligible homeworking expenses without triggering income tax or National Insurance contributions.

However, removing the individual tax relief effectively transfers the responsibility for dealing with these costs to employers at a time when the overall business tax burden is at its highest level in almost three decades.

As a result, employers may now face pressure to:

• Review homeworking and expense reimbursement policies
• Provide financial reassurance to remote or hybrid staff
• Manage additional administration associated with reimbursing costs

This issue is particularly relevant for businesses operating fully remote models, where employees have no alternative workplace to attend because the employer has no physical premises.

Why was the relief removed?

Eligibility for homeworking tax relief was temporarily expanded during 2020–21 and 2021–22 to cover employees required to work from home as a result of the pandemic, rather than because of the inherent nature of their role.

The government has cited concerns around non‑compliance - including incorrect or fraudulent claims - as the principal reason for abolishing the relief entirely rather than reforming it. In effect, the cost of addressing those concerns has been shifted from the tax system to the private sector.

Given the volume of policy announcements made at the 2025 Autumn Budget, this change received relatively little attention at the time, despite its practical impact on both employees and employers.

Wider considerations for employers

Employers should also be considering their policies in relation to ‘hybrid-working’ arrangements which have grown significantly since the pandemic. HMRC are increasingly focusing on working from home relief alongside reimbursements of employee travel costs.

What should employees and employers consider now?

Employees who believe they were eligible should ensure they have:

• Submitted claims for the 2025–26 tax year
• Considered making retrospective claims, where appropriate (the deadline for claims relating to the 2021–22 tax year is 5 April 2026.)

Employers may wish to:

• Review whether reimbursing homeworking expenses is appropriate
• Review expenses policy in relation to employee travel
• Assess the cost, compliance and employee relations implications
• Communicate clearly with affected staff following the change

We’re here to help

Changes to employment tax rules can have unintended consequences for both employers and employees. Our employment tax specialists can help you understand the implications of this change, review expense reimbursement policies, and ensure your approach remains compliant and cost‑effective.

If you would like to discuss how this change affects your business or workforce, please get in touch.