Major tax rule change from April will affect people who work from home

The change will cost higher-rate taxpayers approximately £124

People who work from home are set for a financial blow next month as a key tax break comes to an end. Chancellor Rachel Reeves confirmed in her autumn Budget that the government is scrapping the work-from-home tax relief in a move expected to hit hundreds of thousands of employees across the country.

Since the pandemic, many workers have relied on the ability to claim back costs for the extra expenses of running a home office – such as increased heating, electricity, and broadband bills. Currently, eligible staff can claim a flat rate of £6 per week without needing to provide receipts, or claim the exact amount of their increased costs.

However, from April 6, 2026, this allowance will be axed entirely for the vast majority of workers. Under current rules, you can only claim this relief if your employer requires you to work from home – for example, if they do not have an office space available for you.

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Those who choose to work from home voluntarily or under a hybrid arrangement have already seen their eligibility tightened in recent years. According to government forecasts, roughly 300,000 people will be directly impacted by the removal of the relief.

For a basic-rate taxpayer, the loss equates to around £62 a year, while higher-rate taxpayers will see their tax bills rise by approximately £124. While the tax relief for individuals is ending, employers will still be permitted to pay their staff a tax-free allowance to cover home-working costs if they wish to do so. However, there is no legal requirement for businesses to provide this.

The Chancellor also revealed many other tax changes in her Budget in November. One change was that the freeze on income tax thresholds will be extended until the end of the 2030/31 financial year.

This phenomenon, known as “fiscal drag,” acts as a “stealth tax,” because wages rise with inflation, the frozen thresholds mean more of your income is pushed into higher tax brackets. The Office for Budget Responsibility (OBR) estimates this will result in:

• 780,000 more people paying the basic rate of income tax
• 920,000 more people being dragged into the 40% higher-rate bracket

The personal allowance – the amount you can earn before paying any tax – will remain stuck at £12,570.