Approximately 300,000 people working from home in the UK will forfeit their annual home working allowance from this Monday, April 6. Research by Azets, an accountancy and business advisory firm, has discovered that HMRC estimates the scrapping of this measure for homeworkers will save £115 million over five years from April 2026.

However, the withdrawal of the tax relief on non-reimbursed homeworking expenses could prove a financial shock to numerous people, said Azets’ head of employment tax, Clair Williams.

She said: “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.

“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.”

Eligibility for homeworking expenses was broadened in 2020 to 2021 and 2021 to 2022 to encompass employees who were obliged to work at home due to the pandemic, rather than owing to their particular employment duties.

Clair said: “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.

“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. Getting rid of the measure will, based on HMRC’s own calculations, save the Treasury £115 million over five years from introduction.”

The scrapping of the tax relief was revealed by Chancellor Rachel Reeves in last year’s Autumn Budget.

“With so many policy announcements made then, this one perhaps fell through the cracks of general awareness,” Clair said.

“The estimated 300,000 people currently claiming for the tax relief can do so for tax year 2025-2026 and retrospectively for up to four previous tax years, but this will no longer be possible for the new tax year starting this April. The deadline for claiming tax relief in relation to the 2021-22 tax year is April 5, 2026.”

Clair cautioned that some employees may unwittingly find themselves pushed into a higher income tax bracket as a result of the continuing freeze in tax bands, a phenomenon known as fiscal drag.

She went on to say: “While the abolition of home working tax relief spells good news for the nation’s coffers, it could well mean administrative headaches for businesses and a financial hit to WFH staff.”