Budget 2025: Home working tax relief scrapped for 300,000 employees

The government has confirmed the removal of the tax relief for non-reimbursed home working expenses, a change that will impact an estimated 300,000 employees starting next April.

Under the current rules, employees who are forced to work from home and do not receive reimbursement from their employers can claim tax deductions for household costs, such as utilities and business calls. However, following a “minor announcement” in the Budget Red Book, this relief will be abolished effective 6 April 2026, as legislated in the Finance Bill 2025-26.

The policy change creates a direct cost for employees relying on this relief. Basic rate taxpayers will see an annual tax increase of £62, while higher rate taxpayers will face a rise of £124. The move is projected to save the government a modest £30 million per year.

Importantly, the change specifically targets employees claiming the relief directly from HMRC. Employers will retain the ability to reimburse staff for homeworking costs tax-free if they choose to do so.

The policy, which was expanded during the Covid-19 pandemic, is now viewed by the government as unnecessary. However, some tax professionals have criticised the move, according to Accountancy Daily, accusing the government of “scrambling behind the sofa for pennies to help plug the wider deficit”.