Under existing rules covering working from home, eligible employees have been able to claim a flat rate allowance of £6 per week to cover additional household costs, such as heating and electricity, without having to provide evidence.
This tax relief will be withdrawn from April 6th and employees will no longer be able to claim or be reimbursed for working from home expenses through this scheme.
This months’ Three Counties Payroll blog rounds up all you need to know about the planned changes.
Who is likely to be affected – This measure, which was announced in the 2025 Budget, will impact employees who are eligible to claim a deduction from income tax for additional household costs if they are required to work from home. It will not impact the ability for employers that reimburse employees for costs relating to homeworking where eligible without deducting income tax and National Insurance contributions.
Why the change now – The objective is to address concerns around non-compliance and to ensure fairness across the tax system. After checking claims, over half have been deemed to be ineligible for the relief, indicating high levels of non-compliance.
Here’s the (recent) history bit. HMRC allowed eligible employees to claim a flat rate of £4 a week from tax year 2011 to 2012, rising to £6 a week from tax year 2020 to 2021. The majority of claimants use the easement of £6 per week to claim, which does not require receipts to be provided.
For the tax years 2020 to 2021 and 2021 to 2022, eligibility was widened to include employees who had to work at home because of the COVID-19 pandemic rather than due to their specific employment duties.
What will the impact be – An estimated 300,000 individuals will be affected which will result in a tax increase of £62 for basic rate taxpayers and £124 for higher rate taxpayers.
It is not expected to impact on individuals’ experience of dealing with HMRC as the change removes a tax relief but does not change any processes or tax administration obligations.
If you have any queries or concerns about the rule change, Three Counties Payroll can put your mind at rest. Call our team on 01905 622245.