Budget 2025 – Homeworking tax relief abolished

Budget 2025 – Homeworking tax relief abolished

An estimated 300,000 employees who work from home will be out of pocket after the abolition of £62 homeworking tax relief from April.

In a minor announcement which appears to have gone under the radar, the government scrapped non-reimbursed homeworking expenses. This measure only applies to those employees who have not had these costs reimbursed by their employer and is currently worth £6 a month, equivalent to £62 for basic rate taxpayers and £124 for higher rate payers. 

Currently, home workers who are forced to work from home by their employer can claim the homeworking allowance. This is where either there are no suitable office facilities provided by the employer, or, where an employer mandates working from home as part of the contract.

These workers are able to deduct a set amount from their taxable income to make up for expenses such as utility costs or business telephone calls at the request of their employers when they work from home.

The government will remove the deduction from income tax for non-reimbursed home working expenses. Employers can still reimburse employees for these costs where eligible without deducting income tax and national insurance contributions. This will be legislated for in Finance Bill 2025-26 and take effect from 6 April 2026. 

This policy, which was introduced a decade ago when home working was not as common as it is now.

This will result in a tax increase of £62 for basic rate payers and £124 for higher rate payers who use the tax relief. It will save the government an estimated £30m a year.