Removal of tax relief on non-reimbursed homeworking expenses
Published 26 November 2025
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Who is likely to be affected
This measure 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.
General description of the measure
This measure only applies to those employees who have not had these costs reimbursed by their employer. This measure will not impact the existing ability for employers that reimburse employees for costs relating to homeworking where eligible without deducting Income Tax and National Insurance contributions.
This measure removes the process in which employees can claim a deduction from Income Tax from HMRC if they have incurred additional household costs when being required to work from home. These costs include increased household utility costs and business telephone calls. The amount that can be claimed can either be based on actual expenditure, with evidence, or at a fixed rate of £6 per week without providing receipts.
Policy objective
This measure aims 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.
Background to the measure
Employees who are required to work from home to perform the duties of their employment are entitled to tax relief on their actual costs under section 336 ITEPA 2003.
Section 336 ITEPA allows for a deduction from earnings for allowable expenses that meet certain criteria that is set out within legislation.
As an administrative easement, 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 vast 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 because of their specific employment duties.
This measure was announced at Budget 2025.
Detailed proposal
Operative date
The measure will take effect from 6 April 2026.
Current law
This measure will amend current law governing the deduction from earnings for additional household expenses incurred in employment duties. The current law is included in Chapter 11 of Part 4 ITEPA 2003.
Proposed revisions
This measure inserts s360B into Chapter 11 of Part 4 ITEPA 2003 to disallow a deduction from earnings for additional household expenses incurred in employment duties, where those expenses are not reimbursed by the employer. The measure uses the same definition of ‘household expenses’ as defined in s316 ITEPA 2003.
s316 ITEPA states no liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of the provision for an employee of accommodation, supplies or services used by the employee in performing duties of the employment if conditions are met. The inclusion of s360B as a result of this measure will mean additional household expenses will no longer qualify for deduction from earnings.
Summary of impacts
Exchequer impact (£ million)
| 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 | 2030 to 2031 |
|---|---|---|---|---|---|
| nil | +10 | +30 | +25 | +25 | +25 |
These figures are set out in Table 4.1 of Budget 2025 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2025.
Macroeconomic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
This measure will impact an estimated 300,000 individuals by removing the tax relief on home working expenses which will result in a tax increase of £62 for basic rate taxpayers and £124 for higher rate taxpayers. Employers can still reimburse employees for these costs where eligible without deducting Income Tax and National Insurance contributions.
This measure is not expected to impact on family formation, stability or breakdown.
This measure 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 admin obligations.
Equalities impacts
An individual may be affected by this measure regardless of their protected characteristics. If a protected group is overrepresented in this population, then it will be disproportionately impacted. This measure is expected to impact on individuals who are eligible for tax-relief on non-reimbursed homeworking expenses, and we expect this population to be representative of typical working age (16-66).
HMRC does not currently hold data on the other protected characteristics of homeworkers and so cannot make an assessment of the impacts on those with shared protected characteristics.
Administrative impact on business including civil society organisations
There is no direct impact on businesses as this measure only affects individuals, however there may be an indirect impact as employers may come under pressure to change their policies on reimbursement.
This measure is not expected to disproportionately impact civil society organisations.
This measure is not expected to have an impact on businesses’ experience of dealing with HMRC as the change does not change any process or tax administration obligations.
Operational impact (£ million) (HMRC or other)
This change requires the removal of homeworking deduction from HMRC systems, guidance pages and forms. HMRC has estimated it will cost in the region of £250,000 to make these changes.
Other impacts
Other impacts have been considered, and none have been identified.
Monitoring and evaluation
Consideration will be given to monitoring this measure through information collected from P87s and kept under review through annual KAI analysis of employment expenses.
Further advice
If you have any questions about this change, contact the Employment Benefits and Expenses Policy Team on email policyemploymentbenefitsexpenses@hmrc.gov.uk team mailbox address.