What are the costs of working from in 2026?
When an employee working from home, they may incur additional costs as a result, such as higher gas and electricity bills. The tax system offers some help where the employer meets some or all of these additional costs. However, the relief that was previously available where employees met these costs themselves is withdrawn from 6 April 2026.
Expenses reimbursed by the employer
No tax liability arises where an employer makes a payment to an employee in respect of reasonable household expenses which the employee incurs while carrying out the duties of the employment at home under homeworking arrangements. These are arrangements between the employer and the employee under which the employee regularly performs some or all of the duties of the employment from home. For these purposes, household expenses are defined as expenses connected with the day-to-day running of the employee’s home. This includes the cost of heating and lighting the work area and the metered cost of extra water, additional insurance costs and the cost of business telephone calls. However, costs that are the same regardless of whether the employee works at home or not, such as rent, mortgage costs and council tax, do not count.
Although homeworking arrangements must be in place for the exemption to apply, there is no requirement for them to be in writing. Under those arrangements, the employee must work at home rather than at the employer’s premises. The exemption will also apply to hybrid arrangements where the employee works at home on certain days and at the employer’s premises on the remaining days.
However, the exemption does not apply where the employee works at home informally, for example, to accept a delivery, or where the employee takes work home in an evening or on a weekend.
To remove the administrative burden of working out the actual extra costs, employers can instead pay employees £6 per week tax free to cover their additional household expenses. The amount is the same regardless of whether an employee works at home one day a week or five days a week.
Employers can reimburse the actual additional household costs instead where these are higher as long as evidence can be provided to justify the amount paid.
Employee meets the costs of working from home
Prior to 6 April 2026, where employees incurred additional household costs as a result of working from home and these were not reimbursed by the employer, they could claim tax relief for these additional costs. An administrative easement allowed them to claim a fixed deduction of £6 per week (an annual deduction of £312). Where the easement was used, it was not necessary to provide evidence in support of the deduction.
However, as announced at the time of the 2025 Autumn Budget, this relief is withdrawn from 6 April 2026. New legislation will prevent a deduction for work expenses where those expenses relate to the additional household costs incurred as a result of working from home.
The removal of the relief will increase the tax paid by affected employees by £62.40 for basic rate taxpayers, by £124.80 for higher rate taxpayers and by £140.40 for additional rate taxpayers.
Employees who are eligible for relief for 2025/26 can make a claim online or, where they complete a Self-Assessment tax return, in their return.
Partner note:
Income tax removal of the tax relief for additional homeworking expenses
