For many years, employees required working from home could claim tax relief for additional household expenses incurred personally, even where not reimbursed by their employer. This relief recognised that certain expenses (e.g. increased heating, electricity or business-related telephone use) arose directly from the performance of employment duties. However, the relief was tightly defined and was not available where working from home was undertaken by personal choice or for convenience rather than necessity.
During the pandemic, for the tax years 2020/21 and 2021/22 only, HMRC temporarily extended eligibility to reflect the exceptional circumstances in which large numbers of employees were required to work from home. Under this relaxation, employees could claim relief where they worked from home due to government guidance or workplace restrictions, even if not required under their employment contracts. This significantly broadened access to the relief and led to a substantial increase in claims.
When these temporary measures ended, the stricter pre-pandemic rules technically resumed. However, in practice, many employees continued to submit claims under the more relaxed pandemic rules. Subsequent compliance reviews by HMRC indicated that more than half of these claims failed to meet the original statutory criteria. As a result, HMRC decided not only to withdraw the pandemic concession but also remove entirely the ability for employees to claim tax relief directly for additional household expenses where those costs are not reimbursed by their employer.
Changes effective from 6 April 2026
From 6 April 2026, employees cannot claim tax relief directly from HMRC for unreimbursed additional household costs, regardless of whether homeworking is voluntary or a requirement of employment. Even where employment contracts mandate working from home, or where no alternative office accommodation is available, employees cannot claim relief independently. Any tax-efficient support must be provided through employer arrangements.
Employer-provided support
Although the removal of employee claims represents a significant change, there are other tax-efficient mechanisms employers can use to support homeworking staff.
Flat-rate homeworking allowance
Employers may pay a flat-rate allowance of £6 per week (£26 per month) free of income tax and National Insurance contributions without requiring employees to evidence their actual costs. Two conditions must be satisfied:
- there must be an agreement permitting the employee to work from home; and
- the employee must do so on a regular basis such that there is a pattern of working from home (e.g., one day a week).
In practice, emails notifying employees of their requirement to work from home should be sufficient to confirm a ‘homeworking agreement’.
Provision of goods and services
Employers may provide equipment and services necessary for homeworking, such as computers, office furniture or other work-related items. In contrast to the flat-rate allowance, there is no requirement for the employee to work from home regularly or for a formal agreement to be in place. The tax exemption applies provided any private use of the equipment is not significant, a condition that HMRC generally interprets flexibly. There is no prescribed financial limit, but the employee must have a genuine business need for the items. The employer must either provide the equipment directly (retaining ownership) or, from 6 April 2026, reimburse the employee where the employee has incurred the expenditure on the employer’s behalf.
Reimbursement of actual costs
Employers may reimburse employees’ actual additional household expenses, including increased utility costs or business-related telephone charges, free of tax and National Insurance contributions, provided the expenses are necessarily incurred in the performance of employment duties. Any excess will be treated as taxable income. Usually, HMRC requires a high level of proof that payments are no more than the employee’s additional household expenses.
Broadband
Broadband costs may be reimbursed on a tax-free basis where no prior broadband connection existed, the employee is required to work from home and the service is used primarily for business purposes. Where these conditions are not met, reimbursement may give rise to a taxable benefit in kind.
Practical point
The key practical implication of these changes is that support for homeworking expenses must now be delivered exclusively through employer arrangements. Employers should review their existing policies, employment contracts and staff handbooks to ensure compliance.
Partner note:
HMRC Employment Income Manual EIM32760, EIM01472–EIM01476, EIM32815
