Taxpayers dealt double blow as home working relief scrapped and £18,000 allowance rejected

Millions of UK taxpayers are facing changes to their finances after HM Revenue and Customs (HMRC) ended home working tax relief, as Labour also rejected calls to raise the personal tax-free allowance to £18,000.

The standalone tax relief for home workers officially ended on April 6, removing the option for employees to claim the weekly £6 deduction during the current tax year.

However, workers who were required to work remotely in previous years may still be entitled to reclaim money through backdated claims covering the period from April 6, 2022 to April 5, 2026.

The change affects employees who previously used the relief to offset additional household costs linked to working from home.

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Under the scheme, eligible workers were able to claim a flat-rate £6 weekly deduction directly through HMRC without needing to provide receipts.

Employees could also submit claims for actual expenses if their costs exceeded the flat-rate allowance.

The relief was only available to people required to work remotely by their employer rather than those who chose to work from home voluntarily.

Workers whose employer did not have office premises or whose role required them to live far from the workplace may still qualify for backdated claims.

Employees working flexibly by choice cannot claim even if remote working is included within their contract.

Eligible costs include business telephone calls and additional energy usage linked to designated work areas inside the home.

Expenses covering both personal and professional use, including rent and broadband, are excluded from the scheme.

The end of the relief comes as ministers also ruled out increasing the personal allowance to £18,000 despite growing pressure from campaigners.

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A petition calling for the increase attracted more than 31,000 signatures before receiving an official response from HM Treasury on May 5.

Campaigners argued the current £12,570 threshold has remained frozen since 2021 and warned fiscal drag could leave more minimum wage workers paying income tax.

The Treasury confirmed the Government "currently has no plans to increase the Personal Allowance to £18,000".

Officials said increasing the threshold would cost the Treasury more than £40billion annually in lost revenue.

The department warned such a move would significantly reduce funding available for public services including hospitals, schools and defence.

Treasury officials said the fiscal impact would be equivalent to cutting around one-fifth of the NHS budget in England or approximately two-thirds of defence spending.

Labour also argued the proposed increase would disproportionately benefit higher earners compared with basic-rate taxpayers.

Ministers defended the continued freeze on tax thresholds until 2031, saying the policy supports responsible funding of public services while keeping taxes as low as possible.

Officials also pointed to Britain's "internationally high Personal Allowance" and progressive tax structure as evidence the current system remains fair.

The Treasury said additional support is being provided to lower-paid households through increases to the minimum wage and wider cost-of-living measures.

Since April 2025, Labours has instructed the Low Pay Commission to take living costs into account when making minimum wage recommendations.

Support measures highlighted by ministers include 15 hours of funded childcare each week for parents of three and four-year-olds.

Eligible working parents with children aged from nine months old can also access 30 hours of funded childcare support.

Labour said that Budget measures were also aimed at reducing pressure on household finances through lower energy bills and freezes on rail fares and NHS prescription charges.

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