The Rule That Changed on 6 April 2026
If you are an employee, you can no longer claim tax relief from HMRC for working at home. The claim was removed for the 2026/27 tax year and every year after it.
GOV.UK now carries a plain notice on the page that used to explain how to claim: from the tax year 6 April 2026 to 5 April 2027, you cannot claim tax relief for working from home, although you can still claim for the four previous tax years.
This was announced at the Budget on 26 November 2025 and it works by inserting a new section 360B into Chapter 11 of Part 4 of ITEPA 2003, which blocks a deduction from earnings for additional household expenses where the employer has not reimbursed them. The relief itself under section 336 still exists in principle. The route by which an employee claimed it has been closed off.
Three things survived, and this is the part most coverage has skipped:
- Employers can still reimburse homeworking costs tax free. The £6 a week exemption for employers is untouched.
- The self-employed deduction for use of home as office is untouched. Neither the flat rates nor the apportionment method changed.
- Limited company directors still have routes, because a director wearing their employer hat is not the same as a director wearing their employee hat.
So the money did not disappear. It moved from the employee's tax return to the employer's payroll, and a lot of people have not noticed.
Why HMRC Removed It
The policy paper is unusually direct about the reason. HMRC says that after checking claims, "over half have been deemed to be ineligible for the relief, indicating high levels of non-compliance".
That is believable. The rule was always narrow. You could claim only if you had to work from home, for example because your employer had no office or your job required you to live far from one. You could not claim if you chose to work from home, and you could not claim if your contract simply permitted homeworking. For the 2020/21 and 2021/22 tax years eligibility was temporarily widened for the pandemic, HMRC built a quick online service to handle the volume, and a great many people formed the impression that working from home came with an automatic tax allowance. It never did, and the temporary widening ended on 5 April 2022.
The scale is smaller than the noise around it suggests. HMRC estimates the change affects 300,000 individuals, costing a basic rate taxpayer £62 a year and a higher rate taxpayer £124 a year. The Exchequer gains £10 million in 2026/27, rising to £30 million in 2027/28 and settling at £25 million a year. Removing the relief from HMRC's own systems, guidance and forms is costed at about £0.25 million.
Our reading is that this is a compliance measure dressed as a tax change. Faced with a relief where more than half of the checked claims were wrong, HMRC could have tightened the eligibility questions, or asked for evidence at the point of claim, which it already started doing in October 2024. It chose to close the relief for everybody, including the minority who were genuinely entitled. That is a defensible administrative decision, and it is also a real loss for the contact centre worker with no office to go to.
Employees: Three Things Worth Doing
1. Backdate, because the window is still open and it is closing in stages
You can still claim for the four tax years before 2026/27. That means 2022/23, 2023/24, 2024/25 and 2025/26 are live right now, subject to the normal four year limit that runs from the end of each tax year.
| Tax year | Last date to claim |
|---|---|
| 2022/23 | 5 April 2027 |
| 2023/24 | 5 April 2028 |
| 2024/25 | 5 April 2029 |
| 2025/26 | 5 April 2030 |
At £312 a year of allowable expense, four years of backdated claims is worth around £250 to a basic rate taxpayer and £500 to a higher rate taxpayer. You will need evidence that you had to work from home, such as a contract or a letter from your employer, because HMRC has required that for the £6 a week flat rate since the 2022/23 tax year. If you file a Self Assessment tax return, the claim goes on the return rather than through the online service.
Do not pay a refund company a percentage of this. The claim takes a few minutes on GOV.UK.
2. Ask your employer, because the employer route is worth five times more
This is the practical point almost nobody makes, and HMRC effectively invites it in its own impact assessment. The paper notes that "employers may come under pressure to change their policies on reimbursement".
Under section 316A ITEPA 2003 an employer can pay an employee £6 a week, or £26 a month for monthly paid staff, towards reasonable additional household costs of homeworking, with no tax, no National Insurance and no need for the employee to keep receipts. That exemption did not change on 6 April 2026.
Compare the two routes for a basic rate taxpayer:
| Old employee claim | Employer homeworking allowance | |
|---|---|---|
| What moves | £312 of allowable expense | £312 of cash |
| Value to the employee | £62.40 a year | £312.00 a year |
| Employee National Insurance | None either way | None |
| Available in 2026/27 | No | Yes |
The employee was never getting £312. They were getting tax relief on £312, which at 20 percent is £62.40. An employer paying the allowance hands over the whole £312, free of tax and free of National Insurance for both sides, and takes a deduction for it against corporation tax like any other staff cost.
So the abolished relief was the weakest of the available options, and the strongest one still works. For an employer with thirty homeworkers, the allowance costs about £9,360 a year before tax relief, which is a modest line item set against the goodwill of covering a cost that staff have just been told they must absorb themselves.
If you run the payroll, the practical steps are to decide a policy, apply it consistently, and pay it through the payroll as a non-taxable payment. There is no reporting on a P11D for amounts within the exemption. Our guide to PAYE covers the mechanics.
3. Remember £6 a week is a floor for employers, not a ceiling
The £6 figure is an administrative easement that lets an employer pay without evidence. An employer can reimburse more than £6 a week tax free where the additional costs are genuinely higher and are supported, either by agreeing a scale rate with HMRC based on average costs across the workforce, or by reimbursing actual costs with records kept by the employee.
Very few employers use this. It is worth considering if you have staff running specialist equipment at home, or if your workforce is genuinely home based rather than hybrid.
Use of Home as Office: The Self-Employed Rules
Nothing changed here on 6 April 2026. If you are a sole trader or a partner, the cost of working from home is a business expense of your trade, and there are two ways to work it out.
Method one: simplified expenses
HMRC publishes flat monthly rates based on the hours you work from home. You can only use them if you work 25 hours or more a month at home.
| Hours worked from home per month | Flat rate per month |
|---|---|
| 25 to 50 | £10 |
| 51 to 100 | £18 |
| 101 or more | £26 |
The rates are applied month by month, not averaged across the year. HMRC's own example: ten months at 40 hours and two months at 60 hours gives ten months at £10 plus two months at £18, so £136 for the year.
The flat rate covers household running costs. It does not cover telephone or internet, which you claim separately on the business proportion of the actual bills.
Method two: apportion your actual costs
You take the household costs that relate to running the property, work out a fair business share, and claim that. HMRC sets out its approach in its Business Income Manual and accepts apportionment by rooms, by time, or by both, saying that "each case will be dependent on the facts".
Costs you can bring into the calculation include gas and electricity, council tax, buildings and contents insurance, mortgage interest, rent if you rent, general repairs to the property and cleaning. You cannot include anything with no business element, and you cannot include the capital part of a mortgage payment.
Here is a realistic example.
A sole trader designer lives in a house with six usable rooms, ignoring the kitchen, bathroom and hallway. One of those rooms is the office. She works there five days a week and the room is used privately at weekends.
Annual property costs: gas and electricity £1,800, council tax £1,900, buildings and contents insurance £300, mortgage interest £5,000, general repairs and decoration £400. That is £9,400.
One room out of six is £9,400 ÷ 6 = £1,566. Five days out of seven is £1,566 × 5/7 = £1,119.
Business phone calls and the business share of broadband are claimed on top, based on the actual bills.
Against simplified expenses at the top band, which is £26 a month or £312 a year, that is £807 of extra deduction. For someone paying basic rate income tax and Class 4 National Insurance at 6 percent, a marginal rate of 26 percent, it is about £210 a year of real tax. Over five years, roughly a thousand pounds, for a calculation you do once and adjust when your bills change.
The flat rates have not moved since 2013
This is the part we think is worth saying out loud. The £10, £18 and £26 bands were introduced in April 2013 and have never been uprated. Household energy costs are not remotely where they were in 2013. The self-employed relief that "survived" 6 April 2026 has been quietly shrinking in real terms for thirteen years.
That has a practical consequence. Simplified expenses was designed to be the easy and roughly fair option. For anyone with a genuine home office and real bills, it is now usually the worse option by a wide margin, and the gap widens every year the rates stay frozen. If you have been ticking the flat rate box because it is quick, it is worth doing the apportionment once and seeing what the difference actually is.
One more reason to get the figure right this year
If you are a sole trader or landlord with qualifying income over £50,000, you have been inside Making Tax Digital for Income Tax since 6 April 2026, and your expenses now go to HMRC every three months rather than once a year. A use of home figure you have never checked is now being reported four times a year instead of once. Thresholds drop to £30,000 in April 2027 and £20,000 in April 2028, so most self-employed people will be in the same position within two years.
Limited Company Directors: Three Routes
A director working from home is in an odd position, because they usually sit on both sides of the arrangement. The company is the employer. The director is the employee. Section 360B removed the employee's claim, so route one below is gone. The other two are not.
Route one, the director claims on their own return. Gone from 6 April 2026, exactly as for any other employee. If you have been putting a £312 employment expense on your Self Assessment return for use of home, stop.
Route two, the company pays the homeworking allowance. Your company pays you £6 a week or £26 a month, tax free and NIC free, under the exemption described above. It needs to be a genuine homeworking arrangement, meaning you regularly perform some of your duties at home under an arrangement with the company rather than simply catching up on email in the evening. This is the simple option, it takes one board minute and a payroll line, and it costs the company £312 a year against which it gets a corporation tax deduction.
Route three, a licence agreement. Your company pays you rent for the part of your home it uses. The rent is a deductible expense for the company. You declare it as property income on your Self Assessment return and set the business proportion of your household costs against it, using the same apportionment method a sole trader would use. Done properly, the rent and the deductible costs roughly cancel each other out, so there is little or no personal tax, and the company has taken a deduction for a real cost.
Three warnings on route three, because it is oversold:
- The rent has to be commercial. Set it at what an arm's length tenant would pay for that space. An inflated figure looks like a distribution dressed as rent, and will be treated as one.
- Put it in writing. A short licence agreement between you and the company, approved in the minutes, describing the space, the rent and the period. Without that document you have a payment with no explanation attached to it.
- It is a property business, with property business consequences. The income goes on the property pages of your return, it interacts with the rent a room scheme and any other rental income you have, and it is one more thing to get right every January.
For most single-director companies, route two is enough and route three is not worth the paperwork. Route three earns its keep when the space involved is substantial, for example a converted outbuilding used as a workshop, where a realistic rent is in the thousands rather than the hundreds. Our guide to directors' remuneration covers how this sits alongside salary and dividends, and the directors' loan account guide explains why these payments need to be recorded properly rather than drawn and sorted out later.
Two Traps People Walk Into
Exclusive use, and what it costs when you sell
The instinct, once you start apportioning costs, is to make the claim as large as possible by dedicating a room entirely to the business. Do not.
Private Residence Relief normally takes the capital gain on your home out of capital gains tax altogether. The relief is restricted for any part of the dwelling used exclusively for business. A room used for work during the week and for anything else at other times keeps full relief. A room that is only ever an office does not, and a slice of your eventual gain becomes taxable.
Run the numbers before you do it. Dedicating a room might add a few hundred pounds a year to your deduction. On a property that gains £200,000 over the years you own it, losing relief on one sixth of it puts around £33,000 of gain into charge. At 24 percent that is about £8,000 of tax to save a couple of hundred a year. The time apportionment that keeps some private use of the room is almost always the better answer.
Business rates
You will not usually pay business rates for using a small part of your home as an office. You may pay them where the property is part business and part domestic, where customers visit, where you employ other people at the property, or where you have altered your home for the business, for example by converting a garage into a treatment room. If any of those apply, speak to the Valuation Office before you assume nothing has changed.
Which Route Applies to You
| Your situation | What you can claim in 2026/27 | Typical annual value |
|---|---|---|
| Employee, no reimbursement | Nothing from 6 April 2026. Backdate 2022/23 to 2025/26 while you can | £62 to £124 per backdated year |
| Employee, employer pays the allowance | £6 a week or £26 a month, tax free and NIC free | £312 in cash |
| Employee with high evidenced costs | Employer can reimburse above £6 a week with evidence or an agreed scale rate | Varies |
| Sole trader or partner, simplified expenses | £10, £18 or £26 a month by hours worked | £120 to £312 of deduction |
| Sole trader or partner, actual costs | A fair business share of real household costs | Commonly £600 to £1,500 of deduction |
| Company director, homeworking allowance | Company pays £6 a week or £26 a month | £312 in cash, deductible for the company |
| Company director, licence agreement | Commercial rent under a written agreement | Varies, usually only worth it for substantial space |
Our View
The wrong relief was removed. The employee claim was worth £62 a year to a basic rate taxpayer and had a compliance failure rate above 50 percent. It was the smallest and most error prone of the three routes. Closing it is understandable. The problem is that it is the only route most employees knew about, so the abolition reads as "there is no relief for working from home", when the better relief has been sitting in section 316A the whole time and is worth five times as much.
Employers are about to find out they are the answer. HMRC's own impact note says employers "may come under pressure to change their policies on reimbursement". That pressure has not arrived yet, because most employees have not registered the change and will only notice when they go to make a claim in January. If you employ homeworkers, deciding your position now is cheaper and better received than deciding it after somebody asks.
Employment status has become the thing that decides this. Two people doing identical work from identical spare rooms now get completely different answers depending on whether they are employed or self-employed. That is not new in UK tax, but the gap here is unusually stark, and it is one more thing for anyone weighing sole trader against limited company or sitting near an IR35 boundary to price in.
Frozen flat rates are a tax rise nobody announces. £10, £18 and £26 a month have been the figures since 2013. The self-employed relief was not cut, it was simply never uprated, and after thirteen years of that the flat rate is no longer a reasonable proxy for the cost. Most sole traders we take on are using the flat rate out of habit and are worse off for it.
Do the apportionment once and keep it. A single sheet showing your room count, your annual bills, the split you used and why is the difference between a deduction that survives a question from HMRC and one that does not. It takes half an hour, it stands up for years, and you update it when your bills move.
How IAK Can Help
We work with sole traders, contractors, limited companies and small businesses across North London and Hertfordshire, and this question comes up in almost every onboarding.
For employers, our payroll service covers setting up the homeworking allowance correctly, deciding whether to go above £6 a week, and keeping the payment exempt rather than accidentally taxable. For the self-employed, our accounting team builds the use of home calculation into your year end and your quarterly Making Tax Digital submissions, so the same defensible figure is used every time rather than a round number someone guessed. For directors, our tax planning service works out whether a licence agreement is worth the administration in your case, and drafts it if it is.
If you have been claiming the £6 a week on your own return, or you are not sure which of these routes you are eligible for, get in touch for a free consultation. Our salary calculator will show you the effect on take home pay, and our guides to HMRC mileage rates, trivial benefits and capital allowances cover the three expense questions that usually come up in the same conversation.
Sources
- Removal of tax relief on non-reimbursed homeworking expenses, HMRC policy paper published 26 November 2025, for the 6 April 2026 operative date, the insertion of section 360B into Chapter 11 of Part 4 ITEPA 2003, the "over half have been deemed to be ineligible" finding, the estimate of 300,000 affected individuals, the £62 and £124 figures, the Exchequer impact of £10 million rising to £30 million, the £0.25 million operational cost, and the statement that employers "may come under pressure to change their policies on reimbursement".
- Claim tax relief for your job expenses: working from home, GOV.UK, for the notice that relief cannot be claimed from the 2026/27 tax year, the four year backdating window, the £6 a week flat rate, the eligibility conditions and the evidence requirement from the 2022/23 tax year.
- Expenses and benefits: homeworking, work out the value, GOV.UK, for the £6 a week limit an employer can pay without supporting evidence.
- EIM01476, employment income manual, HMRC, for the £6 per week or £26 per month guideline rate from 6 April 2020, the previous £4 per week rate, and the ability to pay more where it is supported by an agreed scale rate or actual costs.
- Simplified expenses if you're self-employed: working from home, GOV.UK, for the £10, £18 and £26 monthly flat rates, the 25 hour minimum, the exclusion of telephone and internet, and the worked example.
- BIM47825, business income manual, HMRC, for the apportionment of fixed and running costs by area and time and the statement that each case depends on the facts.
- Self-employed National Insurance rates, GOV.UK, for the 6 percent Class 4 rate between £12,570 and £50,270 used in the worked example.
- Introduction to business rates: working at home, GOV.UK, for the four circumstances in which a home office can attract business rates.