Compliance
Compliance Alert: Homeworking Cost Deductions Removed & What Employers Need to Do
A recent UK change removes employee tax deductions for non-reimbursed homeworking expenses. Here’s what that means for you as employer or employee to stay compliant.
By NomadicTax Research Team • 5-8 min read • May 5, 2026
## Overview of the Policy Change
As of **6 April 2026**, the UK government has **removed the deduction** employees could claim for **non-reimbursed homeworking expenses** — including additional household bills and business telephone costs. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-april-2026/april-2026-issue-of-the-employer-bulletin?utm_source=openai)). Employees *may still* claim for previous four tax years if eligible and have not claimed already. Employers, however, retain the ability to **reimburse eligible homeworking costs** without applying Income Tax or National Insurance contributions. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-april-2026/april-2026-issue-of-the-employer-bulletin?utm_source=openai))
## Why It Matters
- Many remote or hybrid workers will see a change in what they can deduct directly on their tax returns.
- Employers who previously let employees claim deductions may need to adjust internal policies or reimbursement programs.
- Risk of under-or overpayment if individuals misunderstand or fail to account correctly during Self Assessment.
## What Employers Should Do
- Review your **homeworking cost reimbursement** policies. Consider shifting more costs into employer-paid reimbursements rather than letting employees incur and claim after.
- Communicate clearly to employees: what costs can still be reimbursed tax-free, and what deductions are no longer allowed from 6 April 2026.
- Ensure record-keeping: keep documentation for reimbursements; track employer payments separately from employee borne costs.
## What Employees Need to Know
- You cannot claim extra utility bills, increased heating, business phone calls, etc., as non-reimbursed expenses from 6 April 2026.
- If you made such expenses previously and did not claim, you may still do so for **four earlier tax years**, provided you're eligible. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-april-2026/april-2026-issue-of-the-employer-bulletin?utm_source=openai))
- If your employer reimburses eligible homeworking costs, make sure the payments are properly documented and that they qualify to be exempt from Income Tax and National Insurance.
## Example Scenario
> **Mary**, a graphic designer working from home, used to claim extra heating and phone costs as deductions. From April 2026, Mary can’t claim those: she must rely on her employer to reimburse or bear those costs.
> **Employer “DesignCo”** inserts this change into its staff handbook: they will offer a monthly stipend for homeworking utilities which they reimburse, documented and subject to approved policy.
## Risks & Best Practices
- Be aware that incorrectly structuring reimbursements might trigger tax or NIC liabilities.
- Miscommunication can lead to employees missing out on legitimate reimbursements or mistakenly claiming now-invalid deductions.
- Maintain records comprehensively, in case of HMRC audits.
## Action Steps
1. Audit which homeworking cost deductions your payroll system still allows or records.
2. Train HR and payroll staff to ensure reimbursements are processed correctly.
3. Communicate directly with remote workers: provide guidance, updates, and a timeline for any changes in policy.
**Bottom line**: If you’re an employee, don’t assume deductions are still in your toolkit; if you’re an employer, seize the chance to clarify policies and ensure reimbursements are done right.