Work-from-home 'tax loophole' will not be scrapped, Treasury insists

·3 min read
File photo dated 21/10/2021 of Rishi Sunak who said it is
The Treasury has dismissed claims that the chancellor is planning to axe a tax deduction for people working from home. (PA)

The Treasury has denied reports it plans to cut a tax deduction for people working from home.

The Home Working Deduction was introduced in 2003 to support home workers. At the start of the pandemic, the £4-a-week allowance was increased to £6-a-week.

Millions more Brits claimed the deduction during lockdown after home-working soared due to coronavirus restrictions and work-from-home guidance, which ended on 19 January.

On Thursday, The Telegraph reported that Rishi Sunak was considering axing what it described as the 'tax loophole' due to spiralling costs.

It said a surge in claimants during the pandemic had cost the Treasury £500m a year.

However, the Treasury has dismissed the claims telling Yahoo News UK there are "no plans" to scrap the scheme.

Read more: Are hard-up households going to get a £500 payout?

General view of the entrance to the HM Treasury building, in Westminster, central London.
The Home Working Deduction was introduced in 2003. (PA Images)

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"The Home Working deduction has been in place since 2003 to support employees with the additional household costs of working from home," a Treasury spokesperson said.

"Since then, it has formed part of a wider support package for individuals during the pandemic.

"There are no plans to reform this deduction, but we keep all taxes under review and closely monitor their value for money."

The comments come amid growing concern over the growing cost-of-living crisis.

Low- and middle-income think tank the Resolution Foundation has warned 2022 could be "catastrophic" for millions and become "the year of the squeeze" amid National Insurance hikes, soaring energy bills, and rising inflation.

A planned increase in National Insurance contributions in April has also proved divisive within the Conservative party.

Writing on Twitter on Tuesday, senior Tory MP David Davis - who called for the prime minister to resign last week - said the planned rises should be scrapped after new figures revealed the government borrowed £13bn less this year than forecast.

Prime Minister Boris Johnson (left) and Chancellor of the Exchequer Rishi Sunak leave 10 Downing Street London, ahead of a Cabinet meeting at the Foreign and Commonwealth Office.
There is growing speculation that Boris Johnson and Rishi Sunak are at loggerheads over planned rises in National Insurance. (PA Images)

The issue has been further complicated by reported tensions between Boris Johnson and Sunak, amid suggestions the prime minister is seeking to scrap the tax to placate rebellious Tory MPs who may be considering submitting letters of no-confidence over the Partygate scandal.

Number 10 has rejected this, insisting the Treasury and Number 10 are "committed" to introducing the tax hike to help fund the NHS.

"The prime minister and chancellor are fully committed to introducing the health and social care levy in April," a spokesperson said on Friday.

"We’ve spoken before about why we are doing that, in order to give the NHS the funds, it needs to tackle the backlog that has built up - as well as tackling the long term issue of social care."

Watch: Chancellor insists he is 'always listening' over cost of living rises