Rishi Sunak is expected to close a tax loophole on working from home that has cost the exchequer about half a billion pounds over the course of the pandemic, according to reports.
The chancellor is planning to abandon a tax relief that allows people to claim up to £125 a year for working at home even if they only spend a single day away from the office a year.
The relief was introduced in 2003 as a way to help home workers with gas, heating, internet and other utility bills.
However, the cost of the scheme to the Treasury has increased over 100-fold because of the home-working revolution caused by the pandemic.
About 4.9 million people successfully claimed the tax break last year, according to Revenue & Customs. Over the two years of the pandemic, the relief has cost the exchequer almost £500 million, from £2 million a year previously.
HMRC has written an urgent report for the chancellor that is expected to recommend scrapping the tax break.
A Treasury source told The Daily Telegraph: “This is a tax relief that existed before Covid and it was there for legitimate reasons but the take-up is now much higher so it needs to be looked at.”
At the start of the pandemic, the generosity of the relief was increased, with workers allowed to claim £6 a week tax-free, up from £4 a week. For basic rate taxpayers, this amounted to £62.40 a year. Higher earners could end up saving £124.80 annually.
In addition, claimants were eligible for the full tax break even if they only ended up working at home for one day in the year. The scheme was also backdated, potentially allowing workers who missed out in the first year of the pandemic to claim a payout of £250 to cover the two years.
There were 13.4 million people working at home in the week up to January 16, data from the Office for National Statistics has found. Last week the government lifted the work from home guidance, precipitating a gradual return to the office.
Polling by YouGov found that the public was broadly supportive of the change in guidance, with 43 per cent of Britons saying it was right that the work-from-home restrictions were being lifted and 38 per cent believing it was wrong.
Commenting on the speculation, former government advisor and working from home evangelist Richard Alvin, said: “Whilst it is disappointing that Sunak could be removing this tax break for those working from home at a time when we are seeing substantial rises in energy prices, the personal cost benefits to the individual employee when working from home in terms of commuting costs far outweigh that and for some the £125 could almost be what they spend on a less than a week of commuting.”