The allowance - currently £3 per week - is intended to provide assistance with the 'additional household expenses' (that's the costs of heating and lighting, to you and me) that homeworkers incur while working from home. Furthermore, since £4 per week does not divide into a coherent sum on a monthly basis, HMRC will allow employers to round up the sum to £18 per month. On the appropriate bit of the HMRC website, there is no reference to the rise, but the CIPP article just linked to provides a link to HMRC's Weekly Update for 2 March, which contains the news. Presumably, HMRC's website will be updated once we are into the new financial year.
To benefit from the allowance, you have to have a 'homeworking arrangement' with your employer - i.e. your homeworking has to be a formal, regular part of your working life, and not the result of you taking work home now and again.
£4 per week (i.e. £208 per year) is unlikely to cover the full costs of working from home - though it doesn't stop employers from paying more through expenses, where the expenditure can be proven and is backed by paperwork, and where appropriate records are kept. Indeed, HMRC's manual on employment income has a useful (and readable!) section on what can be re-imbursed (although it too still refers to £3 per week). Nevertheless, this is a useful allowance which returns to the homeworker some of the savings that employers make from people working from home.
At the same time, the employer does not have to pay this allowance - and we know that some employers, even in Prospect-represented areas, either pay less than the HMRC amount or even nothing at all. So, even if you are getting the allowance currently, you may not automatically get the rise which HMRC has agreed. Why not speak to your local rep and see what can be done in your employer? (And: likewise if you are not getting the full amount currently!)
Hat-tip: Broomfield Alexander's tax update