Custom background option is not showing.

TheEarthIsFlatI would suggest checking the Teams Version it could be different than other users, besides check on the windows updates...

besides here is the manual way of setting up your custom background if the add new option is not showing...

To manually delete or add virtual backgrounds in Teams:

1. Launch the File Explorer in Windows and add this location in the address/URL bar and press [Enter]:
   %APPDATA%\Microsoft\Teams\Backgrounds
2. From here, you will see the pre-set backgrounds that you have worked with before in Teams. The Uploads folder is where you have your custom virtual backgrounds. So if you got a little bit excited about this option to add your own images and now you’ve changed your mind, you can remove them from the list that displays in the Teams Background settings.
3. To delete the images you no longer want to work with, open the Uploads folder. Select and delete the images you don’t need. You can also copy in images to this folder as an alternative step for adding custom backgrounds.
4. Close File Explorer when you’re done.