Fuel Your Savings: ULEZ Fee Tax Deductions for Sole Traders

September 20, 2023

In a move aimed at providing relief for sole traders and self-employed individuals, the Ultra Low Emission Zone (ULEZ) charges in London are now eligible for tax deductions. This comes as welcome news for those who utilise non-compliant vehicles for business-related travel.

The UK’s HM Revenue and Customs (HMRC) has officially stated that individuals can seek tax relief for ULEZ charges when these charges arise from journeys conducted “exclusively for the purposes of trade.” However, it’s important to note that this tax relief provision does not extend to expenses related to commuting or general travel to a workplace.

The ULEZ framework, which imposes fees on vehicles that do not meet strict emission standards, has seen recent expansions, encompassing all boroughs of London starting from August 29. Under these new rules, older cars failing to meet emission criteria are subject to a daily fee of £12.50 for entering the designated ULEZ area, with a hefty penalty of £180 for non-compliance. This charge remains effective around the clock, 24/7.

Statistics reveal that the majority of cars in outer London, approximately 90%, already meet the ULEZ standards, relieving their owners from the daily ULEZ charge. However, a significant concern arises from the fact that one-fifth of vans fail to meet the stipulated low-emission requirements.

Specifically, the ULEZ rules target petrol cars registered prior to 2006 and diesel vehicles registered after September 2015, subjecting them to the charge.

HMRC’s official statement clarifies the tax relief aspect: “Self-assessment customers are entitled to tax relief on travel expenses, including low emission zone charges if they have been exclusively for the purposes of the trade. When a self-employed individual claims an allowable expense, the amount is deducted fully from their taxable profits.”

Despite these allowances, apprehensions linger regarding the timing and execution of the ULEZ expansion, given the relatively short one-year notice provided. Matt Jaffa, the London spokesperson for the Federation of Small Businesses (FSB), highlights the challenges for businesses, particularly small ones, in making abrupt vehicle changes during these times. He compares the current situation to the prior four-year notice given when the ULEZ was initially extended to the inner London area.

Jaffa emphasises the importance of communication and gradual implementation of the policy, avoiding harsh penalties in the initial months. He urges Transport for London (TFL) and the Mayor’s office to recognise the ongoing challenges businesses face due to the cost-of-doing-business crisis.

To address concerns and facilitate the transition, a £160 million scrappage scheme has been introduced. This scheme is accessible to small businesses with fewer than 50 employees, charities, sole traders, and individuals. The scheme necessitates applications to be made by November 29, 2023, and replacement vehicles must be operational by May 29, 2024.

The incentives within the scrappage scheme are structured in tiers: London residents with non-compliant vehicles can receive either £2,000 for scrapping a car or £1,000 for a motorcycle. For wheelchair-accessible vehicles (WAVs), the options include a £10,000 payment for scrapping the vehicle or £6,000 for retrofitting to meet ULEZ standards.

For non-compliant vans, a scrappage grant of £7,000 is available, along with a £9,000 subsidy for purchasing electric vans. Small businesses and charities stand to benefit from increased grant payments, ranging from £6,000 to £11,500. Notably, eligible businesses and sole traders can apply for the scrapping or retrofitting of up to three vans or minibuses, even if they have already received a grant for one vehicle through this scheme.

Unlock the full potential of ULEZ tax deductions and eco-friendly strategies with our experts! Get in touch here.

Emma Panayi

Emma leads our London office in Camden, bringing 24 years of diverse experience to our team. Her role bridges SMEs and Live Music, with a strong focus on cultivating client relationships. As Partner, Emma is dedicated to creating a workspace where everyone can pursue their aspirations, making her an integral part of our success.

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