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ULEZ fees tax deductible for sole traders


Sole proprietors and individuals who are self-employed now have the opportunity to seek tax relief for Ultra Low Emission Zone (ULEZ) charges when they file their annual tax returns for business-related trips. The HMRC (Her Majesty's Revenue and Customs) has officially announced that individuals with non-compliant vehicles can claim this relief, provided their travel was conducted exclusively for business purposes. Notably, this does not encompass commuting expenses or travel to one's workplace.


Effective from August 29, the expanded Ultra Low Emission Zone (ULEZ) charge encompasses all boroughs within London. Under this initiative, older vehicles will incur a daily fee of £12.50 for entering the designated area, with a penalty of £180 for failure to comply. This charge remains in effect 24/7.


Statistics indicate that a significant majority, approximately 90%, of cars operating in outer London on a typical day already meet ULEZ standards, sparing their drivers from the daily charge. However, around 20% of vans fall short of the new low emission requirements.


The ULEZ regulations apply to petrol cars registered prior to 2006, while diesel cars registered after September 2015 are also subject to the charge.


HMRC's statement affirms, "Self-employed individuals engaged in self-assessment are entitled to claim tax relief on travel expenditures, which include charges related to low emission zones, as long as these expenses are exclusively incurred for business-related activities. When a self-employed person claims an allowable expense, the entire amount is subtracted from their taxable profits."


However, concerns have arisen regarding the rapid implementation of the ULEZ charge extension, which was communicated with just a year's notice. Matt Jaffa, the London representative of the Federation of Small Businesses (FSB), voiced his apprehensions, saying, "This introduces another operating cost. Swiftly altering one's vehicle under these circumstances is challenging, and considering the zone expansion to inner London, businesses were afforded a four-year notification. This time, they've had only one year to prepare."


He further emphasized, "Many small businesses will face difficulties. What's crucial now is effective communication and a gradual introduction of this policy. It's important to avoid excessive punitive measures, especially in the initial months. Transport for London (TFL) and the Mayor need to acknowledge this, as the business community continues to grapple with operating cost challenges."


To mitigate the impact, a scrappage scheme amounting to £160 million has been instituted for owners of affected vehicles. This scheme is open to small businesses with fewer than 50 employees, charitable organizations, sole traders, and individuals. Applications must be submitted by November 29, 2023. All replacement vehicles must be on the road by May 29, 2024.

London residents with non-compliant vehicles have the opportunity to receive £2,000 for scrapping a car or £1,000 for a motorcycle. Wheelchair accessible vehicles (WAVs) are eligible for a £10,000 grant for scrapping or a £6,000 grant for retrofitting to meet ULEZ standards.


A £7,000 grant is available for scrapping non-compliant vans, while a subsidy of £9,000 supports the acquisition of electric vans. Furthermore, small businesses and charities will benefit from enhanced grant payments ranging from £6,000 to £11,500. Eligible entities can seek funding for up to three van or minibus scrappage or retrofit projects in total, even if they have previously received a grant for a single vehicle within this program.


Contacts

If you require assistance in relation to the above and/or would like to discuss anything further, please do not hesitate to contact info@act.london or your usual A.C.T. contact.

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