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Published on 2 November 2023

Can employees claim tax relief on ULEZ charges?


Owners of a vehicle that doesn't meet the Ultra Low Emission Zone (ULEZ) emissions standards and isn’t exempt must pay a £12.50 daily charge to drive within London boroughs. It has been confirmed by HMRC that self-employed drivers will be able to claim tax relief on the daily charge. But what about employees?

Image of a green Ultra low emission zone (ULEZ) sign in the UK

The recently expanded Ultra Low Emission Zone (ULEZ) operates 24 hours a day, 7 days a week, every day of the year, except Christmas Day (25 December). It applies to the City of London and all the London boroughs. If your vehicle doesn't meet the ULEZ emissions standards and isn't exempt, you need to pay a £12.50 daily charge to drive within the zone. It has been estimated that hundreds of thousands of cars in and around the Greater London area may be caught by the charge.

HMRC have confirmed in a statement to the BBC that self-employed drivers will be able to claim tax relief on the daily charge, if they have incurred the charge wholly and exclusively for the purposes of their trade. But what about employees?

Although HMRC’s guidance (see here) does not directly state that ULEZ charges are to be included within travel costs that might be eligible for tax relief, it does refer to similar expenses such as toll fees, parking costs and congestion charges.

Our understanding is that employees are entitled to tax relief on ULEZ daily charges, if they are undertaking qualifying business travel when the charges are incurred. On this basis, for employees who are not reimbursed by their employer, it should be possible to claim the £12.50 daily charge as a deduction, in addition to any tax relief you are due for your mileage, in the same way as things like toll fees, parking costs and congestion charges.

There is a different page of guidance dealing with employer reimbursed expenses that covers ULEZ charges.

Note that there are other areas, outside London, that have clean air zones and that may levy ULEZ-like charges. 

All this means that:

  • If your employer reimburses a charge that you incurred whilst on business travel, there is no tax or National Insurance to pay on the reimbursement.

  • If your employer does not reimburse the charge, or only reimburses part of it, you can claim tax relief. This will reduce the income on which you have to pay tax. Sadly, this is not the same as receiving full reimbursement.

If you are not undertaking qualifying business travel, there is no such relief.

Being able to claim tax relief on the daily charges may be particularly important for care workers who are on lower incomes and often have to travel from client to client in their own, potentially older, cars.

Note that to get tax relief, you must have paid some income tax. Because of the level of the personal allowance (currently £12,570), people on low wages (especially if working part time) may not pay income tax. However, even if you do not earn enough to pay tax and therefore can’t make a claim for tax relief, the treatment of expenses for benefits often follows the treatment for tax purposes. This means that if your costs meet the tax rules, you may be able to deduct the expenses from your income for the purposes of benefits you claim. We explain more about this and also about how unreimbursed expenses interact with the national minimum wage, on our website.

What counts as business travel?

Business travel includes:

  • journeys that you have to make in the performance of the duties of your employment (this may apply where the duties themselves inherently involve travelling such as those of a care worker, delivery driver or meter reader); and

  • journeys which you make to or from a place you have to attend in the performance of your duties, which can include trips from your office or other work location to visit a customer or other workplace. This rule can also include travel directly from your home to visit a customer or to a workplace (but not where the expenses are those of ‘ordinary commuting’ – that is, travel between your home and a permanent workplace).

What the last bullet point means is that where the home to work travel is to a temporary workplace rather than your permanent workplace, tax relief is available. ‘Temporary’ for the tax workplace travel rules has a set meaning which unfortunately is not the same as the ordinary, natural meaning of the word! Unfortunately for most people, ULEZ charges incurred for home to work travel will not qualify for tax relief.

You can find out more about the travel rules and about how HMRC apply them to different scenarios in HMRC’s booklet 490. Even though this booklet is referred to an employer booklet, it is useful for employees too.  

If you think you are entitled to claim tax relief, our guidance explains how to calculate and claim it: What if I use my own car for business purposes?. To get the relief, you will have to make a claim to HMRC, but it is not usually that difficult and if you do it yourself, it is free of charge. If you are thinking of paying a tax refund company to help you make the claim, we recommend you read our guidance.

What about ULEZ penalties?

No tax relief is available for any penalties that you may incur. This is because the cost has not been incurred for business travel, it has been incurred because you didn’t pay the daily charge and are being punished!

What about the scrappage scheme?

While a scrappage scheme is available to help eligible drivers potentially upgrade their vehicle, it is unlikely that the amount alone will buy you a ULEZ compliant vehicle and so you may need to also use your own money. If you are an employee, no tax relief is available for purchasing the vehicle, even if you use it mostly for work – the mileage rate is intended to cover this instead.

The position is more complex for the self-employed and some guidance is available on our website.

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